File No. 33-8150.WP - Comments on new proposed rule of Standards of Professional Conduct for Attorneys From: Bakhshov Alex [Alex.Bakhshov@O2.com] Sent: Thursday, December 19, 2002 1:35 PM To: 'rule-comments@sec.gov' Cc: Bramwell Philip Subject: File No. 33-8150.WP - Comments on new proposed rule of Standards of Professional Conduct for Attorneys Dear Mr Katz mmO2 plc is grateful to the Securities and Exchange Commission ("SEC") for giving it the opportunity to comment on the proposed rule on professional standards for lawyers appearing and practising before the SEC. Part 205 exceeds SEC's mandate and violates English legal professional privilege For the reasons set out below we contend that the new proposed Part 205 should not apply to a foreign issuer resident in the UK. The proposed rule, Part 205 to Title 17, Chapter II, of the Code of Federal Regulations, in response to Section 307 of the Sarbanes Oxley Act ("Act") exceeds the SEC's mandate under the Act. Furthermore, the proposed Part 205 also infringes legal professional privilege ("Privilege") as recognised in English common law. Subsection 205.3(a) is expected to affirm that the lawyer represents an issuer as an entity rather than the officers or others with whom the lawyer interacts in the course of that representation and that therefore the proposed rule does not infringe the Privilege. This fails to take into consideration both the underlying rationale in English common Law for the existence of the Privilege and the practical difficulties in applying this notion in practice. Section 307 - SEC's Mandate Section 307 of the Act is set out here in full for ease of reference: " SEC.307.RULES OF PROFESSIONAL RESPONSIBILITY FOR ATTORNEYS. Not later than 180 days after the date of enactment of this Act, the Commission shall issue rules, in the public interest and for the protection of investors, setting forth minimum standards of professional conduct for attorneys appearing and practising before the Commission in any way in the representation of issuers, including a rule- (1) requiring an attorney to report evidence of a material violation of securities law or breach of fiduciary duty or similar violation by the company or any agent thereof, to the chief legal counsel or the chief executive officer of the company (or the equivalent thereof); and (2) if the counsel or officer does not appropriately respond to the evidence (adopting, as necessary, appropriate remedial measures or sanctions with respect to the violation), requiring the attorney to report the evidence to the audit committee of the board of directors of the issuer or to another committee of the board of directors comprised solely of directors not employed directly or indirectly by the issuer, or to the board of directors. " SEC Proposal In its response to this mandate the SEC proposed Part 205, which broadly requires a lawyer who appears or practices before the SEC (i.e. prepares or is involved in the preparation of filings with the SEC) to report evidence of a "material violation". Under the rule the lawyer would be required initially to make a report of such violation to the chief legal officer (General Counsel or Company Secretary in the UK - referred to below as "CLO"). Receipt of such a report would oblige the CLO to determine whether to conduct an inquiry into the reported material violation. The CLO may conclude that no action needs to be taken, in which the CLO would provide a notice to the reporting lawyer of the CLO's conclusion. If the CLO concludes that a material violation has occurred, is occurring or is about to occur, CLO would be required to ensure that the issuer adopts appropriate remedial measures and the CLO would be required to report "up the ladder" within the issuer what remedial measures have been adopted and to advise the reporting attorney of his or her conclusions. In particular Subsection 205.3(d) would deal with the obligation of an lawyer who has not received an appropriate response from the issuer and in certain circumstances would require him to make a "noisy withdrawal" and disaffirm a submission made by his or her client to the SEC. This last provision is not mandated by Section 307 of the Act and, we submit, breaches the Privilege as recognised in English common law. Both in-house lawyers and external legal advisors are consulted by officers and employees (at various levels of seniority) within a company for the purpose of entering into agreements, effecting transactions or generally carrying out any action on behalf of the company. Such advice is sought for the purpose of establishing that a proposed course of action is in the best legal interests of the company and compliant with generally applicable law. Such communications will in many cases have implications for public disclosures that have been made or will consequently be made and will thus fall within the scope of proposed Part 205. Subsection 205.3(a) will state that the privilege exists between the entity and the lawyer and so the communications referred to are not the subject of legal privileged. The concept of the entity as the client can have no practical application, indeed if the communications referred to above were not protected, there would be fewer candid and open communications internally and externally with legal advisers. This would increase, rather than decrease, the risk of unlawful conduct by denying officers and employees access to legal advice with the protection of privileged communication. Legal Privilege under English Law The concept proposed by Subsection 205.3 (a) fails to recognise the underlying rationale for the existence of the Privilege which was articulated as early as the nineteenth century by Lord Broughman LC (1 My & K 98 at 103, [1824-34] All ER 767 at 770): "The foundation of this rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers. But is out of regard to the interest of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case." This principle which underlies the notion of the Privilege has been repeated many times since and as such is a fundamental tenet of English common law. More recently in Hobbs v Hobbs and Cousens [1959] 3 All ER 827 at 829, [1960] P112 at 116-117 Stevenson J said: "... privilege has a sound basis in common sense. It exists for the purpose of ensuring that there shall be complete and unqualified confidence in the mind of a client when he goes to his solicitor or when he goes to his counsel that which he there divulges will never be disclosed to anybody else. It is only if the client feels safe in making a clean breast of his troubles to his advisers that litigation and the business of the law can be carried on satisfactorily... There is ...an abundance of authority in support of the proposition that once legal professional privilege attaches to a document ... that privilege attaches for all time and in all circumstances." The proposals under Subsection 205.3(a) overlook the underlying rational for the existence of the Privilege in English common law. The Privilege exists to protect not only the giving of professional advice to those who can act on it, but also to the giving of information to the lawyer to enable him to give sound and informed advice. In summary therefore the proposed Part 205 exceeds the mandate granted to the SEC under Section 307 of the Act (this was conceded by the SEC in its release, 2002-158, on 6 November 2002) and infringes the concept of Privilege as understood in English Common Law. The continuing applicability of these principles was reaffirmed very recently by Lord Hoffman in the House of Lords (R (on the application of Morgan Grenfell & Co Ltd) v special Commissioner of Income Tax [2002] UKHL 2): "... legal professional privilege is a fundamental human right long established in the common law. it is a necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice. The cases establishing this principle are collected in the speech of Lord Taylor of Gosforth CJ in r v. Derby magistrates Court, ex p B [1996] AC 487. It has been held by the European Court of Human Rights to be part of the right of the privacy guaranteed by art 8 of the Convention for the Protection of Human Rights and fundamental Freedoms(Rome, 4 November 1950; TS 71 (1953); Cmd 8969) (the convention) (see Campbell v. United kingdom (1992) 15 EHRR 137; Foxley v United Kingdom (2000) 31 EHRR 637) and held by the Court of justice of the European Communities to be a part of Community law (see AM & S Europe Ltd v. EC Commission (Case 155/79) [1983] QB 878, [1982] ECR 1575)". For the above reasons we respectfully submit that the new proposed Part 205 should be withdrawn and redrafted so as to respect the fundamental right of access to legal advice within a privileged environment. In the event that such redrafting does not occur, we submit that it should be made clear that the SEC recognises that its provisions should not apply to a foreign issuer resident in England. Philip Bramwell General Counsel and Company Secretary mmO2 plc ========================================================= This electronic message contains information from the mmO2 plc Group which may be privileged or confidential. The information is intended to be for the use of the individual(s) or entity named above. If you are not the intended recipient be aware that any disclosure, copying, distribution or use of the contents of this information is prohibited. If you have received this electronic message in error, please notify us by telephone or email (to the numbers or address above) immediately. =========================================================