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America's love affair with porsches is so strong — almost half of all those made are sold in the U.S. — that for several months the sports car's German maker has been considering whether to list its shares on the New York Stock Exchange. But when Porsche chief executive Wendelin Wiedeking saw the tough new Sarbanes-Oxley Act that President Bush signed into law this summer on the heels of the Enron and WorldCom scandals, he had a fit. The new law, which seeks to safeguard against fraudulent accounting, requires CEOs and CFOs to vouch for the accuracy of their company's books under oath. That "makes no sense," Wiedeking said last month. A company spokesman explains that hundreds of employees are involved in finalizing Porsche's accounts and that under German law the management board is collectively responsible for them, not any individual.

Wiedeking's unease at the new rules is widely shared among European executives whose companies are traded on U.S. exchanges or are thinking of listing there. (The spokesman says Porsche has not yet made a final decision.) A handful of Germany's biggest firms, including DaimlerChrysler, Allianz and Deutsche Telekom, last month tried to persuade the U.S. Securities and Exchange Commission (SEC) that they should be exempted from the account-certification rule. Their petition was rejected. Now, a broader movement is stirring behind the scenes, as national business federations across Europe seek to coordinate a common position with the European Commission. The goal of Sarbanes-Oxley — to restore public confidence and prevent future mass fraud — is widely applauded. It's the details that are exasperating: the new regulations don't take into account significant differences in the way their companies are managed and audited, Europeans say, and would require the adoption of practices that are burdensome and at times at odds with their own national laws. "It's like using a bulldozer to export corporate governance rules," says Marco Becht, executive director of the European Corporate Governance Institute, a Brussels think tank. "In terms of substance and form, it is very problematic."

ACCOUNTING FOR TROUBLE Continental companies aren't wild about the Sarbanes-Oxley Act What the new U.S.legislation says Why Europe doesn't like it CEOs and CFOs must certify that accounts are truthful and don't omit material facts Management boards in some countries have collective responsibility by law Accounting firms to be regulated by new oversight board Amounts to double regulation of E.U. audit firms Accounting oversight board would have access to internal audit documents Breaches professional- secrecy laws and raises concerns about confidentiality Board audit committee, not management, will appoint auditors Shareholders already appoint auditors in several European countries Board audit committee must comprise only directors who are totally independent Incompatible with laws in Germany, the Netherlands and elsewhere mandating employee representation on boards

The issue risks becoming a new flashpoint in trade relations between the U.S. and the European Union, already strained by disputes over steel tariffs and tax breaks for American exporters. E.U. Commissioner Frits Bolkestein complained in a letter to sec chairman Harvey L. Pitt on Aug. 29 that "the implementation of some of the provisions of the Act might have undesirable extraterritorial consequences or they might create unnecessary difficulties for European companies." Among his concerns: a new U.S. body that will oversee auditing firms will regulate non-U.S. auditors and have access to internal audit documents. This would likely breach national professional-secrecy laws in Europe and "constitute a wholly unnecessary and burdensome second layer of public oversight for E.U. audit firms," Bolkestein wrote.

The sec has in the past been willing to treat listed foreign companies more flexibly than American ones, acknowledging that there are differences. As a result, 176 European companies are now listed on the New York Stock Exchange. If the new rules are applied rigidly, those firms will have to decide whether to play by them or cut themselves off from the world's largest capital market.

The lobbying will gather steam this week, when business representatives from the 15 E.U. countries meet in Brussels to hammer out a joint stance. One of the biggest questions they face is how much of a public fuss to make. It's a tough call. Markets are already unsettled, and companies don't want to look as if they have something to hide. "Just because many are holding back with public criticism doesn't mean that they agree with the extraterritorial application of the Sarbanes-Oxley Act," says a memo to the E.U.'s Bolkestein from the German Industry Federation. "They are simply concerned that intervening with the sec could be misinterpreted."

There is a certain irony in all this. Since the mid-1990s, most European countries have taken steps to improve their corporate practices — often looking to the U.S. as a model. Notions such as creating shareholder value or making a company's affairs more transparent and directors more accountable have crossed the Atlantic and been codified. According to a study earlier this year by the law firm Weil, Gotshal & Manges, there were just 10 codes of corporate governance in E.U. nations in 1997, six of which were issued in Britain. By the beginning of this year there were 35. National practices and legislation still vary widely, however. Among the biggest differences: firms in Germany, Denmark, the Netherlands and Austria have two separate boards — one for day-to-day management and the other, which by law includes employee representatives, for oversight. The U.K., with its freewheeling capitalist culture and well-established stock market, is in many respects closer to the U.S. than to its Continental neighbors, where ownership is often more concentrated. But even the British have misgivings about the new U.S. legislation. "We must place on record the firm view in support of the principle that regulation of audit and corporate governance is a matter for individual countries," the Confederation of British Industry wrote to the sec.

Jaap Winter, a law professor at Rotterdam's Erasmus University who chairs a group of experts advising the European Commission on company law, says conflict should be avoidable. He contends that the U.S. is in some ways catching up with European practice with the new legislation. One example is the stipulation that a board's audit committee — not management, as in the U.S. — appoint a company's auditors. Indeed, regulations in much of continental Europe require auditors to be chosen by shareholders. As for the idea of certifying accounts, Winter notes that in Germany and other European countries the entire board already must sign the documents, not just the chief executive. To clear the air, "we should just have an open and frank discussion of these differences" with the sec, Winter says. What's not clear is whether the U.S. — or the E.U. — is ready just yet.

• PETER GUMBEL/Paris
• U.S. anti-fraud plans provoke backlash from European executives