Category: Legal news

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is part of both German and French law. So, if one of these two laws applies, either because one of these two laws applies (Art. 1 a) CISG) or because the parties agreed to it (Art. 1 b) CISG), then the Convention applies. It replaces national sales law provisions.

The concurrent relationship between the CISG and claims arising from product liability, i.e., the question of whether claims can be asserted under producer liability in addition to the Convention, is one of the “classic” problems of the CISG. There are a number of different decisions by national courts on this issue. Opinions on this question also differ in legal literature.

This problem was the subject of a decision by the French Court of Cassation on May 17, 2023 (Cass. civ. 1ère, 22-16.290), which prompts this newsletter.

Product liability law within the European Union is based on the European Product Liability Directive 85/374, which has been implemented in Germany by means of the ProdHaftG and, with some delay, also in France with Articles 1245-1 to 1245-17 of the Civil Code. While the Product Liability Directive 85/374 and the ProdHaftG only apply to the consumer sector, the French legislature has extended its application to the commercial sector. The CISG, for its part, only applies to B-2-B transactions (Art. 2 a) CISG). Due to these different areas of application, there can be no conflict between product liability law and the CISG in Germany; in Germany, the problem of competing claims only arises with the provisions on tort, §§ 823 BGB ff.

In French law, however, the CISG and the product liability provisions may concur with each other. The concurrence is all the more direct as French law, in accordance with the European Directive, expressly permits contractual claims (Art. 13 Directive 85/374 and Art. 1245 – 17. Code civil).

This can give rise to serious application problems. For example, the CISG contains an obligation to inspect and give notice of defects (Art. 38 (1) and 39 (1) CISG). If the lack of conformity is not notified within a reasonable period of time, the buyer loses his rights (Art. 39 (1) CISG). In any case, no claims can be asserted after two years have elapsed since delivery (Art. 39 (2) CISG).

The situation is quite different under product liability law: there is no obligation to examine and give notice of defects. Claims for damages due to safety defects can be raised up to three years after the damaging event (Art. 1245-16 cc). In addition, there is a limitation period of 10 years after the item was placed on the market (Art. 1245-15 cc). However, under product liability law, damage to the product itself cannot be claimed (Art. 1245 cc in accordance with Art. 9 b) of Directive 85/374).

It is therefore clear that situations may arise under French law where the buyer has lost its rights under the CISG and is now attempting to succeed by means of product liability claims.

The French Court of Cassation ruled on this conflict of claims in its judgment of May 17, 2023. It found that no claims under product liability law can be asserted in addition to the CISG, basing its decision on Art. 7(2) CISG. In casu, the issue concerned Art. 79 CISG, which allows for more extensive grounds for exemption than product liability law. In the opinion of the cour de cassation, the seller can exonerate itself by means of Art. 79 CISG, which is not possible under product liability law. However, the buyer is denied a claim under product liability law.

Remarkably, in a decision handed down just one month earlier on April 19, 2023 (Cass. civ. 1, 22-23.726), the same court of cassation allowed a concurrent claim under product liability law when national sales law applied. In particular, the claim under sales law for compensation for damage to the product supplements the claim under product liability law for consequential damage caused by the defective product.

This case law has important implications for Franco-German legal relations. If French law applies, the CISG applies, which takes precedence over French national sales law. In such a setting no further claims under product liability law can be asserted between the contracting parties.

If, on the other hand, the CISG is excluded when choosing French law, not only does national sales law apply (with its well-known provisions on “vices cachés”), but product liability law also applies.

Depending on whether one represents the interests of the buyer or the seller, this legal situation can be exploited in one way or another.

Nicola Kömpf

Avocate/Rechtsanwältin

Dr. Friedrich Niggemann

Avocat honoraire/Rechtsanwalt

INSOL International’s latest publication explores the role of insolvency practitioners across various jurisdictions, highlighting the differences in appointment processes, reporting obligations, creditor recovery mechanisms, and cross-border challenges. This resource is designed to assist insolvency and asset recovery professionals with key insights, research databases, and essential contacts worldwide.

We are proud to share that Gilles Podeur, partner in our Restructuring department, contributed to the France chapter, providing his expertise on the country’s insolvency framework. His analysis offers valuable perspectives on the legal procedures, challenges, and best practices shaping restructuring and insolvency in France.

An Ordinance transposing EU Directive 2022/2381 of the European Parliament and Council of 23 November 2022 on a better gender balance among directors of listed companies, known as the “Women on Boards” Directive, was published in the Official Journal on 16 October 2024.

It marks a significant step forward in promoting gender equality in decision-making roles. The Directive mandates that by 2026, listed companies in the EU must ensure that women make up at least 40% of non-executive director positions.

This is intended to reduce the gender imbalance that has historically dominated corporate governance.

The transposition of the Directive has been met with varying levels of commitment and success across different EU member states.

Prior to the EU Directive, France was one of the first countries in Europe to introduce binding provisions to promote gender balance within the boards of directors of commercial companies through Law n°2011-103 of 27 January 2011, known as the “Copé-Zimmermann” Law. Under this law, the boards of directors and supervisory boards of listed and unlisted companies with more than 250 employees and net sales or total balance sheet of at least €50 million must include a minimum of 40% of members of each gender.

The Ordinance of 15 November 2024 strengthens the system for listed companies by extending it to members representatives of employees and of employees shareholders.

This means that directors representing employee shareholders, appointed by the general meeting, are included in the same college as all the other directors. In practice, to comply with the new provisions of the Ordinance, companies will have to adjust the election procedure set out in their articles of association. Directors representing employees constitute a separate college and are appointed according to specific procedures. The rules on gender balance are applied to them depending on the appointment process.

By transposing the EU Directive into national law, France reinforced its commitment to achieving gender equality in corporate leadership and aligned its existing laws with EU-wide standards.

It is common for shareholder’s agreements to include provisions under which a shareholder, an employee or a non-employee corporate officer irrevocably undertakes, through a promise to sell, to transfer their shares. Such provisions often give rise to significant litigation, particularly in cases of forced enforcement of sale promises and disputes over the valuation of the shares to be transferred in the event of disagreement between the parties;

Below are several reminders and points of vigilance:

-Even when the transferor or transferee is a natural person, jurisdiction over disputes arising from the transfer of shares is specifically assigned to commercial courts.

-In cases where forced transfer is initiated against an employee on the grounds that the agreement included a promise to transfer shares in the event of termination of their employment contract for « gross or wilful misconduct », the enforcement of such transfer may be suspended if the employee challenges the grounds for their dismissal. Indeed, should the labour court rule thar gross or wilful misconduct was not established, the triggering event for exercising the promise will be deemed to have ceased to exist.

–Bad leaver clauses requiring the forced transfer of an employee’s shares at a discounted price or a significantly reduced value to their dismissal for gross or wilful misconduct are deemed null and void (Paris Court of Appeal, May 12, 2022) as they constitute an unlawful financial penalty.

-The valuation of shares by an expert, either designated by the parties or appointed by the President of the Commercial Court, must be established as of the date closest to the submission of the expert’s report (French Court of Cassation, Commercial Chamber, September 16, 2014).

-The expert may be appointed:

• Pursuant to article 1843-4 of the French Civil Code, which specifically governs the transfer of shares the expert is tasked with determining the value of the shares, with the discretion to select.
• Pursuant to article 1592 of the French Civil Code, which is part of the general framework of contract law, the expert’s mission is to determine the sale price of the shares, subject to the prior agreement of the parties both as to the principle of the expert’s appointment and the valuation method to be applied.
• Depending on the drafting of the relevant clauses, certain provisions may authorise the company to execute the necessary share transfer orders without the consent or cooperation of the shareholder whose shares are being repurchased. Such mechanisms may deprive the shareholder of a means to delay the transfer, even in the event of a dispute regarding the validity of the clause or the valuation of the shares.

Consequently, heightened vigilance is required (i) when drafting shareholder’s agreements, particularly with regard to the conditions governing the enforcement of promises to sell and/or the determination of share valuations or sale prices, and (ii) when initiating the enforcement of a promise to sell shares and engaging in the associated valuation processes, given the potential legal challenges that may then arise.

The European Artificial Intelligence Regulation or AI Act came into force on August 1st 2024, after three years of negotiations within the European Commission.

The entry into force of this new European legislation will require us to rethink public procurement.

Companies wishing to sell and/or integrate artificial intelligence systems into public services will need to use suitable contracts both:

-on form, through contracts and procedures that encourage innovation;

-as well as terms of content, with clauses governing AI, data and the level of responsibility of the various players.

Given the unprecedented nature of the AI Act, as the world’s first legislation on artificial intelligence, it will be necessary to provide to use legal toolkits.

As inter-company relations evolve, particularly in the context of groups or complex subcontracting, the limits between influence and interference are increasingly being examined by the courts. The recent French “Cour de cassation” decision of October 9, 2024, involving the Française des Jeux (FDJ) illustrates this trend (Cass. soc., 9 oct. 2024, n° 23-10.488, F-B).

In France, co-employment, historically defined as «confusion of interests, activities and management», was redefined by a major decision on November 25, 2020. For a company to be recognized as a co-employer, simple coordination between entities belonging to the same group is no longer sufficient. The essential condition is «permanent interference» in the employer’s social and economic management, leading to a total loss of autonomy for the employer. This nuance is designed to protect the legal independence of legal entities, while punishing manifest abuse.

The application of this concept is particularly important when it comes to the parent company’s liability in the event of economic difficulties and insolvency proceedings involving the group’s French subsidiary.

In the FDJ case, employees dismissed for economic reasons by an affiliated company attempted to have FDJ recgnized as a co-employer. In their opinion, FDJ’s overriding influence on their employer’s commercial policy had destroyed its autonomy.

However, the “Cour de cassation” rejected this claim. Although FDJ had exercised a significant influence, notably because of its monopoly and centralized commercial coordination, the affiliated company retained sufficient flexibility in matters of social management, recruitment and salaries.

This decision confirms a trend in case law: only total and proven interference justifies the recognition of co-employment. Judges refuse to confuse economic dependence or legitimate coordination with a loss of autonomy.

The tightening of the criteria for co-employment reflects a desire to limit this notion to exceptional situations. While this approach provides companies with more legal security, it also requires employees to provide strict proof of the interference complained of.

Thus, co-employment remains a rare but powerful legal weapon. The ruling of October 9, 2024, takes a clear line: only flagrant abuse of legal personality can override the principle of corporate independence.

For companies, it is a reminder to be vigilant: any interference must be measured and justifiable. For employees, the decision illustrates the challenges of such recognition, but also the importance of accurately documenting situations of interference.

Far from being a fixed concept, co-employment is still playing an important role in shaping intercompany relations.

The French Competition Authority has fined ten manufacturers and two distributors a total of €611
million for vertical price fixing in the sector for manufacture and sale of small and large household appliances.

To counter the success of online sales in the late 2000s, ten manufacturers (BSH, Candy Hoover, Eberhardt, Electrolux, Indesit, LG, Miele, SEB, Smeg and Whirlpool) individually agreed with their distributors to maintain high retail prices, thereby protecting their traditional retailers from competition from internet sellers. Two distributors (Darty and Boulanger) agreed to charge the manufacturers’ prices and were fully party to the agreement.

Ten out of the twelve companies involved in the proceeding requested the benefit of the settlement procedure and negotiated with the investigating authorities a range of fines between a minimum and a maximum amount. Only two (a manufacturer and a distributor) contested the grievances against them.

The agreement between the manufacturer and distributors highlights the danger of trying to control resale prices.

When “recommended prices” become “imposed prices” by the manufacturer

The investigation revealed a strategy of continuous communication of «recommended prices» from the manufacturer to its distributors, perceived by the distributors as imposed prices. In addition, the manufacturer regularly monitored the resale prices observed on the Internet, in particular by means of an automated monitor, which gave rise to requests for price increases. The Authority notes that, aware that it had no right to intervene in the determination of the resale price of its products to its distributors, the manufacturer used a «coded language» in which the word «stock» referred to the notion of «minimum resale price».

The distributors’ acceptance to the supplier’s setting of minimum resale prices

The investigation file contained evidence that distributors had agreed to increase prices or maintain prices at a level in line with instructions given by the manufacturer. The evidence also came from certain exchanges in which a distributor’s reaction to an elliptical request from the manufacturer made it clear that this was in fact an invitation to raise prices.

The widespread nature of the practices

The investigation revealed that the invitations sent by the manufacturer were addressed to all distributors. Even if the monitoring was limited to the prices posted by the various distributors active on the Internet, it was reinforced by feedback from distributors who themselves observed the prices charged online by competitors.

Damage to competition

The purpose of the practices was to directly fix the selling prices of the distributors for the various products marketed by the manufacturer. They were clearly detrimental to the free play of price competition. As a result, they had the object of restricting intra-brand competition. The manufacturer was fined €189,500,000. (Decision no. 24-D-11 of December 19, 2024.)

Artificial intelligence is increasingly used by public actors for security and surveillance purposes: regulations are being implemented with the aim of framing this use, such as the GDPR, the AI Act or the French Code de la Sécurité Intérieure.

On November 15th, 2024, the CNIL (the French data protection authority) released a decision (Décision n° MED-2024-150 du 15 novembre 2024 mettant en demeure le ministère de l’intérieur) giving formal notice to the Ministre de l’intérieur to comply with data privacy legislation regarding its use of augmented reality cameras.

Since 2015, French police have been using a video analysis software with facial recognition features called BriefCam.

The control of the CNIL on the use of this AI tool showed the following findings:

• No use of augmented reality in real time in public space has been observed.
• Augmented reality software is used on existing videos to filter through large amounts of data as part of criminal investigations; while this is legal personal data processing, compliance undertakings and privacy impact assessments should have been shared with the authority beforehand.
• An option for facial recognition has been added on the BriefCam software; while the Ministry claims it is not being used, CNIL is giving formal notice to make this option unavailable to ensure privacy by design.

The CNIL also implemented controls in eight French cities, which use augmented reality cameras for different uses, without always respecting applicable legislation.

The French data protection authority remains a careful watchdog regarding the use of AI augmented tools in the public domain and protects French citizens’ privacy against public actors.

Corinne Thiérache, designated as a Qualified Person by Decree, was part of the committee in charge of the surveillance of the use of AI augmented cameras during the 2024 Olympic and Paralympic Games. The report has been transmitted to the French Ministère de l’Intérieur on January 14, 2025.

The EU General Product Safety Regulation (Regulation (EU) 2023/988), effective December 13, 2024, establishes a comprehensive framework for consumer safety across the European Union. Replacing Directive 2001/95/EC,

it addresses modern challenges,including those in the digital age, with direct application across all Member States.

This regulation applies to economic operators both within and outside the EU that place products on the Union market. It covers items made available to consumers, including new, used, repaired, or reconditioned products, with exceptions such as medicines, food, and plant protection products. For regulated products (e.g. medical devices, cosmetics, or toys), it complements existing legislation. Its primary goal is to ensure product safety regardless of origin or distribution method.

Manufacturers, importers, and distributors face stricter obligations, including maintaining supply chain traceability, promptly notifying authorities (providing clear details on risks and remedial actions taken, including on the EU portal “Safety Gate” and on “RappelConso” in France) and consumers about dangerous products, and providing clear safety information in accessible languages (warning or safety information must be affixed to the product or on the packaging). Online product sales must meet the same safety standards as physical sales. Businesses must also ensure cybersecurity and AI measures are implemented to protect products from external threats and enable product evolution, learning and adaptive capabilities.

French national authorities, including the DGCCRF, Customs, and Labor Inspectorate, have expanded powers to enforce compliance. They can recall dangerous products, impose stricter penalties, and coordinate at the EU level to ensure harmonized market surveillance.

Businesses must adapt by conducting product risk assessments, updating security information, ensuring accurate traceability, and monitoring non-conformity issues. These obligations extend to manufacturers, importers, and distributors alike.

The regulation marks a significant advance in EU consumer protection. Compliance not only fulfills legal requirements but also enhances consumer trust and strengthens market reputation. Compliance is not just a legal obligation but also an opportunity for businesses to reinforce consumer trust and safeguard their reputation in a competitive marketplace.

In a decision dated of 7 November 2024 (Civ.3ème, 7 November 2024, no. 22-14.088), the Court of Cassation recently set a limit, in matters of loss of enjoyment, to the principle prevailing in French law according to which the victim is not required to limit his or her loss in the interest of the person responsible. In this case, the victims of construction defects who had been compensated for the amount of the repair works by the insurer of the company responsible, had not undertaken the works necessary to remove the damage, which had therefore persisted. On the base of the principle of the right to full compensation for the damage as well as the principle according to which the victim is not required to limit his or her loss in the interest of the person responsible, the victims were claiming compensation for their loss of enjoyment of their property after receiving the compensation corresponding to the amount of the repair works for the damage.

After noting that the compensation received allowed them to carry out the works, the Court dismissed their claim, considering that the loss of enjoyment resulting from the failure to carry out the repair works, after receiving the compensation, has no causal link with the builder’s failings.

When the existence of loss of enjoyment is established in its principle by the victim, as well as its causal link with the fault committed, it is up however to the judge to set the amount of
compensation to be paid to the victim, without being able to allege that the claim was not made explicit in its amount. The judge cannot therefore refuse to compensate for loss, certain in its principle, based on the insufficiency of the evidence provided by the parties, unless he is guilty of a denial of justice. This is the principle recalled by the commercial chamber of the Court of Cassation in a decision dated of December 11, 2024 (Com., December 11, 2024, no. 23-10.028).

If the victim cannot rely on his or her own turpitude, the person responsible cannot reciprocally hide behind the evidentiary difficulties attached to the quantum of the loss of enjoyment, to claim to escape his liability.