Monday

22nd Apr 2019

EU concerned over loss of sovereignty over US bill

The US corporate reform bill has sparked concerned amongst EU governments that it risks extending itself to foreign companies and expose them to “double jeopardy”. Internal market Commissioner Frits Bolkestein will today, on Tuesday, send a letter to members of the congressional conference working on the legislation, warning that this bill would “pre-empt” the regulatory role of the European Commission.

EU concerns have arisen over a section of the Senate version of the bill, which would apply the new regulatory supervision to foreign as well as US auditing firms. The aim is to discourage US companies from relocating abroad in order to escape more aggressive supervision of accounting practices, the Financial Times reported.

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The Senate bill requires that foreign-based auditors of any foreign company that has a US listing be subject to supervision by a new board to prevent accounting frauds. That board would be empowered to require the auditor to produce records for such foreign companies.

While the US already has bilateral agreements with many European countries allowing access to auditing records for certain investigations, EU officials fear the bill goes much further, and could open corporate officers of European firms to both civil and criminal penalties in the US. In addition, EU officials are worried that the legislation could interfere with efforts to agree on European-wide corporate governance rules, by creating a de facto standard for all European companies that trade in the US.

The FT wrote that in a similar letter last week, the UK government said the bill “would extend the reach of US regulation beyond the territory of the United States … undermining our sovereignty right to impose a system of regulation in the UK appropriate to our own circumstances.”

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