CESR HOLDS HEARING ON MEDIATION OPTION

UNCLAS SECTION 01 OF 02 PARIS 007947

SIPDIS

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PASS CEA
STATE FOR E, EB, EUR
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL
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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

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CESR SETS IN MOTION REGULATORY MEDIATION
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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.

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PRIVATE SECTOR INPUT
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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).

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COMMENT
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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#