EU firms risk delisting from US stock exchanges

European companies risk being thrown off US stock exchanges if they refuse to hand over data which they fear would violate EU data protection laws.

Companies face problems gaining entry to US stock exchanges because of data demands from the US Securities and Exchange Commission (SEC), the financial services watchdog, and are also threatened with being taken off the stock exchanges if requests for data are not met.

The problems were highlighted at a recent debate held by the American Chamber of Commerce in Frankfurt by companies doing business in the US or with sister or parent companies in the country.

The type of data requested by the American authorities is often aimed at investigations into corporate governance but the absence of guarantees that the data will be used only for a specific purpose and not transferred to other US agencies causes great concern for European companies, said Mark Hilgard, co-chairman of the corporate and business law committee of the American Chamber of Commerce in Germany.

"If the respective purpose is clear and restricted, then that’s fine but if it’s a case of ‘give us all your data and we will see what we can make of it’, that is unacceptable," said Hilgard.

He added that companies were often asked for data on all their employees, including their names, addresses, emails and telephone numbers. In such a case European laws dictate that the consent of the employee must be sought, but if he or she refuses consent it can seem to the SEC that the company is obstructing their investigations. "European companies can run into problems, listing can be endangered and it can create problems for the parent company in the US," said Hilgard.

Since the consent must be given voluntarily, dismissing employees who do not agree with their data being transferred to the US authorities also violates EU laws.

The issue has become a problem over the past six years, as demands for data transfers have increased in the aftermath of the 11 September 2001 attacks on the US. Controversial transfers including information on airline passengers travelling to the US and banking transfer information through SWIFT, the banking network, have alarmed European companies about the different interpretations of data protection on either side of the Atlantic.

"The understanding of the purpose of data protection is very different between Europe and the US. They use the same words but have different concepts," said Hilgard.

The SWIFT case particularly worried European companies because it involved the company being subpoenaed to supply information to the US authorities. After it supplied the information, SWIFT was accused of making transfers that violated EU data protection laws, he added.

One German bank was told by a US court to hand over information on a particular customer but the customer refused consent to transfer the data. An injunction by a German court on issuing the information was rejected by the US court involved in the case and only after the parties sat down to work out a compromise was the matter resolved, said Hilgard.

European companies risk being thrown off US stock exchanges if they refuse to hand over data which they fear would violate EU data protection laws.