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SOX Whistleblowers Hotline Now Acceptable to the CNIL

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SOX Whistleblowers Hotline Now Acceptable to the CNIL

What was the issue?

The French people have a natural distaste for informers. Their history of wartime informers and collaborators has made it culturally challenging to accept an system which allows informers, especially anonymous informers, to have any platform where they can act. But Sarbanes Oxley requires informer hotlines. And France needs US corporations who trade in their geography to continue to trade lawfully.

Resolution

A great deal of hard work by the Commission Nationale de l'Informatique at des Libertés (CNIL) advised by Robert Bond of Faegre and Benson has created a substantial redrafting of guidelines. By kind permission of Faegre & Benson LLP we reproduce their articles here:


Faegre Helps French Redraft Guidelines on Whistleblowing Hotlines

November 21, 2005

The London office of international law firm Faegre & Benson LLP has played a major role in helping French regulator, Commission Nationale de l'Informatique at des Libertés (CNIL), to change its guidelines on setting up whistleblowing hotlines in France, which are compulsory under Sarbanes Oxley (SOX).

Prior to the involvement of Faegre & Benson and UK whistleblowing charity Public Concern at Work, the French had maintained that whistleblowing hotlines were rarely permissible under French law. A number of major global companies have had their whistleblowing policies rejected in France as a result and have been left unsure as to how to comply with their SOX requirements.

In response to companies' concerns and keen to assist companies in complying with SOX and French data protection laws, CNIL produced draft guidelines, which were put out to consultation for just ten days. SOX, which applies to any company listed in the US, requires that there is a confidential anonymous route through which employees can report concerns related to accounting and financial matters.

Robert Bond, partner and data protection expert at Faegre & Benson who was invited by CNIL to advise on the draft guidelines, said:

“The French ruled that any schemes which required employees to whistleblow or which encouraged any anonymous reporting were unlawful, a position which has left international companies in limbo, not only in relation to their SOX obligations, but also in terms of their wider risk management and corporate governance measures. In response to these companies' concerns, CNIL published draft guidelines which unfortunately begged more questions than they answered and would have resulted in even greater uncertainty.”

As a result of Faegre & Benson's advice and with the help of Public Concern at Work, CNIL has now published new guidelines which offer far greater clarity on how companies can meet their SOX requirements under French law.

Guy Dehn of Public Concern at Work, said:

“Our main concern was that the French did not appreciate the importance of whistleblowing in relation to good corporate governance and viewed it with a high degree of suspicion. We're very pleased that these new guidelines clear up some of these misunderstandings and that the French have come some way in recognising the very important role whistleblowing plays in corporate accountability and good governance.”

Robert Bond added:

“Before the revised guidelines were issued, we had a situation where it was almost impossible to advise companies in France on how to stay on the right side of both French and US law. Overall, the amendments to the guidelines are encouraging and it will be much easier to advise clients on meeting their SOX requirements in France. ”

© Faegre & Benson LLP


Update on CNIL Whistleblowing Guidelines, New Authorization Decision and SOX Compliance

January 16, 2006

Further to our previous information on this subject and our input to the CNIL Guidelines, the CNIL, has acknowledged and provided compliance options consistent with SOX. At the end of December 2005 the CNIL published a Decision (AU-004) consistent with the Guidelines, such that if the Guidelines and the Decision are followed, it will give an authorization to an organization that commits to implement a compliant whistleblowing scheme.

The Decision itself has a number of key requirements, but these mirror the Guidelines and therefore in this article where we refer to Guidelines, by implication we also incorporate reference to the Decision.

Unlike the standard authorization process, which requires the filing of a complete application which must be examined at a plenary session of the CNIL within two months of such filing (provided no additional information is requested by the CNIL), the single authorization is simpler: it is achieved by completing an on-line declaration.

This on-line declaration requires the organization implementing the whistleblowing scheme to:

  • indicate its legal nature
  • the name, address and contact details of the entity responsible for implementation
  • the name, address and contact details of the person responsible for compliance in general
  • the name, address and contact details of the person whom the CNIL can contact, and a purpose section which requires the organization to indicate which software is used, how many persons are concerned by the whistleblowing system, the year of its implementation, and whether data will be transferred to countries outside the E.U. (if so, the countries concerned have to be specified in a list)

The CNIL then issues an acknowledgement of filing and the company can implement the whistleblowing scheme without having to submit the scheme to scrutiny. Additionally, under certain conditions, this acknowledgment allows cross border transfers of personal data within the whistleblowing scheme.

If the company wishes to implement a scheme that does not precisely match the requirements of the Guidelines and Decision then it may still complete an application but this will be subject to examination by the CNIL as provided by the standard authorization process.

The Guidelines were presented to the Securities and Exchange Commission on December 8, 2005, and whilst the CNIL have not yet received the assurance that the SEC finds the Guidelines to be compatible with SOX, both parties are continuing to liaise until such an assurance is received.

During the first quarter of 2006, the CNIL has been delegated by the Article 29 Working Party with the responsibility of drafting a pan-European working document on these issues, and the CNIL Guidelines will obviously influence the document and its subsequent adoption by the Article 29 Working Party.

The options outlined above should help reduce the company's risk profile while complying with SOX. There still remains a difficulty for E.U. subsidiaries of American headquartered companies adopting “one size fits all” hotline and code of conduct policies. Because each such code is different, there are multi-dimensional compliance possibilities, for which companies should consult counsel. At a minimum, hotline policies need to be drafted and implemented in accordance with E.U. data protection and labor laws, including, in France, the CNIL Guidelines and the Decision.

© Faegre & Benson LLP


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