Cablegate: Cnil Talks to Unblock Sox

This record is a partial extract of the original cable. The full text of the original cable is not available.

131127Z Oct 05

UNCLAS PARIS 007031

SIPDIS

PASS SEC FOR SBOONE
PASS FEDERAL RESERVE
STATE FOR EB AND EUR/WE
TREASURY FOR DO/IM MSOBEL AND LHULL
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER
LABOR FOR ILAB
USDOC FOR 4212/MAC/EUR/OEURA

SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON PGOV FR
SUBJECT: CNIL TALKS TO UNBLOCK SOX

SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET

1. (SBU) SUMMARY: We met with CNIL to discuss its opposition
to listed companies' whistleblower provisions, as required
by Sarbanes Oxley Section 301. CNIL says it has developed
guiding principles to resolve the conflict of law, which it
soon will share informally with interested parties. END
SUMMARY.

BACKGROUND
----------
2. (U) The French National Commission on Information and
Liberty (CNIL), a French agency set up to guard civil
liberties, issued two decisions in May 2005 that prevent
firms, listed in US markets but doing business in France,
from complying with Sarbanes Oxley (SOX) Section 301. That
section requires audit committees of publicly traded
companies to establish procedures for confidential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters (e.g.,
whistleblower systems, or "hotlines"). We are aware that US
Securities and Exchange Commission (SEC) staff members have
been in direct contact with CNIL to find a solution.

3. (SBU) A number of representatives of US-listed firms have
contacted us to discuss the conundrum, how to go about
designing a solution, and how to propose any solution
without risking CNIL sanctions (which include both civil and
criminal penalties). Issues identified include the extent
of CNIL jurisdiction, other financial reporting obligations,
good faith requirements, the practicality of anonymity
issues in small offices or worksites, and labor law issues
including union views. Companies represented in such
discussions have included Coca-Cola, the Walt Disney
Company, Johnson & Johnson, along with a number of other
firms' local attorneys.

4. (SBU) We met with Christophe Pallez, CNIL Secretary
General, and with Clarisse Girot, head of international and
European Affairs at CNIL, on October 13, to present local
firms' concerns, express our interest in furthering
corporate governance principles, and explore possible
solutions to the firms' hesitation on presenting proposals.
Pallez said the CNIL has received many inquiries about its
decisions, and has been working with other French Ministries
to determine the parameters of a possible compromise. CNIL
has been preparing a draft document with guiding principles,
which it will finish in the next few days. It will then
consult with interested parties, informally by circulating
the draft, before presenting the document to the
Commissioners for their approval in a few weeks. The
substance of the proposal is to carve out whistleblowing
systems for strictly accounting and auditing matters,
leaving other issues to be governed by current French law
(which prevents anonymous accusations and transmission of
data containing such accusations). Pallez promised to
provide us the draft as well. He mentioned CNIL's
participation in European Commission Article 29 Working
Group, arguing that the French effort there is designed to
harmonize 25 possibly different approaches to the data
privacy issues presented by ethical hotlines. Girot stated
she is preparing a working paper for presentation to the
next meeting in November.

5. (SBU) COMMENT: Once we get a copy of the CNIL draft, we
will share it with the representatives of the firms who have
contacted us, to see if it is both responsive and
practicable. If that is the case, it could help lessen the
impact of the French effort to block SOX throughout the EU.
STAPLETON#

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