US embassy cable - 05PARIS7947

UNCLAS SECTION 01 OF 02 PARIS 007947 
 
SIPDIS 
 
PASS FEDERAL RESERVE 
PASS CEA 
STATE FOR E, EB, EUR 
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL 
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER 
USDOC FOR 4212/MAC/EUR/OEURA 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, PGOV, FR 
SUBJECT: CESR HOLDS HEARING ON MEDIATION OPTION 
 
 
1.  (U) SUMMARY:  At a public hearing organized in Paris on 
November 21 by the Committee of European Securities 
Regulators (CESR), financial market participants aired 
differing opinions about how and whether CESR should 
institute a mediation procedure for national regulators. 
The idea is to not supplant EU or national authority, but to 
give regulators yet another route to EU-wide financial 
market integration.  END SUMMARY 
 
---------------------------------------- 
CESR SETS IN MOTION REGULATORY MEDIATION 
---------------------------------------- 
 
2.  (U) The Committee of European Securities Regulators 
(CESR) has set up a mediation task force, chaired by Manuel 
Conthe, Director General of the Spanish Financial 
Supervisory Authority, to consider whether mediation could 
strengthen the enforcement mechanisms of EU regulators. 
This type of mediation would be reserved for government 
officials to resolve possible cross-border conflicts. 
Besides inviting public comment, the task force held an open 
hearing in Paris on November 21.  The hearing attracted 
representatives from major European issuers and industry 
associations. 
 
3.  (U) Conthe divided the discussion at the hearing in four 
parts: an analysis of the key feature of a possible 
mediation system; the scope of matters amenable to 
mediation; the role of market participants and the European 
Commission; and the possible procedural framework. 
 
4.  (U) Fabrice Demarigny, the Secretary General of CESR, 
took care to point out the limited scope of the proposed 
mediation system.  It would only exist for EU member 
government regulators.  Market participants and investors 
would have no access.  It would only exist for what CESR 
describes as Level 3 matters: standards, guidelines, and 
recommendations, with the goal being to help promote a 
single market by regulatory convergence.  It would be 
completely non-binding, and would not create or change any 
national or European law.  Any matter requiring legal 
interpretation of EC directives would be referred to the 
European Commission.  It would have three "gate-keepers," 
whose task would be to filter cases to keep it manageable. 
 
-------------------- 
PRIVATE SECTOR INPUT 
-------------------- 
 
5.  (U) Opinions were divided about the wisdom of a 
mediation system.  One business association representative 
questioned the utility of a non-binding procedure.  Conthe 
explained that the expert group had looked at two different 
mediation concepts: facilitative (akin to the UK definition) 
and evaluative (closer to what we would call arbitration), 
and having decided on the latter, the group had opted to 
preserve national authority.  A former financial services 
mediator argued that CESR would find it difficult to 
maintain confidentiality, and observed that the gatekeepers' 
filtering function indicated that CESR was not fond of the 
idea of mediation.  Conthe answered that his goal is to 
create a perfect mediation method that regulators would 
never need to use. 
 
6.  (U) Several business representatives sought to pin down 
the role of the European Commission.  An EC representative 
said the EC interest is to be informed of conflicting 
interpretations of law.  While its legal opinions may not 
have the force of law, the EC could launch infringement 
proceedings in the European Court of Justice if needed. 
 
7.  (U) Other questions raised included the potential 
matters that would be subject to mediation, and how CESR 
would deal with transparency, particularly in getting 
privileged information to the market.  Some participants 
wanted more time to consider whether market participants 
might want access to the mediation proceedings, but Conthe 
indicated further consultations would depend on the written 
comments received (the deadline for comments is November 
30). 
 
------- 
COMMENT 
------- 
 
8.  (U) The idea that an arbitration-style mediation 
mechanism could lead to greater European financial market 
integration seems a bit counter-intuitive, and it is 
certainly a novel approach.  CESR's purpose, of course, is 
to get regulators to agree among themselves, and it is 
possible that an additional tool like mediation could 
resolve some of the difficulties in implementing a single 
financial market. 
STAPLETON#