De Brauw Blackstone Westbroek
Telephone: (31-70) 328 5328
Via e-mail: firstname.lastname@example.org
Mr. Jonathan G. Katz, Secretary
Peter N. Wakkie - advocaat
Amsterdam, April 7, 2003
Dear Mr. Katz,
1.1 We are a Dutch law firm of over 400 attorneys. Our firm represents a broad range of corporate clients from The Netherlands and other jurisdictions. Our corporate clients include many companies that are listed on U.S. stock exchanges and have securities registered under the U.S. Securities Exchange Act of 1934. Our firm has offices in The Netherlands, New York and London. This letter is sent on behalf of all offices.
1.2 We appreciate the Commission´s consideration of our comments and the comments of other practitioners in its revision of the initially proposed rules in Release No. 33-8150 (the "First Proposing Release"). These rules relate to standards of professional conduct for attorneys in implementation of section 307 of the 2002 Sarbanes-Oxley Act. We are particularly appreciative of the Commission´s decisions to (i) exempt foreign attorneys under certain circumstances and (ii) defer final action with respect to its initial noisy withdrawal proposal.
2. Summary of comments
2.1 We are currently responding to Release No. 33-8185 (the "Adopting Release") and Release No. 33-8186 (the "Second Proposing Release"). In the Second Proposing Release the Commission solicits comments on rules in both the Adopting and Second Proposing Release (together, after entering into force, the "Standards of Professional Conduct").
2.2 Our comments regard the definition of "non-appearing foreign attorney" in section 205.2(j) as adopted ("Section 205.2(j)"). The attorneys within our firm are all members of the Dutch bar. All attorneys - including those in New York and London - practice Dutch, Netherlands Antilles and Aruban law only. As a consequence, all attorneys ought to qualify under the definition of non-appearing foreign attorney. Although the language on its face allows for such an interpretation, ambiguity remains. The purpose of our comments is to remove that ambiguity.
3. Ambiguity in Section 205.2(j)
3.1 Section 205.3(b) as adopted provides that the Standards of Professional Conduct will be applicable to any "attorney, appearing and practicing before the Commission in the representation of an issuer, [who] becomes aware of evidence of a material violation by [such] issuer", among other parties.
3.2 As an exemption from this rule, section 205.2(a)(2)(ii) as adopted stipulates that "appearing and practicing before the Commission" does not include "an attorney who is a non-appearing foreign attorney". Qualifying as non-appearing foreign attorney is therefore essential for non-applicability of the Standards of Professional Conduct.
3.3 Section 205.2(j) defines a non-appearing foreign attorney as "(...) an attorney:
(1) Who is admitted to practice law in a jurisdiction outside the United States;
(2) Who does not hold himself or herself out as practicing, and does not give legal advice regarding, United States federal or state securities or other laws (except as provided in paragraph (j)(3)(ii) of this section); and
(i) Conducts activities that would constitute appearing and practicing before the Commission only incidentally to, and in the ordinary course of, the practice of law in a jurisdiction outside the United States; or
(ii) Is appearing and practicing before the Commission only in consultation with counsel, other than a non-appearing foreign attorney, admitted or licensed to practice in a state or other United States jurisdiction."
Scope of covered attorneys in general
3.4 Our first comment concerns the exact scope of covered foreign attorneys in general. In our opinion, Section 205.2(j) should make clear that all foreign attorneys who practice - in short - foreign law only fall within its ambit. In other words: Any attorney meeting prong (1) and prong (2) of Section 205.2(j) ought already qualify.
3.5 We acknowledge that such a reading is possible. Nonetheless, the addition of prong (3) to Section 205.2(j) in conjunction with the word "and" indicates that a third test should be met. The apparent meaning of prong (3) is to also bring within the scope of Section 205.2(j) those foreign attorneys who - in short - (i) would appear and practice before the Commission only incidentally to the practise of foreign law or (ii) would advise on U.S. law only in consultation with U.S. counsel.
3.6 Part (ii) of prong (3) is consistent with the reading that foreign attorneys who do not practice U.S. law will without more qualify as "non-appearing foreign attorney". Part (i) of prong (3) however leaves open for argument that foreign attorneys practicing foreign law only must nonetheless also appear and practice before the Commission incidentally to the practice of foreign law in order to qualify.
3.7 We believe that this interpretation is unwarranted and ought to be corrected. Firstly, meeting prong (1) and (2) will by default render any activity by a foreign attorney before the Commission incidental to the practise of foreign law. As such, part (i) of prong (3) does not have independent legal significance. More importantly, part (i) of prong (3) creates ambiguity as to which activities would, and which activities would not constitute "appearing and practicing before the Commission only incidentally to, and in the ordinary course of, the practice of law in a jurisdiction outside the United States".
3.8 We think that the goal of exempting foreign attorneys who do not practice U.S. law from obligations under the Standards of Professional Conduct is served by a clear safe harbor that such attorneys are - without more - exempted. Needless to say, foreign attorneys advising on U.S. law would remain exempted when in compliance with part (ii) of prong (3). We politely request the Commission to adjust Section 205.2(j) accordingly.
Foreign attorneys admitted in the U.S.
3.9 Our second comment concerns the coverage of foreign attorneys who practice foreign law only, but who are also admitted to practice law in a jurisdiction within the U.S. It is not uncommon that attorneys licensed to practice law in The Netherlands are also licensed in the U.S. Our firm employs several such attorneys. As said, however, all attorneys within our firm - including those in New York and London - practice Dutch, Netherlands Antilles and Aruban law only.
3.10 Assuming that a mere admission in a U.S. jurisdiction does not qualify as holding oneself out as practicing U.S. law as provided for in Section 205.2(j)(2), a strict interpretation of Section 205.2(j) would allow foreign attorneys admitted in the U.S. to rely on the exemption for non-appearing foreign attorneys, provided they would not practice U.S. law (or only in consultation with U.S. counsel).
However, it is - although admittedly not likely - not beyond doubt that Section 205.2(j)(1) might be misinterpreted to apply to an attorney "Who is only admitted to practice law in a jurisdiction outside the United States". Such reading would disqualify foreign attorneys also admitted in the U.S. (but practicing foreign law only).
3.11 We feel it is the Commission´s unequivocal intention to - all other requirements having been met - exempt foreign attorneys also admitted in the U.S. from application of the Standards of Professional Conduct (as well). In the interest of clarity, however, we deem it prudent to suggest revising Section 205.2(j)(1) so that it reads as follows:
3.12 It is our expectation that the suggested amendment to Section 205.2(j)(1) will further a clear safe harbor for foreign attorneys also admitted in the U.S. but not practicing U.S. law (or holding themselves out as such). At the least, it will negate any ambiguity in this respect.
4. Closing remark
4.1 We assume that our suggested interpretation and amendment of Section 205.2(j) will - in conjunction with the sections referred to under 3.1 and 3.2 - unambiguously preempt application of the Standards of Professional Conduct to foreign attorneys practicing foreign law only, even when also admitted in the U.S. For this reason, we do not consider ourselves in a position to comment on other aspects of the Adopted Release and the Second Proposing Release.
4.2 In the event our assumption would be incorrect, we would like to reiterate our observations as set forth in our comment letter of December 18, 2002, especially with regard to the Commission´s initial noisy withdrawal proposal. In compliance with footnote 25 of the Second Proposing Release, we will refrain from restating them here.
We would like to thank you for your attention to the above. If you have any questions regarding this letter, please feel free to contact us.