IBA launches a bid for exemption from whistleblowing law for firms outside US

SARBANES-OXLEY: international lawyers say legislation will affect their ability to do business

International lawyers this week called on the US Securities and Exchange Commission (SEC) to provide an exemption from the post-Enron Sarbanes-Oxley Act over fears of conflicts with national rules and overly onerous duties.

The International Bar Association (IBA) has written to SEC general counsel Giovanni Prezioso, arguing that the extension of whistleblowing rules to non-US lawyers would affect their ability to do business in the US and conflict with regulation in other countries.

Under the plans, non-US lawyers would have to decide whether there were 'material violations' of US securities laws, 'even though they are neither trained in US law nor qualified to practise there,' the IBA said.

Individual lawyers would have to voice concerns up the line of a company's management and then, if it was necessary, affect a 'noisy withdrawal' from acting (see [2002] Gazette, 14 October, 1).

The letter highlighted a string of other potential problems, such as the breadth of the proposals.

It postulated that a foreign lawyer who contributed to an agreement or local law opinion that is attached as an exhibit to a registration statement could be caught by the new rules.

Venezuelan lawyer Fernando Pelez-Pier, chairman of the IBA's business law section, said: 'In most jurisdictions, lawyer-client communication remains entirely confidential and privileged - we are concerned that Sarbanes-Oxley as currently proposed challenges this principle.'

Stephen Revell, a senior partner at City firm Freshfields Bruckhaus Deringer and a member of the section's council, said: 'We have been encouraged by the recent comments made by SEC corporation finance director Alan Beller that the SEC must be "extraordinarily open- minded" about how the rules might be applied to non-US lawyers.

'However, this still falls short of exemption.

A way forward may be to examine whether we can obtain some form of temporary exemption while further work is done [on] how to reconcile SEC and other national jurisdictional requirements.'

The American Bar Association last week set up a task force on the Act.

One issue it will examine very closely is the proposed exemption from attorney/client privilege.

The Law Society has also begun work with top City firms on their response to the proposals.

Neil Rose