axlaw, avocat rouen, avocat paris, Newsletter

Newsletter

Contact us

We regularly distribute a Newsletter with comments and legal notes on current topics related to the concerns of our clients.

 

Follow our latest publications on

        

 

April 2018 | Newsletter 10

EDITORIAL

Dear All,

It sounds highly unlikely that you have not received, either privately or professionally, one of the many e-mails from most organizations with which you are used to communicate electronically. You may even have noticed that these various sending result from the entry into force on May 25th of a new General Data Protection Regulation (GDPR).

This European Regulation applies to all companies regardless of their size. We will come back to the requirements and stakes this implies by a dedicated newsletter on this subject.

In this context, I wish to remind you that we keep some of your personal information, especially to send you this newsletter.

Please note, that you can choose at any time to unsubscribe from our mailing list.

For the time being, we offer you a quick overview of the recent case law that has caught up the attention of our firm these last weeks. They cover issues of commercial law, social law and insolvency proceedings.

In addition to these fields, the firm is used to intervene in criminal business law, a discipline less exposed in appearance but whose personal and impersonal issues are of great importance in terms of legal advice and litigation.

The new provisions of the Judicial Convention of Public Interest demonstrate how strong and rapid the evolution of this matter can be. The presentation opening this newsletter will allow you to judge it by yourself.

Last but not least, we remain at your disposal for any additional information you may need.

Yours truly.

 

Stéphane SELEGNY

Avocat à la Cour

 

 

PUBLIC INTEREST JUDICIAL CONVENTION

Having in mind the anticorruption mechanisms of the Anglo-Saxons regime, especially those of the American Foreign Corrupt Practices Act of 1977, the French legislator introduced by Law No. 2016-1691 of December 9, 2016 (known as SAPIN II) a range of innovative legal mechanisms with the aim of improving the prevention and the repression of certain offenses involving dishonesty and moral turpitude of the economic agents.

 

This legislation “relating to transparency, the fight against corruption and the modernization of economic life” puts at the disposal of the public authorities a series of new and promising elements. Among them is the Public Interest Judicial Convention (PIJC), a transactional measure inspired by the Deferred Prosecution Agreement, which the US Department of Justice does not fail to use when it comes to impose formidable fines on corrupted operators.

 

The adaptation in French Law of this emblematic instrument is determined by the new article 41-1-2 of the French Code of Criminal Procedure. It is of a paramount importance for the concerned parties to ensure, through their legal advisers, that they are sufficiently aware about the new legal regime as long as the government is slow to lay down implementing decrees, circulars and general guidelines that would define it in a better way.

 

LEGAL PROVISIONS IN A NUTSHELL

 

Initiative – It belongs to the prosecutor to decide whether to propose or not the conclusion of a PIJC to a legal person. In principle, its choice intervenes before the introduction of a public action. Although it can still be initiated during the investigation, this implies for the referred legal person to acknowledge the facts alleged against it and to accept their criminal characterization.

 

Purpose – The settlement of a PIJC gives rise to negotiations between the prosecution and the affected company. Three types of legal obligations can result of it :

 

  • payment to the Treasury of a public interest fine, whose amount has to be proportionate “to the benefits derived from the breaches found, within a limit of 30% of the average annual turnover calculated over the last three known annual turnovers on the date of the founding of these breaches”; and whose payment may be staggered over a maximum period of one year at the will of the prosecutor;

 

  • subjugation for a maximum of three years to a compliance program designed and controlled by the Agence Française Anticorruption (AFA); knowing that the costs incurred in the application of its control missions must be borne by the legal person concerned within the limits of a conventional ceiling;

 

  • and/or compensation within one year for the harm suffered by a victim who has been identified at the prosecutor’s office and invited to submit evidence of the actual damage resulting from the breaches found.

 

Validation or invalidation – Once the defendant company has agreed to finish the negotiations and to proceed to the conclusion of a PIJC on the basis of its latest version, the prosecutor shall address to the president of the French Tribunal de Grande Instance (TGI) which is competent a request to validate the negotiated terms of the conventional proposal. This introductory act includes the details of the facts and their legal qualification. After having publicly heard the parties involved in the proceedings, namely the legal person concerned and its eventual victims, the president of the court shall decide once and for all on the validation or rejection of the proposed PIJC on the basis of its well founded and regularity.

 

In case of validation, the company involved has a period of then days from the notification of the enacted judicial order to exercise its right of withdrawal.

 

The validation order does not amount to a conviction and does not carry the effects of it, such as the exclusion form public procurements in accordance with European Law. Also, the PIJC is not mentioned on the criminal record. Its content is nevertheless disclosed through a press release by the prosecutor and through a dedicated publication on the AFA website.

 

In case of invalidation, retraction or non-execution of the PIJC, the prosecutor’s office has the responsibility to implement the public action unless new elements arise in opposition to it. Partial execution of the agreement may be considered in the event of a subsequent prosecution.

 

When the request for validation is rejected or when the validation of the request is followed by an effective retraction, the prosecutor is no longer authorized to rely on the documents that the legal person has communicated to him during the conventional proceedings, both before the investigative and trial judges.

 

PRECISIONS AND OUTSTANDING ISSUES

 

The liability of natural persons – The new law provides that the legal representatives of the accused company remain liable as natural persons. Accordingly, they should not be able to take advantage of the PIJC to negotiate any exemption of criminal liability.

 

However, the actual effectiveness of this statement should be relativized, since it is very likely that in reality the French Parquet National Financier (PNF) will have to redefine on a case-by-case basis the extent of the criminal proceedings brought against the leaders participating in a PIJC, depending on the degree of good faith or goodwill and their level of cooperation.

 

Asked to comment on this point, the PNF deputy prosecutor said that negotiating a PIJC with a company would affect in no way the prosecution of individuals involved in criminal proceedings. Their participation to the conventional process should never amount to a complete exemption from liability.

 

This precision matters in the sense that it recognizes a contrario the possibility of exonerating the natural person from part of its individual liability in proportion to the service rendered to the courts during the pursuit of the legal person; provided that, of course, that it is not directly responsible for the offenses committed. The direct criminal liability of the individual cannot be mitigated in return for a PIJC. There is no question of allowing the author (natural person) of the offense to hide behind the indirect liability of its sponsor (legal person).

 

Assessment of the public interest fine – Following a transnational logic, the negotiated fine must be proportionate to the benefits (monetary, reputational, etc.) caused by the company’s failures. According to a penal logic, the homologated fine must be punitive, that is to say of a value superior to the compensation of the profits consecutive to the alleged facts.

 

The amount of of the penalty that is added to the base of the refund of the financial gains related to the offenses noted is calculated according to a proportional formula that the law refuses to detail. In these circumstances, it is up to the PNF to establish relevant evaluation factors, such as the level of cooperation, the quality of the exchanges, the temporality of the revelations and the care taken to bring them into compliance. As long as elements of this type have not become predictable, it will affect the entire conventional system with a legal uncertainty limiting its effectiveness.

 

The undetermined impact of the compliance program and the compensation for a damage – The legislator does not rule on the possibility for the prosecution to modulate – downward or upward – the criminal liability of the persons concerned based on the examination of compliance with their compliance obligations.

 

The silence of the law does not preclude the PNF from considering the good conduct of the company and its managers or the adoption and implementation of mechanisms consistent with the law when assessing the amount of the conventional fine. In doing so, the modalities of such modulation should be clarified.

 

If need be, the law provides for the inclusion in the PIJC of the obligation to repair within a period of one year the damages suffered by a victim identified with de prosecutor’s office. In the absence of legislative provisions to the contrary, the amount of this compensation seems likely to affect that of the fine, but to what extent? Here as elsewhere, the authorities will be asked to detail their positions very soon.

 

FIRST APPROVAL

 

On November 14, 2017, the French TGI of Paris decided to homologate a PIJC negotiated and concluded between the PNF and HSBC PRIVATE BANK. This is the first of its kind since the entry into force of the conventional scheme. The British bank has agreed to pay the French Treasury a fine of 300 million euros to escape from a criminal conviction for laundering of tax fraud.

 

The Swiss subsidiary of the private bank had been indicted for aggravated money laundering, as well as illegal banking and financial solicitation at the end of an instruction based on data and computer files seized in the home of a former employee.

 

The bank was criticized for having carried out in France, through several account managers, various operations that allowed French taxpayers to mislead the tax administration by concealing a certain amount of their assets behind the opacity of the bank secrecy accorded to bank accounts seated in Switzerland.

 

At the end of a 6-month negotiation, the bank acknowledged the facts and agreed to pay 300 million euros to the French authorities. This sum should be related to the total amount of assets subtracted from the French Impôt Sur la Fortune, which amounted to 1.6 billion euros. Despite the fact that it represents less than 20% of the amount concealed, the fine negotiated remains to this date the largest ever the French courts imposed to anyone in this context.

 

More news about Business Criminal Law

 

 

RECENT CASE LAW

 

Unauthorized access of the employer to the Facebook account of an employee – The social chamber of the French Cour de cassation estimated in a judgement of December 20, 2017 (n° 16-19.609 F-D) that unauthorized access of the employer to information posted on the Facebook account of an employee, with whom he is opposed in the context of a labour law dispute, constitutes a disproportionate and unfair infringement of his private life.

 

The professional nature of the mobile phone through which the employer disposed of an authorized access to the employee information does not change anything of it. In this case, the former sought to obtain from the Facebook account of the latter some pieces of evidence to be exposed against him in court. Not having the necessary authorizations himself, the employer ordered another employee, who had individual access to the disputed data from a professional phone, to allow him to access the publications of the said account without the awareness of his author.

 

The screen shots made by the bailiff at the end of this scheme were found to be inadmissible on the basis of a disproportionate and unfair breach of the employee’s private life. The social chamber upheld the position of the trial judges, rejecting, among other things, the argument of a presumption relating to the professional use, which is of a public nature in the eyes of the employer, of a professional phone.

 

This decision tends to reinforce the jurisprudence of the first civil chamber. In a judgement of April 10, 2013  (n° 11-19.530 FS-PBI), it confirmed the private nature of the space constituted by a Facebook profile whose access is limited to a ‘very limited’ number of people.

 


 

Compensation for home work in the absence of business premises – The employee obliged to perform his work at home in the absence of business premises must be compensated for the subjection he suffers because of this situation, which is left to the sovereign appraisal of the trial judges.

 

As a reminder, the French Cour de Cassation estimates the obligation to work from his personal home constitutes an abnormal interference by the employer in the private life of the employee, provided that this obligation does not result from his own initiative, from a request made for personal convenience.

 

Work-related constraints at home, such as the inconvenience associated with the normal exercise of his duties or the space lost as a result of the private arrangement of documents and work tools, entitle him to a compensation calculated on the basis of the endured grievance, in addition to the reimbursement of costs incurred by the domiciliation of the contract (judgement of April 7, 2010, n° 08-44.865 FS-PB).

 

The judge of cassation holds a similar position in the presence of business premises whose provision of the employee does not prove out to be effective (judgement of December 12, 2012, n° 11-20.502 FS-PB).

 

Faithful to its previous positions, the social chamber indicated in a judgement of November 8, 2017 (n° 16-18.499 FS-PB) that the possibility for itinerant employees :

 

  • Of storing objects (orders, folders, etc.) inside a company car;
  • And of using all the technological means at their disposal (telephone, computer, tablet, internet key and printer) from this very same vehicle;

could not be sufficient to reject their claim for compensation for the use of their home for business purposes of administration, planning and storage. In the absence of a work space allowing them to carry out all the diversity of their tasks in good conditions, the employees were well-founded to claim a subjection indemnity from their employer.

 

More news about Labour Law

 

RECENT CASE LAW

The refusal for one of the members of a management board to make the transition after a restructuring that does not meet his expectations of being appointed chairman of a French Société anonyme (SA) cannot serve as a valid reason for his dismissal – In this case, the individual in question was convinced to succeed sooner or later to the President of the defendant SA. Contrary to this individual ambition to preside over the company, the supervisory board began to merge with a competing company. Determined to leave the executive board following the total disappointment of his legitimate beliefs, the plaintiff refused the offer of an amicable departure which enjoined him to stay in place while restructuring the management of the company. His refusal would have motivated the decision of the members of the supervisory board to dismiss him on the spot.

 

Considering by a judgement of December 7, 2017 (n° 16/01013) that the dismissal did not contain correct grounds, the Paris Court of Appeal ordered the SA to pay him a compensation for injury of 1.6 million euros on the basis of article L225-61, paragraph 1 of the French Code of Commercial Law.

 

The judges found that the disappointed expectations of the former board member were based on unfulfilled promises of the incumbent President. The willingness to negotiate his departure was justified by the circumstances, as were the claims made to compensate him, as these were consistent with the prior commitments of the SA to him.

 

In the end, the decision to dismiss him did not follow the decision of the injured member to leave the company without a transitional period, but the refusal of the supervisory board to honor the contractual terms of a dismissal without just cause.

 


 

The triennial prescription of the action seeking responsibility of the corporate leader starts from the day of the harmful event, or from the day of its finding in case of dissimulation – The date of the placement in legal redress of a company seeking to engage the responsibility of a director for misconduct committed in the execution of its mandate as an administrator does not mark the default launching point of the limitation period for the action. This is the position the judges of the French Cour d’appel of Bourges held on May 7, 2015, before the commercial chamber of the Court of cassation censored them pursuant to articles L225-254 and L227-8 of the French Code of Commercial Law by a judgement of December 20, 2017 (n° 15-23.218).

 

In this case, the director of a French Société par actions simplifiée (SAS) which was in legal redress since November 2, 2011 was receiving a monthly remuneration for the fulfillment of his corporate mandate. On March 21, 2013, he assigned the SAS in payment of an amount equal to an unpaid portion of his remuneration. In response, the defendant field a damage counterclaim for misconduct by the plaintiff in the performance of his duties as an administrator.

 

The judges of the merits dismissed the director before condemning him to the payment of damages up to the extent of his wrongful behavior. According to them, the responsibility of the director was not yet prescribed on the day the SAS filed its conclusions for responsibility, since a period of less than 3 years separated that date, which was prior to the judgement of May 6, 2014, from the opening of the collective insolvency proceedings on November 2, 2011. 

 

The judges of cassation reject this reasoning on the ground that it starts the period of the triennial prescription on the day of the launching of the collective procedure without having verified that it was indeed the legal starting point of the commission or the revelation (after concealment) of the harmful facts.

 

More news about Commercial Law

 

RECENT CASE LAW

 

The liquidation procedure does not in itself cause the termination of the contracts in force at the time of its lunch – The judges of cassation have recalled by a judgement of October 25, 2017 (n° 15-24.060) that the organs of the collective procedure did not have to request the continuation of the contractual engagements of a company on the verge to be liquidated, knowing that the opening judgement of the liquidation process remained as such without effect on their contractual effectiveness.

 

In this case, a company A specialized in the manufacture of textile articles intended for decorative and furnishing articles was bound by a framework contract to a company B specialized in the distribution of furniture. Under this instrument, the two companies entered into a series of supply contracts. Faced with a continual rise in the price of raw materials, Company A obtained from Company B to accept several price increases. However, Company B had taken advantage of a final raise to indicate to Company A that it would refuse any new request in the future. In the meantime, Company A experienced major setbacks, leading it from an unsuccessful recovery attempt to the extremity of a bankruptcy.

 

Through its liquidator, Company A assigned Company B in payment of damages for the imposition of excessively low rates in accordance with their last contract. The judges of the merits had rejected the request on the basis of the automatic termination of the commitments whose continuation had not been solicited at the time of the liquidation. The reinstatement of the opposite principle - the implicit continuation of the contracts in force at the opening of the liquidation procedure - justifies alone the judgement of cassation rendered.

 

 


 

 

Condemnation of a creditor for a characterized interference with the management of the debtor who is subject to a collective action – By an judgement – unreported – of January 10, 2018 (n° 16-10.824, FS-D), the commercial chamber of of the French Cour of cassation validated for the first time the appeal condemnation of a ruinous credit provider in application of article L650-1 of the French Code of Commercial Law. As the judges interpret this provision, liability for “faulty” (incorrect) lending practices of the creditor can only be engaged in the event of fraud, of a characterized interference with the debtor’s management or of disproportionate guarantees – unpublished judgement of December 11, 2012 (n° 11-25.795, F-D). It follows that the creditor will not be held liable for lending operations which, while being “faulty”, do not constitute a fraud, a characterized interference or a disproportion of the associated guarantees. Similarly, the creditor will not be concerned in the presence of lending operations which, while constituting fraud, a characterized interference or a disproportion of the associated guarantees, are not ‘faulty’ – judgement of the March 27, 2012 (n° 10-20.077, FS-PBRI).

 

In this case, a supplier had granted to a farmer, who was already heavily indebted to him, four restructuring credits with interest rates ranging from 5 to 7% per annum assorted with short repayment terms. In view of its operating results, the debtor could not meet such borrowing conditions. The trial judges qualified the operation of faulty lending practices following the issuance of “ruinous” credits despite the knowledge of the irremediable economic difficulties of the farmer-debtor.

 

To this, the French Cour d’appel of Amiens was able to add the qualification of a characterized interference with the management of the debtor on the basis of clauses stipulating the full repayment with anticipation of sums lent in case of partial or total cessation of the exclusive supply relationships it had with the supplier-creditor. The guarantees taken in consideration of the faulty lending practices had been declared void accordingly. The French Cour of Cassation validated the dual qualification retained by recalling however that the creditor could be required to repair only the aggravation of the insufficiency of assets and not the entirety of the amount declared by his fault on the liabilities.

 

More news about Insolvency Proceedings

 

printable version of the Newsletter (pdf)