– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Pierre Briançon

PARIS, April 14 (Reuters Breakingviews) – When does regulation become protectionism? This is what European Commissioner Michel Barnier has to decide as he attempts to broker a compromise between the UK and French governments on the EU’s proposal to regulate hedge funds and other alternative investment vehicles.

A deal is in sight on the last remaining bone of contention of the controversial directive: the creation of a “passport” that foreign fund managers would need to peddle their goods within the EU.

The requirement to force non-EU managers to submit to the same rules as EU-based ones prompted strong objections from both the UK — home to most of Europe’s hedge funds — and the United States, which complained about the directive’s “protectionism”.

But advocates of a stringent passport argue that, just as Chinese toys have to submit to EU safety rules, it should be possible to subject foreign-based funds to European regulation without crying protectionism.