The Economic and Financial Affairs Council (Ecofin) of the European Union (EU) was planning to discuss the implementation of the Alternative Investment Fund Manager directive yesterday (March 16th 2010) but plans for the talks were shelved.
Earlier in the week, Mr Brown called Jose Luis Rodriguez Zapatero, the Spanish prime minister, to tell him the plans were unacceptable to the UK.
In its current role as president of the EU, Spain then removed the discussion from the agenda for the Ecofin meeting.
Elena Salgado, Spain's finance minister, told the Independent that it is important to get "as much consensus on this as possible and we think there is more room to manoeuvre so we can get it".
She added: "It is a major priority of ours to get a deal on hedge funds through during our presidency, so we still have a few weeks ahead of us to get this done."
The main problem in reaching a compromise is said to be a disagreement on which hedge funds would be allowed to offer their services to countries outside of the EU.
In the UK, which is home to much of the hedge fund activity that occurs in Europe, it is felt that the plans are an attempt by France and Germany to limit its dominance of the financial services industry.
Andrew Shrimpton, of the management consultancy Kinetic Partners, said: "Probably 80 per cent of Europe's hedge funds are based in the UK and a lot of those are connected to the US. This is seen as an Anglo-American industry."
Last week, US Treasury secretary Tim Geithner waded into the debate â sending a letter to Michel Barnier, Europe's internal market commissioner, stating that the EU should not push ahead with regulatory reform on hedge funds without international backing.
By Claire Archer