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Cablegate: Cnil Unlocks Sox

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

171349Z Nov 05

UNCLAS PARIS 007814

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

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


1. SUMMARY: Bowing to pressure, CNIL Commissioners announced
on November 15 that they would allow US-listed companies to
enact whistleblower provisions in France, as required by
Sarbanes Oxley Section 301. CNIL published an "orientation
document" and promised to grant blanket approval to firms
that self-certify compliance. CNIL plans to take the
document to the EC WP 29, in the hopes of reaching a common
EU position. END SUMMARY.

BACKGROUND
----------
2. The French National Commission on Information and
Liberty (CNIL), a French agency set up to guard civil
liberties, has effectively reversed its decision of May 2005
that prevented firms 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, also known as
ethical hotlines).

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SOLUTION
--------
3. CNIL published an orientation document on November 15 on
its website, www.cnil.fr, in which it permits companies to
set up whistle-blowing systems under certain conditions.
Each system should be set up to respond to specific
obligations, e.g., to report financial or accounting
irregularities, or corruption. Anonymous reports are
permissible, but should not be encouraged. Companies should
maintain the confidentiality of data. Companies should
inform anyone implicated as soon as practicable to ensure
rights of opposition, access to the facts (but not the
identity of the source), and correction of facts.

4. The CNIL stated its next step would be to adopt a
decision approving in advance those systems that conform to
the conditions spelled out in its orientation document.
Companies will thereafter be able to self-certify compliance
by a simple letter to the CNIL, avoiding the need for the
CNIL to examine each company's policy on a case-by-case
basis.

5. The CNIL may issue a further note to explain the
practical steps companies will need to take, and will issue
an authoritative English translation of its orientation
document as soon as possible. CNIL will present its work at
the next meeting of the European Commission Article 29
Working Group on November 24-25, as the basis for adopting a
common position to the data privacy issues presented by
whistle-blower systems.

6. COMMENT: We have heard that associations, lawyers, and
others representing about 300 firms, both French and
multinational, had contacted CNIL to express concerns about
its prior opposition to ethical hotlines. At the Embassy,
we organized several meetings with representatives of major
and smaller US companies to devise strategic solutions and
improve on the CNIL draft text. We also actively engaged
government officials, CNIL staff and CNIL Commissioners to
advocate for SOX implementation. Although local firms
tended to acknowledge that whistle-blowing was alien to
French culture, and government officials are wary of
extraterritoriality, there is general recognition that
current trends in corporate governance point to the need to
accept stronger financial safeguards.
STAPLETON#

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