Brussels / Washington, 29/08/2002 (Agence Europe) - While Germany objects and speaks of a "problem", the European Commission seeks to play down the risk of conflict between Community law and the new US accounting law, the so-called "Sarbanes-Oxely Act", which is to come into effect on Thursday in all companies quoted on the stock market on the other side of the Atlantic, whether American or non-American.
Talks are under way with the Securities and Exchange Commission (SEC) on practical arrangements, precisely in the hope of being able to avoid conflict and overlapping between the accounting requirements and the measures for corporate governance, said Commissioner Fritz Bolkestein's spokesperson. He stressed that the reason for this legislation, which is the result of a wave of accounting scandals, is well understood and that its broad guidelines are not being brought into question. In a letter dated 8 August 2002, the person in charge of Internal Market issues was called by the German Justice Ministry to fight this "problematical plan" which imposes "unacceptable" demands on non-American firms. From the European Commission's point of view, however, the main concern, that Mr Bolkestein had already pointed out last month in a letter to the US Congress, covers the extraterritorial scope of certain provisions, a dimension to which the Union objects almost systematically. Henceforth, an audit firm that carries out audits on a "European company in Europe" falls in principle under the scope of the new law simply because the company undergoing the probe is quoted on the American stock exchange, a problem that we "hope to settle with the SEC", it is said in Brussels. The same sources consider that, if there is the risk of conflict, it is not between US law and Community law but at national level, especially with German legislation which foresees the representation of workers in the works council that serves as audit committee, while that of the United States demands that audit officials be independent. Also, CEOs and financial directors are compelled to certify that their accounting is strictly above board, thus becoming personally responsible for the company's accounting rectitude and liable to penal sanctions if they refuse or make a deliberate "mistake", a requirement that is also imposed on US firms. "There is no discrimination", it is stressed, recalling that already in the Sotherby and Christie's affairs the American justice system had endorsed the principle of personal responsibility incumbent on company directors.