Buyout king Robert Easton and hedge-fund legend Paul Marshall are the big names on the Treasury and Financial Services Authority's (FSA) working groups leading the fight against burdensome proposed EU legislation.
The FSA and the Government have set up seven groups to scrutinise aspects of the European Commission's directive to regulate hedge funds and private equity. Their recommendations will be pooled over the next few weeks and handed to the commission.
One of the major concerns is over disclosure of company investments. Any private-equity or hedge fund that has €500m (£430m) in funds under management must report detailed information on any of their portfolio companies that turn over at least €50m.
In the UK, where the industries are sophisticated, this could end up impacting the entire private-equity mid-market groups, as well as the bigger peers the EU was initially targeting.
The British Venture Capital Association (BVCA) has estimated that there are 10,000 British companies that have a €50m-plus turnover, about 1,000 of which are private-equity owned.
The organisation believes that this puts private-equity portfolio companies at a competitive disadvantage, as they would have to provide details of their business plans. Rivals under different ownership structures would then be able to adapt their own business plans, which they would not have to publicly declare.
Mr Easton, the Carlyle Group managing director who sits on the disclosure working group, warned that the directive could end up being challenged by member states. He said: "Our starting point is that the disclosure requirements of the draft directive shouldn't even apply, given that each jurisdiction already has its own laws. Indeed, you might find that the required EU disclosures breach rules at local country level."
Mr Easton added that providing detailed information would be costly. "If you were to apply the €50m rule it would significantly increase the cost burden on many, many companies, and that's quite apart from the pressure on the FSA, which would have to recruit an army of people to oversee it," he said.
The FSA has seconded accountants and lawyers to help amend the legislation. A private-equity source echoed Mr Easton, saying: "The FSA doesn't want to regulate portfolio companies. It is practically dragging people off the street to look at this."
The BVCA believes that the cost of disclosure could be £30,000 per company, and is unnecessary because private equity already has its own, albeit lighter, code in the UK.
Mr Marshall, co-founder of hedge fund manager Marshall Wace, has campaigned extensively against the directive. A City source said that Mr Marshall had been "heroic" in his efforts.
The Government and these industries are pinning hopes on European Council president Fredrik Reinfeldt, Prime Minister of Sweden, who holds the presidency for six months. He is considered sympathetic to the UK's position.