WRITTEN QUESTION E-3159/02 by Erik Meijer (GUE/NGL) to the Commission. Application of the most effective methods of combating corporate fraud to companies operating or listed inside and outside the EU.
Date: 2002-11-05
Institutions: European Parliament, Provisional data
Subjects: United States, audit, business ethics, economic offence, financial legislation, fraud, management audit

14.8.2003

EN

Official Journal of the European Union

C 192 E/99

Answer given by Mrs Wallström on behalf of the Commission

(29 January 2003)

The work on the implementation of Council Directive 96/59/ECC of 16 September 1996 on the disposal
of PCBs and PCTs is co-ordinated by two officials in the Directorate-General who, in addition to that
Directive, are also responsible for other Community environmental legislation. Furthermore, desk-officers
responsible for the implementation of Community environmental legislation in each Member State are
involved in the preparation and follow-up of infringement proceedings regarding this Directive as well as
the adequacy of available
other legislation.
resources the Commission would confirm that pursuant to Article 211 of the EC Treaty implementation of
Community legislation is a priority for the Commission. Within its limited resources the Commission is
looking to reinforce staff devoted to implementation.

In answer to the Honourable Member’s question about

France and Belgium did not supply within the prescribed period all the information required under the
provisions of Directive 96/59/EC. France was condemned by the Court in 2002 and the Commission
decided in December 2002 to initiate a second round of
legal proceedings against France, under
Article 228 of the EC Treaty, for failing to comply with the Court ruling. Following a reasoned opinion,
Belgium submitted information, which is currently being examined in relation to the legal requirements.

In 2000, the Commission initiated infringement proceedings pursuant to Article 226 of the EC Treaty by
the sending of letters of formal notice to all 15 Member States for not submitting the information required
under the provisions of Directive 96/59/EC. Apart from France, also Spain, Italy and Luxembourg were
condemned by the Court in 2002. Cases are currently going on before the Court against Germany, Greece
and Portugal. The cases against the remaining Member States have either been closed or are currently
being examined.

Decontamination of sites is not among the actions, which are generally funded by the Commission.
Nevertheless, the Commission encourages and supports any co-operation between Member States to
exchange information and jointly prevent or if not possible solve these cross-border contamination
episodes.

(2003/C 192 E/097)

WRITTEN QUESTION E-3159/02

by Erik Meijer (GUE/NGL) to the Commission

(5 November 2002)

Subject: Application of the most effective methods of combating corporate fraud to companies operating

or listed inside and outside the EU

On what grounds did Commissioner Bolkestein object on behalf of

1.
the Commission to the
application of the US Sarbanes-Oxley Act to European companies with a second listing on the New York
Stock Exchange or with subsidiaries operating in the USA? The Act in question requires businesses in the
USA to make it impossible to provide misleading financial data by imposing obligations on their senior
managers and subjecting them to independent supervision arrangements.

2.
Do the objections referred to in paragraph 1 mainly relate firstly to the requirement to set up an
independent board to oversee the supervisor and secondly to the ban on businesses extending loans to
their own directors? What is wrong with these requirements?

3. Why should it be regarded as a form of ‘extraterritorial rights’ to require businesses operating outside
the EU to comply with the rules for the prevention of corporate fraud which apply in the country where
they are operating or are listed on the stock exchange? Would it not be far truer to say that such rights
were enjoyed if businesses operating within a country’s territory were not subject to that country’s
domestic rules?

C 192 E/100

Official Journal of the European Union

EN

14.8.2003

In the interests of establishing a comprehensive system of measures against corporate fraud, will the
4.
Commission seek an agreement with the USA based on the principle that the most effective supervision
rules should apply to each party’s businesses when they operate internationally, without themselves
negotiating exceptions or allowing others to make exceptions, so that US companies which are listed on
European stock exchanges and/or have branches or subsidiaries in the EU Member States are also subject
to the rules which currently apply in the EU or are introduced by the EU in future?

Source: Dutch newspaper De Volkskrant, 9 October 2002.

Answer given by Mr Bolkestein on behalf of the Commission

(19 December 2002)

In its exchange of letters with the Chairman of the US Securities and Exchange Commission (SEC),
1.
Mr Pitt, and with US Congressmen Sarbanes and Oxley, the Commission has consistently indicated its full
support for the objectives of the Sarbanes Oxley Act, which are to ensure proper financial reporting and
hence to restore investor confidence in the capital markets. However, the Sarbanes Oxley Act, which was
adopted without any prior consultation,
includes several provisions that are disproportionate and
burdensome for EU companies and audit firms because they are already subject to equivalent Community
and national rules. In some cases, there are even clear conflicts of laws.

The European Commission has identified seven key issues of concern, such as the registration of
2.
Community audit firms at the Public Company Accounting Oversight Board (PCAOB), US access to EU
audit working papers, audit committee requirements, auditor independence,
loans to directors and
executive officers, certification of financial reports and certification of internal control systems. These issues
were discussed with Mr Pitt when the Commissioner in charge of the Internal Market and the Taxation and
Customs Union met him in early October 2002 and were followed up in the framework of the ‘EU-US
regulatory dialogue mechanism’.

A PCAOB registration of EU audit firms performing audits of EU companies with a dual listing in the US
would imply double oversight (Member State + US) for all major EU audit firms. This is unnecessary,
burdensome and inefficient and may even result in conflicts between two oversight mechanisms. As a
consequence of the registration requirements, EU audit firms would have to apply US standards on ethics,
auditing, quality assurance and auditor independence also for certain audits performed in the EU. EU audit
firms would (also in the EU) be subject to inspections by the PCAOB which would duplicate the Member
State’s quality assurance system.

As to loans to directors and executive officers, the Sarbanes-Oxley Act expressly exempts executive officers
of US banks from the prohibition. In contrast, the exemption does not apply to US-listed EU bank issuers,
even if they are subject to comprehensive consolidated supervision by their Member States’ regulators. The
SEC has recognised this as discriminatory;
the Commission has requested this discrimination to be
eliminated.

3. While the US authorities rightfully expect the same standards of conduct from companies raising
capital on American markets irrespective of whether they are domiciled in the United States or overseas,
they are not necessarily better placed than other relevant authorities to establish precise rules that ought to
apply outside the US jurisdiction. Unless exemption is granted, many EU companies and audit firms will be
subject to super equivalent rules; leading at best to duplication and at worst to conflict of rules, confusion,
double jeopardy and certainly unnecessary cost.

The Commission believes that the Sarbanes Oxley Act provides an excellent opportunity to pursue
4.
the EU-US regulatory dialogue aimed at resolving regulatory issues in a positive and constructive way. As
the Community is rapidly integrating its capital market and financial services legislation and regulation
such an EU-US dialogue will become increasingly important. The Commission will be pursuing all the
areas of concern over the next months with the SEC as the implementing rules emerge.