December 3, 2001

Re:

Mandated EDGAR Filing for Foreign Issuers
File No. S7-18-01

Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Dear Mr. Katz:

We are pleased to respond to the Commission's request for written comments on the amendments proposed in Release Nos. 33-8016, 34-44868, and International Series No. 1250 (September 28, 2001) (the "Release") to Regulation S-T and Rule 403(c) under the Securities Act of 1933 (the "Securities Act"), Rule 12b-12 under the Securities Exchange Act of 1934 (the "Exchange Act") and Exchange Act Form 6-K relating to mandatory EDGAR filing by foreign issuers. We generally support the proposal to require foreign issuers to file Securities Act registration statements and certain Exchange Act reports electronically through the EDGAR system; however we believe that:

Davis Polk & Wardwell regularly represents foreign companies that are reporting companies under or otherwise from time to time subject to the U.S. securities laws. This representation informs our comments regarding the proposed rule and form changes, although the comments are solely our own and are not intended to represent the views of any client.

Translation Requirements

As noted in the Release, the Commission staff typically has not permitted summaries of exhibits that "in the staff's view are too important to present in an abridged fashion", such as articles of incorporation, bylaws, instruments defining the rights of shareholders and exhibits containing financial statements.1 The Release then suggests that this list comprises most of the exhibits required for a Form 20-F registration statement or annual report. In our experience, however, there is a wide range of additional documents that may be required to be filed as exhibits to reports on Form 20-F, other Exchange Act filings (such as Schedule TO), and Securities Act filings. The most significant such additional document category is material contracts. For the reasons set forth below, we believe that any expansion of the translation requirement beyond that currently imposed on an informal basis by the staff would impose a burden on foreign issuers without generating any material benefits for investors.2Accordingly, we recommend that no change be made to Rule 403(c) under the Securities Act and Rule 12b-12(d) under the Exchange Act. We further recommend that no change be made to the foreign language instructions contained in Form 6-K, Form CB and the MJDS forms. Finally, we recommend that Rule 306 under Regulation S-T be amended to allow foreign issuers to file English language summaries of foreign language documents electronically through EDGAR and that Form SE be amended to enable filers to submit a paper copy of a foreign language document when electronically filing an English summary of that document.

The translation requirement would impose financial costs

Adoption of the blanket translation requirement proposed by the Commission would require foreign issuers to incur additional costs in order to achieve compliance. These costs will vary depending on the number of documents to be translated, the number of pages per document and the foreign language to be translated. In New York, for example, the going rate to translate a document from Spanish, Portugese or French into English is between $0.18 and $0.24 per word, which for a fifty-page document amounts to a range of approximately $2,250 to $3,000 (assuming 250 words per page). The going rate in New York to translate a fifty-page document from German to English is between $2,500 and $2,750; to translate the same document into the English language from Japanese and Russian would typically cost in the range of $4,000 to $4,375 and $3,500 to $3,750, respectively.3 Moreover, once a document has been translated by a service company, the translation must be reviewed by the foreign issuer and its lawyers for accuracy, as professional translators generally do not have sufficient legal and technical training to understand many aspects of the documents they are asked to translate. It is very difficult to estimate the costs of this extra layer of translation review, but in most cases it would exceed the cost of the translation service. The expense associated with subjecting all documents to a line-by-line translation, while not prohibitive, would constitute a burden on foreign issuers.

The translation requirement would also impose delays in filing and transaction timing

Compliance with the proposed blanket translation requirement would not only prove expensive for many foreign issuers but, more importantly, would be time-consuming and could delay filings. The potential delay associated with an expanded translation requirement arises from the two-fold translation process described above. In many financing and acquisition transactions, timing is critical, and the burden of translating documents in addition to those currently required by the staff to be translated could affect the ability of parties to make filings in the time frame required for execution of the transaction. For example, Exchange Act Rule 14d-3 mandates that as soon as practicable on the date of the commencement of a tender offer the bidder file with the Commission a Tender Offer Statement on Schedule TO, including all exhibits thereto. Adopting the requirement that all exhibits to Schedule TO be translated could affect the ability of businesses to act strategically in the M&A context. The translation of documents could also hinder the speed with which parties can access the capital markets in a financing transaction.

Imposition of a blanket translation rule would provide limited benefits to investors

We believe that requiring a full translation of those documents that foreign issuers are now permitted to submit in summary form would provide limited benefits to investors because such documents generally are not material to investors except for those limited aspects of the documents that are described by the issuer elsewhere in its filings. Whereas documents of the types currently required by the staff to be translated, such as by-laws or other documents establishing the rights of securities holders, often are important to investors in their entirety, typically only limited portions of those classes of documents not currently required to be translated (such as material contracts) are similarly relevant. For example, the exclusivity provisions of a supply contract may be highly relevant to investors, while the same contract's voluminous technical annexes are not. To require a word-for-word translation of such a contract, instead of a summary, together with accurate disclosure of the exclusivity and other material provisions, would impose a burden on issuers without generating any commensurate benefit for investors.

We believe that adequate incentive to provide complete and accurate disclosure of the content of those documents not currently required by the staff to be translated is ensured by the various antifraud provisions of the federal securities law. Under these provisions, an issuer risks enforcement proceedings or third-party litigation for any filing that is misleading as a result of the omission to disclose any material aspect of an exhibit or other foreign language document. Moreover, issuers are specifically required to provide summaries of all material contractual obligations by Form 20-F.

Investors would, of course, benefit from electronic access to the English summary of a foreign issuer's foreign language documents. Accordingly, we respectfully recommend that the Commission consider amending Regulation S-T Rule 306 to permit a foreign issuer to file electronically its English summaries of foreign language documents. In addition, we urge the Commission to consider amending Form SE to enable filers to submit a paper copy of a foreign language document when electronically filing an English summary of that document.

The written representation requirement should be eliminated

We respectfully urge the Commission to eliminate the Regulation S-T Rule 306 requirement that a designated official of a filer attest in writing to the accuracy of the English translation of a foreign language document. Under current Commission rules and forms, at least one officer of an issuer is required to sign each Securities Act and Exchange Act filing and submission made by the issuer. In addition, issuers and, in certain cases, their officers, may be held liable for misstatements and omissions in such filings and submissions as described above. In light of these signature requirements and liability provisions, we believe the certification requirement is unnecessary. In fact, we believe that the requirement may be interpreted as adding an independent, higher standard of liability for document translations. We do not believe that a higher standard of liability is appropriate and, accordingly, respectfully request that the Commission consider amending Regulation S-T Rule 306 to eliminate the requirement.

EDGAR filing of Reports on Form 6-K

Documents submitted to the Commission on Form 6-K fall into two categories:

For the reasons described below, we believe that only (i) Filed 6-K's and (ii) those Furnished 6-K's containing interim financial statements should be required to be filed through EDGAR.

Form 6-K submissions of foreign private issuers differ substantially from the analogous Exchange Act filings made by domestic issuers. Domestic issuers file three 10-Q's per year and an occasional 8-K, all of which are required to be incorporated by reference into an issuer's Securities Act registration statements and all of which subject the issuer to liability under Section 18 of the Exchange Act. These filings are in almost all cases prepared well in advance of submission to the Commission, thereby allowing time for the EDGAR process. By contrast, foreign private issuers typically submit a large number of reports on Form 6-K, only a small subset of which -- generally a 10-Q-equivalent containing interim financial statements -- is likely to be incorporated by reference into a Securities Act registration statement. The remaining reports, which comprise the substantial majority of 6-K submissions, consist mainly of copies of press releases and other documents already made public by the issuer. Typically, the issuer has little lead time in which to "EDGARize" these documents prior to their submission on Form 6-K, as the press releases themselves are not prepared long in advance of their release.4

We believe that there are clear benefits to be gained from requiring foreign private issuers to submit Filed 6-K's via EDGAR as well as Furnished 6-K's that contain interim financial statements. Accordingly, we support the proposed rule and form changes in this respect. The burden associated with submission of these documents via EDGAR would be limited by the long lead-time in which they are prepared. In addition, Filed 6-K's clearly should be available over EDGAR if the registration statements into which they are incorporated are themselves so available. However, this cost-benefit analysis does not apply to the submission via EDGAR of other Furnished 6-K's. These reports are not incorporated by reference in Securities Act registration statements and generally are not prepared long in advance of filing. Moreover, the content of these submissions -- as reflected by the absence of any requirement to include their content in Securities Act registration statements -- is generally of less relevance to investors than that included in Filed 6-K's and Furnished 6-K's containing interim financial statements. Accordingly, we believe that the Commission should continue to permit the submission of Furnished 6-K's on paper, with one exception: reports on Form 6-K containing interim financial statements should be filed via EDGAR, as these documents share the long lead preparation time and relevance of Filed 6-K's.

Conclusion

For the reasons set forth above, we are of the view that (i) the Commission should not adopt a blanket translation rule but rather leave in place its current requirements with respect to translation and (ii) only reports on Form 6-K that are incorporated by reference into a Securities Act registration statement or contain interim financial statements should be required to be submitted through EDGAR.

We appreciate the opportunity to comment on the Commission's proposals on mandated EDGAR filing for foreign issuers. Please do not hesitate to call the undersigned at (212) 450-4950, Andrés Gil in Madrid at 011-3491-702-2755 or Margaret Tahyar in London at 011-44-20-7418-1394 to discuss the comments contained in this letter.

Very truly yours,

Nicholas A. Kronfeld
ENDNOTES

1 Release Nos. 33-8016, 34-44868, Mandated Edgar Filing for Foreign Issuers, Section II.D.2
2 We note that, in the case of reports on Form 6-K, certain documents presently are not required to be translated or summarized, but rather briefly described. See Form 6-K, General Instruction D.
3 We have used a 50 page document as an example, but the documents that would be required to be translated under the Proposal in many cases would exceed 50 pages.
4 We have performed a random sampling of the SEC filings of 132 foreign issuers during the 12-month period from October 2000 to September 2001. Our survey revealed that a significant number of issuers filed more than one 6-K per month, or more than 12 per annum. See Appendix A attached hereto. In fact, the average number of 6-K's filed by the issuers surveyed was 17.6 per annum, and the range varied from one 6-K filing per annum to as many as 290 6-K filings per annum.

 

APPENDIX A

Issuer Country of Incorporation Stock Exchange Industry No. of Forms 6-K filed in the 12-month period from October 2000 through September 2001
ABN AMRO Holding N.V. The Netherlands NYSE Banking 8
Advanced Semiconductor Engineering Inc. Taiwan NYSE Electrical Equipment 10
Aegon N.V. The Netherlands NYSE Insurance 15
Alcatel France NYSE Telecom Data Networking 8
Amcor Ltd. Australia NASDAQ Paper and Forest Products 2
Amvescap plc U.K. NYSE Financial Services Investment 290
Antenna TV SA Greece NASDAQ Telecom Data Networking 3
Atlas Pacific Ltd. Australia NASDAQ Luxury Goods 2
AXA France NYSE Insurance 16
Barbeques Galore Ltd. Australia NASDAQ Retailing 3
Biora AB Sweden NASDAQ Biotechnology 11
Brilliance China Automotive Holdings Ltd. Hong Kong NYSE Automobile Auto Parts 12
Bunzl plc U.K. NYSE Packaging 8
Banco Bilbao Vizcaya Argentaria, S.A. Spain NYSE Banking 28
Banco Santander Central Hispano, S.A. Spain NYSE Banking 35
Banco Santander Chile, S.A. Chile NYSE Banking 9
BASF AG Germany NYSE Chemicals 7
BBVA Banco Francés S.A. Argentina NYSE Banking 10
Blue Square - Israel Ltd. Israel NYSE Retailing 10
British Airways plc U.K. NYSE Airlines 4
British Sky Broadcasting Group plc U.K. NYSE Media and Entertainment 19
Buhrmann N.V The Netherlands NYSE Office Equipment Supply 14
Cadbury Schweppes plc U.K. NYSE Beverage 10
Canon Inc. Japan NYSE Office Equipment Supply 7
Carlton Communications plc U.K. NASDAQ Media and Entertainment 2
Chartered Semiconductor Singapore NASDAQ Engineering Machinery 26
China Convergent Corporation Ltd. Hong Kong NASDAQ Construction and Housebuilding 17
China Mobile (Hong Kong) Ltd China NYSE Telecom Data Networking 32
China Petroleum and Chemical Corporation China NYSE Oil and Gas Service 17
China Southern Airlines Co., Ltd. China NYSE Airlines 6
Cemex S.A. de C.V. Mexico NYSE Construction and Housebuilding 5
Coca Cola Femsa S.A. de C.V. Mexico NYSE Beverage 7
Compagnie Generale de Geophysique France NYSE Oil and Gas Services 18
Companhia Vale do Rio Doce Brazil NYSE Mining and Minerals 66
Compañia Nacional Teléfonos de Venezuela CANTV Venezuela NYSE Telecom Data Networking 3
Crucell N.V. The Netherlands NASDAQ Biotechnology 2
Dassault Systemes S.A. France NASDAQ Technology: Software 32
Delhaize Le Lion S.A. Belgium NYSE Food, Agribusiness, Tobacco 2
Deutsche Telekom AG Germany NYSE Telecom Data Networking 26
Dresdner Bank AG Germany OTC Banking 1
Diageo plc U.K. NYSE Beverage 14
Elsevier N.V. The Netherlands NYSE   20
Endesa, S.A. Spain NYSE Utilities Gas and Electricity 39
Enersis S.A. Chile NYSE Utilities Gas and Electricity 19
Espirito Santo Financial Group S.A. Luxembourg NYSE Financial Services Investment 10
FutureMedia plc U.K. NASDAQ Media and Entertainment 5
Gemini Genomics plc U.K. NASDAQ Pharmaceuticals Healthcare 7
GlaxoSmithKline plc U.K. NYSE Pharmaceuticals Healthcare 153
Gruma S.A. de C.V. Mexico NYSE Food, Agribusiness and Tobacco 8
Guangshen Railway Co. Ltd. China NYSE Transportation Services 8
Hanaro Telecom Inc. Korea NASDAQ Telecom Data Networking 8
Hitachi Limited Japan NYSE Electrical Equipment 8
Honda Motor Company, Ltd. Japan NYSE Automobiles Auto Parts 11
Huaneng Power International, Inc. China NYSE Utilities Gas and Electricity 11
I-Cable Communications Inc. Hong Kong NASDAQ Telecom Data Networking 4
ICICI Bank Ltd. India NYSE Banking 21
ICICI Ltd. India NYSE Financial Services Investment 19
Ilog S.A. France NASDAQ Technology: Software 6
Infosys Technologies Ltd. India NASDAQ Technology: Services 3
Korea Electric Power Corporation Korea NYSE Utilities Gas and Electricity 14
Korea Telecom Korea NYSE Telecom Data Networking 20
Kyocera Corporation Japan NYSE Consumer Electronic Parts 10
Lion Bioscience AG Germany NASDAQ Biotechnology 10
Logitech International S.A. Switzerland NASDAQ Technology: Software 5
LVMH Moet Hennessy Louis Vuitton France NASDAQ Luxury Goods 45
Macronix International Co. Taiwan NASDAQ Technology: Service 3
Makita Corporation Japan NASDAQ Electrical Equipment 4
Matav Cable Systems Media Ltd. Israel NASDAQ Telecom Data Networking 23
Mitsui & Company, Ltd. Japan NASDAQ Multi-Industry 5
Mobile Telesystems Russia NYSE Telecom Data Networking 40
National Bank of Greece Greece NYSE Banking 18
Netia Holdings S.A. Poland NASDAQ Telecom Data Networking 16
Nice Systems Ltd. Israel NASDAQ Multi - Industry 18
Nippon Telegraph & Telephone Corporation Japan NYSE Telecom Data Networking 10
Nokia Corporation Finland NYSE Telecom Data Networking 14
Nortel Inversora, S.A. Argentina NYSE Telecom Data Networking 27
Novartis AG Switzerland NYSE Pharmaceutical Healthcare 19
Novo Nordisk AS Denmark NYSE Pharmaceutical Healthcare 20
Orix Corporation Japan NYSE Financial Services Investment 11
Pacific Century Cyberworks Hong Kong NYSE Telecom Data Networking 14
Pechiney S.A. France NYSE Packaging 18
Pérez Companc, S.A. Argentina NYSE Utilities Gas and Electricity 19
Petrochina Co. Ltd China NYSE Oil and Gas Service 6
Pfeiffer Vacuum Technology AG Germany NYSE Engineering Machinery 3
Pioneer Corporation Japan NYSE Consumer Electronics -Parts 9
Portugal Telecom Portugal NYSE Telecom Data Networking 55
Premier Farnell plc U.K. NYSE Electrical Equipment 23
PSI Technologies Holdings Inc. The Philippines NASDAQ Technology: Hardware 8
PT Pasifik Satelit Nusantara Indonesia NASDAQ Telecom Data Networking 3
Publicis Groupe S.A. France NYSE Printing and Publishing 4
Quilmes Industrial Quinsa, S.A. Argentina NYSE Food, Agribusiness, Tobacco 4
Repsol - YPF, S.A. Spain NYSE Oil and Gas Service 33
Reuters Group plc U.K. NASDAQ Media and Entertainment 17
Royal Bank of Scotland Group plc U.K. NYSE Banking 14
Royal Dutch Petroleum Co. The Netherlands NYSE Oil and Gas Service 15
Santa Isabel S.A. Chile NYSE Food, Agribusiness and Tobacco 6
Satyam Infoway Ltd India NASDAQ Technology: Hardware 9
Scania AB Sweden NYSE Automobile Auto Parts 11
Schering AG Germany NYSE Pharmaceutical Healthcare 42
Serono S.A. Switzerland NYSE Biotechnology 28
Siemens AG Germany NYSE Engineering Machinery 9
Siliconware Precision Industries Co. Taiwan NASDAQ Technology: Hardware 9
Sinopec Shanghai Petrochemical Co. China NYSE Chemicals 4
SK Telecom Co. Ltd. Korea NYSE Telecom Data Networking 7
Sony Corporation Japan NYSE Consumer Electronics - Parts 14
ST Assembly Test Services Ltd. Singapore NASDAQ Electrical Equipment 17
Stolt - Nielsen S.A. Luxembourg NASDAQ Transportation: Services 6
Super - Sol Ltd. Israel NYSE Retailing 13
Tatneft Russia NYSE Oil and Gas Service 6
Telecom Argentina STET France Telecom S.A. Argentina NYSE Telecom Data Networking 28
Telecom Austria AG Austria NYSE Telecom Data Networking 6
Telefónica, S.A. Spain NYSE Telecom Data Networking 63
Telefónica de Argentina S.A. Argentina NYSE Telecom Data Networking 14
Telefónica del Perú S.A.A. Peru NYSE Telecom Data Networking 17
Telefónica Móviles, S.A. Spain NYSE Telecom Data Networking 25
Tele Norte Leste Participações, S.A. Brazil NYSE Telecom Data Networking 9
Telemig Celular Participações, S.A. Brazil NYSE Telecom Data Networking 5
Tele Sudeste Celular Participações, S.A. Brazil NYSE Telecom Data Networking 14
Terra Networks, S.A. Spain NASDAQ Technology: Services 26
Total Fina ELF S.A. France NYSE Oil and Gas Service 9
Transgene S.A. France NASDAQ Pharmaceutical Healthcare 12
Turkcell Iletisim Hizmetleri AS Turkey NYSE Telecom Data Networking 35
Ultrapar Participaçoes S.A. Brazil NYSE Oil and Gas Service 6
United Microelectronics Corp. Taiwan NYSE Electrical Equipment 9
United Utilities plc U.K. NYSE Utilities Gas and Electricity 46
Vimpel Communications Russia NYSE Telecom Data Networking 2
Vivendi Universal France NYSE Media and Entertainment 45
Wacoal Corporation Japan NASDAQ Textiles 8
Wherever Net Holding Corp. Hong Kong NASDAQ Telecom Data Networking 4
Wipro Ltd India NYSE Technology: Services 6
Xeicon N.V. Belgium NASDAQ Printing and Publishing 3
Yanzhou Coal Mining Company Limited China NYSE Mining and Minerals 4