The 'third country' clause in the Alternative Investment Fund Managers Directive, which could prevent EU investors from investing in non-EU hedge funds, has reared its head again under proposals by a task force of the European Securities and Markets Authority.

The legislation, or Level 1 of the directive, was agreed last year by the European Council, the European Commission and members of the European Parliament. The next stage, or Level 2, is aimed at establishing the details of the new rules.