Sources close to the negotiations said Brown telephoned Spanish Prime Minister José Luis Rodríguez Zapatero on Monday night, to inform him that Britain could not back the Alternative Investment Fund Manager (AIFM) directive in its existing form.
Spain, which currently holds the rotating presidency of the European Union, yesterday responded by pulling a debate on the issue from the agenda of an EU finance ministers’ meeting.
Had the debate gone ahead, a majority of European finance ministers would have pushed ahead with the directive against the UK’s wishes.
The main sticking point is the “third countries” section of the directive, which would put up barriers to overseas fund companies looking to sell products to customers such as pension investors in the EU.
Brown’s supporters yesterday hailed a major coup for the Prime Minister, but critics said that the government had been too late to start lobbying against the directive in the first place.
Mark Hoban, shadow financial secretary, said: “ The government failed to provide leadership when the directive was being drafted.”