Category: Legal news

The involvement of the Works council on environmental matters: new constraints or additional prospects?

In consideration of the generalized raising of awareness on environmental matters, it becomes inconceivable for a company to ignore this topic, in the framework of its activities but also in its relations with the employees and their representatives.

In France, since 2022, this involvement is mandatory through staff representatives (when they exist within the company): employers (with 50 employees or more) must present information on the environmental impact of their projects and activities to the CSE (Works council).

The choice of hard law on such a topic is not neutral, as these new obligations pile up with the other usual – dense – topics to be presented to the staff representatives (economic and strategic rationale of a project, impacts on the work conditions, health and safety implications…)

But the main benefit is probably to be found in the enhanced visibility it brings to environmental issues within companies.

How is the CSE involved?

The new requirements don’t mean new processes in terms of CSE information, but extend to existing environment matters already prerogatives of the CSE:

• Training for the CSE members will include topics on environment.

• Information about environmental aspects of the company’s activities is to be added to the permanent database accessible to the CSE members. This information includes the general policy of the company on environment matters, the sustainable use of resources and waste management and in some cases the identification of the company’s scope 1 emissions and carbon footprint.

• This database is used as a basis for the three regular CSE consultations (strategic orientations, financial and economic situation, social and work conditions), which now include the environmental impact of the company’s activity.

• The CSE is also consulted on the environmental impact of a specific project, before any implementation of the said project.

• The external expert that the CSE may appoint under some circumstances, is now allowed to access corporate information related to environment.

New points of attention?

As wide as the CSE attributions may appear, the consultation process can usually be managed quite smoothly, as the consultation period is well-defined and the CSE’s opinion is not binding.

The CSE may express its point of view and suggest changes, but may not oblige the employer to modify the project.

But difficulties may arise when the employer doesn’t include the environmental aspects in the provided information or holds back major information. In such cases, the CSE may obtain a suspension of the project as long as the proper information is not made available.

Some attempts to block or cancel restructuration projects have already happened. Even if there is no stable case law on this topic, some courts have already ruled that a consultation on a redundancy plan which did not include the environmental consequences of the restructuration may not lead to the cancellation of the plan.

If confirmed, it means that the main risk of ignoring environmental issues during restructuration would be to delay the process (while waiting for the company to complete the information), but not jeopardize it.

Most certainly an issue to watch closely!

What changes of culture are to be anticipated?

For the first time, the CSE members are indeed required to, not look only inside the company, but also to its impact outside, which is surely a game changer, and could lead in some cases to a change of culture in several ways:

• Raising of awareness on such topics for employees and their representatives, and internal evolution through social dialogue and negotiation.

• Transparency and accuracy of the data on the environmental impact of activities transmitted by the company: if staff representatives can fulfill their new role, they will be able to challenge the decisions and communication of the company on such topics.

Maybe, together with the extension of reporting obligations with the recent CSRD Directive, an efficient way to fight greenwashing and purpose washing?

Jacques Perotto, Partner and Maxime Hermes, Associate

Alerion invites you to follow the news on distribution law.  To start this Serie, focus on the status of commercial agent. Inaugurated in 1958 in France, the status followed the European harmonization in 1986 and continues to evolve under the influence of the Court of Justice.

Episode 1 – Commercial agent status does not require the power to modify prices

Episode 2 – The possibility to derogate from the right to commission

Episode 3 – Compensation and serious misconduct of the agent

Episode 4 – Commercial agent operating outside the EU and French law

Episode 2

Commercial agent – The possibility to derogate from the right to commission

Court of Justice of the European Union admits the possibility to contractually derogate from the right to commission of the commercial agent in respect of a transaction entered into with a third party that agent previously acquired as a customer for transactions of the same kind. The possibility to limit the right to commission of the agent subsequently restricts his right to compensation at the end of the agency contract.

The status of commercial agent is legal (C.com. Art. L. 134-1 et seq.) and has been harmonized in the European Union (Directive 86/653/EEC of 18 December 1986). A commercial agent is an independent intermediary who has continuing authority either to negotiate or to negotiate and conclude the sale or purchase of goods in the name and on behalf of a principal (producer, industrial, trader, or another commercial agent (C.com. Art. L. 134-1). In return, the agent is entitled to commission on commercial transactions (e.g. the sales) concluded as the result of his action or with a third party whom he has previously acquired as a customer for transactions of the same kind (C.com. Art. L. 134-6, Dir. Art. 7.1). Some of the provisions of the legal status are mandatory: it is not possible to derogate from them.

According to the Court of Justice*, the agent’s right to receive a commission, as provided for in the Directive, may be adapted contractually when it applies to subsequent transactions concluded with a client who initially contracted through the agent. The Court of Justice has ruled that the commercial agency contract may stipulate that the agent shall not receive any commission on such subsequent transactions of the same kind.

Thus, the parties are free to modulate and adapt the suppletive rules of the legal status, such as the right to commission for subsequent transactions. Such adjustment may give rise to strong reluctance on the part of agents. However, the Court has pointed out that, making the right to commission on transactions of the same kind mandatory would not necessarily lead to increase protection for commercial agents because “it cannot be ruled out that, in such circumstances, some principals would offset the cost of the commission which would necessarily be payable […] by reducing the basic commission rate, by limiting or excluding the costs previously reimbursed or other elements of the remuneration, or even forgo entering into a contractual relationship with a commercial agent” (§35).

As a result, we consider that the protection organized by the European status of the commercial agent, is seriously altered by such a possibility given to the principal.

Indeed, under French law, as the compensation owed to the commercial agent at the end of the contract is calculated on the commissions paid during the last years, depriving the agent of commission on subsequent sales has the mechanical effect of reducing the amount of the said compensation.

• To preserve the attractiveness of the status of commercial agent, both for the agent, who is entitled to a fair remuneration, and for the principal, who can develop his clientele without incurring heavy investments, the commercial agency contract must therefore be drafted in such a way as to preserve the interests of both parties, during the relationship and at the time of its termination.

The Alerion Team in charge of Distribution – Commercial Contracts, Catherine Robin and Johanna Guerrero, is at your disposal to assist in the drafting of your commercial agency contracts and for any pre-litigation and litigation in connection with this type of distribution.

* CJUE October 13, 2022, aff. 64/21, Rigall Arteria Management sp. Z o.o sp.k c/ Bank Handlowy w Warszawie S.A.

Alerion invites you to follow the news on distribution law.  To start this Serie, focus on the status of commercial agent. Inaugurated in 1958 in France, the status followed the European harmonization in 1986 and continues to evolve under the influence of the Court of Justice.

Episode 1 – Commercial agent status does not require the power to modify prices

Episode 2 – The possibility to derogate from the right to commission

Episode 3 – Compensation and serious misconduct of the agent

Episode 4 – Commercial agent operating outside the EU and French law

Episode 1

Commercial agent status does not require the power to modify prices

Under French and European Law, the commercial agent obtains compensation at the end of the relationship with the principal (French Commercial Code, Art. L 134-12, Directive 86/653/EEC of 18/12/1986).

Under French and European Law, the commercial agent obtains compensation at the end of the relationship with the principal (French Commercial Code, Art. L 134-12, Directive 86/653/EEC of 18/12/1986).

Until 2020, and despite criticisms, the French Cour de cassation, followed by the Cour d’appel of Paris, had consistently ruled that the intermediary who did not have the power to modify price and conditions of sale with the clients, could not be qualified as a commercial agent. Consequently, such intermediary could not obtain the said compensation, except if he brought the heavy and difficult proof of his diligences with the clients, and of his negotiations on the price and his power to modify it.

On June 4, 2020^*, Court of Justice of the European Union adopted a position diametrically opposed and ruled that a person who sells goods in the name and on behalf of his principal does not necessarily need to be empowered to change prices to be granted the legal status of commercial agent.

The Cour de cassation^* and the Cour d’appel of Paris^* went then back on their case law and abandoned the condition of the power to change prices as a requirement for a commercial agent.

The distribution via a network of commercial agents is particularly suited to the national and international distribution of products and services. For the duration of the contract, the agent does not act in his own name and does not develop his own clientele but that of the principal, who can thus make his brands known and develop his sales on a national or foreign market according to a light mechanism (the agent is remunerated by a commission on sales) through the intermediary of an operator who is familiar with the functioning of this market.

At the end of the contract, the principal retains the clientele developed by the agent, which enables him to establish himself on a long-term basis on the market developed by the agent, through a local subsidiary or a local distributor who accepts the risk of distributing the products and services on its own behalf. On the other hand, the agent loses the fruits of his work but the status of commercial agent provided for by Directive (86/653/EEC of 18/12/1986) incorporated into the French Commercial Code (Art. L134-1 and following) enables him to obtain compensation which, according to French case law, is most often equal to 2 years’ commission calculated over the last 3 years of the contract. This amount is not mentioned in the law: circumstances may justify a lower amount.

This compensation is limited to commercial agency business and cannot be extended to other intermediaries or service providers.

Indeed, the commercial agent must look after the interests of the principal and act loyally and in good faith (Directive, Art. 3). In particular, the commercial agent must “make appropriate efforts to negotiate and, where appropriate, conclude the transactions for which he is responsible“. Although these operations do not necessarily involve the ability to modify the price of the goods, they require him to provide information and advice as well as to hold discussions with potential or existing customers to encourage sales. Only efforts and actions performed in this respect allow the agent to claim for the status of commercial agent and for commission fees on sales if he deploys them on a permanent basis. Thus, an agent who never visits customers or a service provider who is responsible only for advertising operations in a territory cannot claim either the status of commercial agent or any termination indemnity.

The Alerion Team in charge of Distribution and Commercial Contracts, Catherine Robin and Johanna Guerrero, are at the disposal of the French and foreign companies to draft and organise their commercial relationships.

^*CJUE, June 4^th, 2020,  aff. C‑828/18, Trendsetteuse ; Cass. com. 12 mai 2021, 19-17.042 ; CA Paris 20 mai 2021 19/05011

Looking back and forward

Since the Internet entered in home in the 1990s, our relationship with cyberspace has evolved : we have moved from a libertarian philosophy to the application of our real law in the virtual world, and finally, to the need to make the actors of the Web accountable.

The whole challenge of the legal framework of the cyberspace can be summed up in one word : adaptability. Over the last 20 years, legislators and judges have constantly adapted the legal framework of the liability of technical intermediaries to the Web evolution in France and within European Union.

“Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us.”^[1]

This was the philosophy of cyberspace at the time of the advent of the Internet: the promise of a new universe in which no political control is possible and where freedom is the rule.

But quickly, faced with the excesses of bad behaviour on the Internet, it became necessary to apply real world law in the virtual world. In France, the first decision that marked the end of the libertarian philosophy of the web concerned copyright^[2]. On that occasion, the judges affirmed that there is indeed infringement of copyrighted works when they are made available to Internet users without the authorisation of the rights holder.

Once it had been established that real world law should also govern the virtual world, the question then arose was whether Web actors should be held liable for damage to the rights of third parties caused by the dissemination on the Internet of illegal content provided by their customers.

Initially, French judges considered that hosting providers were bound by an obligation of vigilance^[3]. In « Estelle Hallyday v. Alter » case, intimate photographs had been posted on Internet through the server of the hosting company Altern.org. French judges enjoined the defendant to make impossible to disseminate the photographs on the sites it hosts, because they considered that the host « clearly exceeds the technical role of a simple transmitter of information » and must « obviously assume, with regard to third parties whose rights would be infringed (…) the consequences of an activity that it has deliberately undertaken to carry out (…) »^[4]. By this decision, the French judges chose to make Web actors responsible for the consequences of their economic activities on the Internet.

This case law was part of an awareness’ movement, at the end of the 1990s, of the growing power of technical intermediaries on the Internet. In 1999, in response to John Perry Barlow’s Declaration, the American jurist Lawrence Lessig published a book entitled Code is Law in which he demonstrated that the libertarian logic of the Internet is only an utopia and that cyberspace is indeed regulated by the Code: it creates normativity in cyberspace. For lack of being regulated by law, cyberspace is therefore framed by the codes established by private companies of the web. Then the regulation of the web was left in the hands of private interests.

The public authorities, taking the measure of the ongoing digital revolution, have taken up the subject in order to regulate the responsibility of the technical service providers involved in setting up and distributing services on the Internet. In 2000, the European Commission, inspired by the US legislation on copyright in the information society^[5], adopted the so-called E-commerce Directive^[6]. In France, this directive was transposed by the law for Confidence in the digital economy known as the LCEN^[7].

Unlike the French judge, the European legislator has opted for a more lenient liability regime for technical intermediaries: they are not bound by a general monitoring obligation for information they transmit or store^[8].

The mere conduit and caching providers enjoy a kind of immunity regarding the information circulating on their networks. Indeed, the law provides that the access provider is not responsible for the content, unless it leaves its role of mere conduit or caching provider.

The hosting provider will not be liable for the content stored on its servers under two cumulative conditions : firstly, it must not have knowledge of the illegal activity or information – knowledge of the litigious facts is presumed to be acquired by the host when it is notified of certain elements provided for by the law^[9] – and, secondly, as soon as it has knowledge of them, it must act promptly to remove the information or make access to it impossible. Compared to French common law on civil liability, hosting providers benefit from a lighter liability. However, they lose this benefit if the two conditions are not fulfilled.

Finally, the editorial service provider who makes pages available to the public on the Internet and which he controls the content, is subject to an obligation of monitoring the information he publishes. The editor will thus be considered responsible for all illicit content on his website^[10].

The question of the liability of the various Internet actors has brought to light a new problem: the identification of the technical intermediaries, in particular distinguishing a host from an editor. If the qualification of host or editor is that important, it is because it determines the liability regime. And regarding the lighter liability of the hosting provider, it is in the interest of the Web actors to be identified as hosts by the judges. If it is so thorny, it is because the development of Web 2.0 has highlighted the fragility of the categorisation established by the LCEN. However, case law has succeeded in identifying the criteria for qualifying a hosting provider: the criteria of data storage as the main activity carried out by the site and the criteria of the passive role of the host in its storage activity with regard to the content stored^[11]. On the contrary, the free or paid nature of the service and the presence or absence of advertising on the site concerned are ineffective in identifying a host. According to this jurisprudence, the following sites have been recognised as hosts: the video sharing sites Dailymotion, Fuzz or Amen^[12], search engines such as Google^[13], the e-commerce platforms eBay and Amazon^[14], or the social network Facebook^[15].

In 2019, in order to fight against the piracy of copyrighted works on the Internet, the European Commission adjusted the liability regime of sharing^[16]. A new type of host was created: the « provider of online content sharing services » (i.e. YouTube, Instagram, TikTok). This is a host whose main objective is to store and give the public access to a large quantity of copyrighted works that have been uploaded by its users. According to Article 17 of the Directive, a platform which provides public access to a protected work uploaded by its users must obtain prior authorisation from the right holders. In the event that no authorisation has been granted, a derogatory liability regime applies to providers of online content sharing services: they are liable for unauthorised acts of communication to the public. In other words, Article 17 of the DANUM Directive breaks with the E-commerce Directive’s philosophy, because the DANUM Directive imposes targeted monitoring of uploaded content to prevent the posting or re-posting of illegal content. This obligation to monitor sharing platforms technically takes the form of preventive filtering mechanisms. The Republic of Poland, considering that these mechanisms violate the freedom of expression of platform users, initiated an action for annulment before the CJEU. The latter took the opportunity to confirm the legality of the liability regime for providers of online content sharing services, particularly regarding the absence of a general monitoring obligation for technical intermediaries^[17].

Twenty years after the adoption of the E-commerce directive, the distinction of technical intermediaries into three categories seems to be inadequate. Indeed, since 2000, new web actors have appeared: social networks, search engines and e-commerce platforms. The European Union has drawn the consequences of this digital evolution by adopting the Digital Services Act^[18] in order to modernise the legal framework laid down by the E-commerce directive. The DSA is applicable to the already known intermediary services: mere conduit, caching and hosting services. However, the DSA innovates in the categorisation established by the E-commerce Directive because the Regulation now creates sub-categories of hosting providers: 1) classic hosting providers as provided by the E-commerce Directive, 2) online platforms and search engines, and 3) very large online platforms and very large search engines (with a monthly number of recipients in the EU of 45 million or more).

The main principles governing the civil liability of technical intermediaries laid down by the E-Commerce Directive are retained by the DSA, whereas the opposite solution was adopted by the Copyright Directive regarding providers of online content sharing services. Thus, technical intermediaries retain their lighter liability for the information they transmit, store or host and the cases law defining the contours of the host are not, in principle, challenged.

Moreover, the DSA innovates by imposing specific obligations on technical intermediaries according to a five-tier pyramid scheme depending on the activity of the intermediary: intermediate service providers, hosts, online platforms, e-commerce platforms, and together very large online platforms and very large search engines.

By adapting the categories of technical intermediaries, the European legislator has taken the measure of the evolutions of Web 2.0. Moreover, today, these categories are broad enough to capture new digital actors emerging with the Web 3.0, such as the Metaverse of the Meta company, which is considered as a platform within the meaning of the DSA.

Finally, the next challenges facing European and French judges and legislators will be, not to categorize the new actors of the Web, but to determine what roles they play in the infringements that occur on their networks to know whether the lighter liability regime should be applied or not[19]. As such, French lawyers have an important role to play in defending the interests of Web actors, whether they are provider or recipient, by taking into account the technical and legal evolution. These reflections are even more relevant when we see the increasingly active role that technical intermediaries play in our daily lives.

Corinne Thiérache, Partner

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^[1] John Perry Barlow, A Declaration of the Independence of Cyberspace, February 8th, 1996, wrote in response to a US law aimed to censor certain content and limit freedom of expression on the Internet

^[2] TGI of Paris, August 14th, 1996; n°60138/96 ; « Ecole centrale de Paris et ENSPTT v/ Brel and Sardou »

^[3] TGI of Paris, June 9th, 1998; JCP E 1998.953; « Estelle Hallyday v/ Altern.org »

^[4] Court of Appeal of Paris, February 10th, 1999; n°1988/16424 ; « Estelle Hallyday v/ Altern.org »

^[5] Digital Millennium Copyright Act (DMCA) adopted on October 8th, 1998

^[6] Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market

^[7] Law n° 2004-575 of 21 June 2004 for confidence in the digital economy

^[8] Article 6.I-7 LCEN

^[9] Article 6.I-5 LCEN

^[10] Law n° 82-652 of July 29th, 1982, on audiovisual communication and Law of July 29th 1881 on the freedom of the press

^[11] CJEU, March 23rd, 2010; C-236/08, C-237/008, C-238/08 ; “Google France SARL and Google Inc. v/ Louis Vuitton Malletier SA and Others”.

^[12] Court of Cassation, February 17th, 2011; n° 09-67896, n°09-13202, and n°09-15.857

^[13] Court of Cassation, July 12th, 2012; n°11-13.666

^[14] Court of Cassation, May 3rd, 2012; n° 11-10.505, n°11-10.507, and n°11-10.508

^[15] TGI of Paris, April 13rd, 2010; “Giraud v/ Facebook France

^[16] Directive 2019/790 of April 17th, 2019, on Copyright and related rights in the Digital Single Market transposed in French Law by and Order n° 2021-580 of May 12th 2021

^[17] Court of Justice of the European Union, April 26th 2022; C-401/19

^[18] Regulation 2022/2065 of October 19th, 2022, on a Single Market For Digital Services and amending Directive 2000/31/EC

[19] About a trademark infringement, see CJUE, December 22nd, 2022 ; C-148/21 and C-184/21 ; « Louboutin v. Amazon »

Since its appearance in the 90’s, e-commerce has revolutionized the consumption habits and the distribution of products and services in the world. Its development, intrinsically linked to the evolution of new technologies, has been growing rapidly for two decades[1].

The consecration of electronic commerce has brought to light new stakes (1) to which the law has been forced to adapt (2) in particular to face the new operators: the online platform (3).

1. The challenges of electronic commerce

E-commerce has given rise to new economic players, new distribution methods and new issues that continue to challenge the French and European authorities. The distribution of products and services can no longer do without the Internet. The website becomes essential to such an extent that today, in the European Union, 78% of commercial companies have a website[2]. Similarly, the share of French companies using social media has tripled from 20% in 2013 to 61% in 2021[3]. Professionals, including the most reluctant at first, such as luxury manufacturers, have fully embraced these new modes of communication to transform them into powerful marketing and sales tools for their products and services in order to gain new customers that their traditional geographic markets did not allow them to reach, and establish targeted relationships with them.

The reinforcement of competition and the reinforcement of the transparency of pricing policies are eminently favorable to the buyer (consumer or professional) who has an offer accessible at any time (subject to an internet connection!) and a comparison tool superior to that of traditional trade.

The stimulation of competition and transparency nevertheless entail risks of unfairness and parasitism which have increased. There are many examples. The consumer does not hesitate to compare products and services online before buying them in a physical store. On the other hand, once the advice of the physical salesman or the demonstration of the product is done in the physical store, the consumer will order the product online to benefit from a more attractive price or from the protection of the online sale. Quality products with well-known or recognized brands are used as loss leaders and sold online at knock-down prices by uncontrollable resellers… As for price transparency, it exposes the head of the distribution network to temptations of control… incompatible with the prohibition of cartels.

2. And the law in this revolution?

In order to protect consumers and ensure healthy competition, existing standards have been adapted and new rules have been adopted. The normative framework resulting from both French and European law is forced to be constantly updated in order to take into account the constant evolution of this market.

The main principles of consumer law, such as fairness and transparency of information, have been adapted. E-commerce has brought distance selling into the digital age[4]. Specific information must be provided to the consumer on the website. Online advertising as well as the processing of personal data collected are regulated. New statutes for website hosts and website editors have been specifically created with their own liability regime[5].

In the same way, in the relationships between professionals and particularly in the distribution networks, the effective use of the Internet is protected: direct and indirect restrictions are sanctioned as well as anti-competitive practices caused by online sales such as online price fixing, discrimination between physical and online sales or geo-blocking[6].

3. An omnipresent operator: the online platform

Online platforms, which appeared in the early days of e-commerce, such as Amazon in 1994 or Booking in 1996, have become unavoidable giants for both consumers and companies using their services.

Expedia[7] and Amazon[8] cases have highlighted their abuses towards professional users. The first one imposed to the hotel owners the automatic application of better pricing conditions and promotional offers. The second case gave the company the right to terminate a contract with a professional vendor at its own discretion. The French judge did not hesitate to condemn these practices and to fine these platforms to 1 million and 4 million euros respectively.

The French[9] and European[10] legislators are supervising the activity of these platforms by subjecting them to obligations of fairness and transparency, and by imposing the respect of special rights for consumers and the regulation of online reviews.

The next step is European with the two latest European regulations:

• Digital Service Act (DSA)[11], (applicable from 17^th February 2024): whose aim is to better protect European internet users and mitigate the risks of misinformation and aims at making platforms accountable.
• Digital Market Act (DMA)[12] (applicable from 2^nd May 2023): whose aim is to fight against the anti-competitive practices of the giants of the net and in particular of GAFAM (Google, Apple, Facebook, Amazon and Microsoft) and to correct the imbalances of their domination on the European digital market by imposing new obligations and prohibitions under penalty of heavy fines.

One thing is certain: technological evolutions directly impacting the development of e-commerce have not finished challenging legislators and jurisdictions. We are thinking in particular of the development of artificial intelligence which will allow to increase the personalization of the interactions with the customers, or the implementation of the semantic web known as “web 3.0” still little known by the general public whereas it promises to transform the web into a gigantic base of knowledge and will certainly create new problems in terms of management of security and confidentiality.

Our team is at your disposal to advise you and provide you with legal support on all issues related to online sales.

Catherine Robin, Partner – Johanna Guerrero, Lawyer – Distribution, competition and contract law

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[1] « Chiffres clés du e-commerce 2022 » report published by the French Fédération E-commerce et Vente à distance (FEVAD)

[2] « Les entreprises en France – Insee Références – Edition 2022 » report published by the French Institut national de la Statistique et des Études Économiques (INSEE)

[3] « Les entreprises en France – Insee Référence – Edition 2022 » report published by the French INSEE

[4] Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”)

[5] Law n°2004-575, 21 June 2004 « pour la confiance dans l’économie numérique »

[6] Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreement and concerted practices

[7] CA Paris, 21 June 2017, RG n°15/18784

[8] CA Paris, 2 September 2019

[9] Law n°2016-1321, 7 October 2016 « pour une République numérique »

[10] Regulation (EU) 2019/1150  of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services

[11] Regulation (EU) 2022/2065 of 19 October 2022 on a Single Market for Digital Services and amending Directive 2000/31/EC

[12] Regulation (EU) 2022/1925 of 14 September 2022 on contestable and fair market in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1228

1.- What is a Blocking Statute

The French Blocking Statute (“Loi de Blocage”, Statute n° 68-678 of July 26, 1968, modified by the Statute n° 80-538 of July 16, 1980) prohibits the disclosure of sensitive economic, commercial, industrial, financial, or technical information by French natural and legal persons to foreign authorities or its use in foreign judicial or administrative proceedings[1], issued outside the framework of international mutual legal assistance schemes[2].

Initially adopted in reaction to American discovery rules (subpoenas, production orders, disclosure requirements, etc.) on French territory for use in U.S. proceedings, the French Blocking Statute has only been enforced once by the French Supreme Court (“Cour de cassation”), resulting in a EUR 10,000 fine[3]. As a result, foreign authorities – mainly American courts – consider that the statute is not a valid reason to not comply with discovery or pre-discovery requirements[4].

Ten years after this enforcement by the Supreme Court, the French Anti-Corruption Agency (“Agence française anticorruption”, “AFA”) was created by the so-called “Sapin II” Law, reenforcing anti-bribery regulations and empowering the AFA with the monitoring of the Blocking Statute[5]. In the same year, the European General Data Protection Regulation (“GDPR”) was adopted[6]. Article 48 of the GDPR prohibits transfer of personal data to any non-EU court, tribunal or administrative authority which is not based on a valid international agreement, such as a mutual legal assistance treaty.

The French Agency for Strategic Intelligence and Economic Security (“SISSE”), created in 2016 and attached to the Directorate General for Enterprise (department of Economy), oversees France’s economic security policy. It coordinates the protection from foreign threats of technologies and companies. The SISSE works closely with other ministries, agencies (including intelligence agencies) and independent authorities to unify the national response.

Faced with increasing demands, mainly from the U.S. (such as Alstom (2014), Société Générale (2018) or Airbus (2020) cases), French companies were asking for a real “weaponization” of the legislation to protect themselves from extraterritorial procedures.

Since April 1, 2022, the SISSE assists French companies receiving discovery demands or requests from foreign authorities to disclose sensitive and strategic information[7].

2.- From a Neglected Text to an Efficient Application?

To determine whether a foreign laws bars U.S. discovery, American Courts analyze several factors.

The five first factors are: (i) the importance to the litigation of the documents or other information requested, (ii) the degree of specificity of the request, (iii) the country of origin of the information, (iv) the availability of alternative means of securing the information, and (v) the extent to which noncompliance would undermine US or the State of the information’s interests[8].

Two other factors shall be considered: (i) the hardship that compliance would impose on the party or witness from whom discovery is sought and (ii) the good faith of the party resisting discovery[9].

Recently, in Kashef v. BNP Paribas SA[10], the U.S. District Court for the Southern District of New York analyzed the seven above-mentioned factor, as BNP Paribas invoked the French Blocking Statute to rebut plaintiff’s motion to compel several documents.

In this case, victims of the Sudanese genocide alleged that BNP Paribas effectively facilitated the genocide by processing financial transactions on behalf of Sudanese entities, in violation of U.S. sanctions. In 2014, BNP Paribas pled guilty to the violations of sanctions. The civil case was brought in 2016, with plaintiffs seeking recovery for damages.

Several discovery disputes arose between the parties, including the de-pseudonymization of French and Swiss documents. BNP Paribas stated that the pseudonyms were necessary to remain in compliance with French and European laws – French Bank Secrecy law, French Evidence law and the GDPR.

The Court noted in its decision that “the French blocking statute places limits on the taking of foreign discovery in France” and that the GDPR “requires further consideration of necessity”, placing a “further analytical requirement on the production of data that is not contemplated in the U.S. discovery regime”.

Analyzing the seven factors, the Court explained that “Plaintiffs are, in effect, asking the Defendants to break the laws of the countries in which they operate. While both sides concede that prosecutions in this area have been all-but-nonexistent, the laws still exist and Defendants and the producing entities could expose themselves to potential liability, however slight [which] represents a hardship to Defendants”. The Defendants also acted in good faith in resisting discovery. The Court finally indicated that alternative means for obtaining the information sought was available through the Hague Convention.

Consequently, the Court denied the Motion to Compel the production of several de-pseudonymized documents.

This recent application and recognition of the French Blocking Statute in U.S. Courts has important potential implications. This decision demonstrates that it is possible for French natural and legal persons to oppose the disclosure of sensitive information sought by foreign authorities outside the framework of international mutual legal assistance schemes.

3.- Looking Forward

As both international mutual legal assistance schemes and discovery procedures are time consuming, and do not always produce the results sought, it is possible to envisage few possibilities for entities and institutions to share some sensitive information outside the judicial framework.

The first possibility would be cooperation agreements between governmental authorities. As an example, the French Financial Markets Authority (“Autorité des Marchés Financiers”, “AMF”), and the French Prudential Control and Resolution Authority (“Autorité de Contrôle Prudentiel et de Résolution”, “ACPR”) signed two cooperation agreements with the Securities Exchange Commission (“SEC”) in 2021 in order to allow French entities to register as Security Based Swap Dealers with the SEC and to benefit from a substituted compliance regime[11].

Agreements of this nature, governed by article 50 of the GDPR, would allow, within a specific and established framework, sharing some sensitive information between authorities and entities. We can imagine agreements with export control and dual-use goods departments, banking governmental bodies, or cybersecurity agencies.

Moreover, some French and European companies, may start to take into account the burdens of producing information or denying such production and adapt/amend their internal rules, including Binding Corporate Rules (“BCR”) as provided by article 47 of the GDPR, to manage the relations of the company with other companies or authorities. BCRs are to be established by the production and internal diffusion of procedures and manuals, including rules to be followed by the employees of the company. Documents of this nature are already, and in certain circumstances, mandatory for certain companies, in accordance with both the GDPR and the various EU Member States’ anti-bribery regulations.

The establishment of internal procedures and processes may be taken into account by the U.S. Department of Justice in case of sentencing. The Evaluation of Corporate Compliance Programs states that “the United States Sentencing Guidelines advise that consideration be given to whether the corporation had in place at the time of the misconduct an effective compliance program for purposes of calculating the appropriate organizational criminal fine”[12].

In any case, internal compliance programs would demonstrate good faith in the defendant company, if it is invoking the French Blocking Statute before U.S. courts.

Frédéric Saffroy, Partner & Alice Bastien, Associate.

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[1]               Article 1 bis of the Blocking Statute.

[2]               For example, the Hague Convention of March 18, 1970, on the Taking of Evidence Abroad in Civil or Commercial Matters, providing a specific framework for the cross-border communication of evidence, through a letter of request sent by a court in the requesting State, and the Mutual Legal Assistance Treaty of December 10, 1998 between France and the United States.

[3]               Criminal chamber, Cour de cassation, n° 07-83.227, December 12, 2007, in the “Executive Life” case.

[4]               Société Nationale Industrielle Aérospatiale v. U.S. District Court for the Southern District of Iowa, 482 U.S. 522 (1987)

[5]               Law n°2016-1691 of 9 December 2016

[6]               Regulation (EU) 2016/679 of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data

[7]               Decree n° 2022-207 of February 18, 2022.

[8]               Société Nationale Industrielle Aérospatiale v. U.S. District Court for the Southern District of Iowa, 482 U.S. 522 (1987)

[9]               First Am. Corp. v. Price Waterhouse LLP, 154 F. 3d 16 (2d Cir. 1998)

[10]              Kashef v. BNP Paribas SA, 16 CV 3228 AKH-JW filed on 05/23/2022

[11]              Memorandum of Understanding, Concerning Consultation, Cooperation and the Exchange of Information Related to the Supervision and Oversight of Certain Cross-Border Over-the-Counter Derivatives Entities In Connection with the Use of Substituted Compliance by Such Entities, July 23, 2021

[12]              U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs, updated June 2020

Looking back over the past twenty years, one cannot deny that labour and employment law is a constantly evolving and dynamic field of law.

A retrospective observation enables us to identify, for illustrative purposes, the main examples of the most striking developments in these fields of law.

* * *

Working time – Solutions to meet your needs

• How many hours can your employees work before paying their over hours? Before the Aubry laws of 1998 and 2002, the legal working time was fixed at 39 hours per week.

• As of 1^st January 2000, for companies with more than 20 employees and 1^st January 2002 for the remaining companies, the legal working time was lowered to 35 hours per week.

• A number of arrangements for the calculation of working time have been introduced progressively, including the organization of working time based on a yearly number of worked days, created in 2000.

Remote work and right to disconnect – The future has been here all along

• Have your employees got used to remote working? Such a dispositive was initially governed by a national interprofessional agreement dated 2005, which only concerned regular remote working.

• The evolution of lifestyles led the legislator to consecrate in 2016, the employee’s right to disconnect, allowing them to achieve a better work-life balance, and to regularise and increase in 2017 the flexibility of the rules both on regular and occasional remote working. 

Internal investigation into harassment – Always dreamed of being a detective?

• How to avoid sexual and moral harassment? When a moral or sexual harassment situation is identified, there is in principle no obligation for the employer to hold an internal investigation.

• It is however recommended to proceed as such, and the French Supreme Court case law established some guidelines into good practices in 2022:
• An internal investigation cannot be simply dismissed because the employer only interviewed the employees who raised the complaint.
• It is not mandatory to hear the alleged harasser, confront them with the plaintiff employees or give them access to file and documents collected during the investigation.
• The employer is not obliged to involve the staff representatives in the internal investigation.

The increased protection of whistle-blowers – When good faith brings you protection

• How to react when facing a whistleblowing situation? Protection for whistle-blowers was introduced in 2013 and reinforced by a second law in 2016.

• A recent law of 2022 further strengthens the guarantees offered to whistle-blowers and requires, since 1^st September 2022, to include the existence of the whistle-blower’s protection system in the internal regulations (“Règlement intérieur”).

The non-compete clause – An effective protection of a company’s interests necessary implies money!

• Protect the company from competition is unfortunately not free! Since 2002, case law raised the financial counterpart of a non-compete clause as a mandatory condition. Otherwise, it will be null and void.

The termination of employment contracts – Many changes over the last twenty years:

• Looking for a fast and amicable way to terminate an employment contract? Since 2008, French labor law provides a new way to terminate the working relation with the mutual termination agreement (“rupture conventionnelle individuelle”). It is an autonomous form of employment termination where an employer and employee mutually agree to end the relation.

• Such a termination is also possible when various employees are involved at the same time: in 2017, the collective mutual termination agreement (“rupture conventionnelle collective”) was implemented.

• Facing economic difficulties in your company? In 2016, the legislator did not only complete the list of economic grounds that may justify a redundancy by considering those already accepted as such by the case law (the need to safeguard competitiveness and the cessation of activity) but has also clarified the notion of economic difficulties itself.

• Worried about reclassifying one of your employees in your premises abroad in case of economic redundancy or physical incapacity? Since 2017, the scope of reclassification is restricted to the sole national territory.

• Be careful, as an employee could be dismissed for a job abandonment, there is now a presumption of resignation since 2022, which is subject to a specific regime. The dismissal’s regime would not be automatically applied then!

The consequences of an abusive dismissal – Having more visibility on the cost of a litigation is therefore possible!

• Do you want to estimate the cost of a dismissal’s challenge from one of your employees? Before 2017, an employee who suffered an abusive dismissal was eligible to be granted a minimal amount of six month’s salary as damages, with no maximum amount foreseen, since that date, such damages are capped according to the size of the company and the seniority of the employee (the Macron scale). However, such a scale may be excluded in some cases.

The expansion of topics open to the negotiation of company agreements – The end of a monopoly

• You wish to adapt the conventional rules to your company? Before 2017, the hierarchy of regulations in French law provided for the primacy of agreements concluded at the branch of activity level (collective bargaining agreements).

• Since 2017, by principle, company agreements provisions prevail over the ones of the collective bargaining agreements.
  This rule however suffers two exceptions:
  • The collective bargaining agreement’s provisions still prevail on some specific topics (minimum wages, trial period, etc.).
  • The collective bargaining agreement may prohibit company level agreements from containing different stipulations (occupational risks, disabled workers, etc.).

Environmental, Economic and Social database – Give green a chance

• Environmental issues have made their appearance in companies. An Economic and Social Database was incorporated into the Labour Code by a 2013 law and gathers all the information communicated to the staff representatives to enable them to perform their consultative missions.

• The content of this database has been progressively extended by laws that came into force in 2015 and later in 2017.

• In 2022, a new environmental topic was integrated into the database, which then became the Environmental, Economic and Social Database and must include a new theme entitled “environmental consequences of the company’s activity”, enabling the staff representatives to be consulted in this subject, as part of the recurrent information and consultations.

* * *

It appears very clearly that employment and labour law has evolved tremendously over the past 20 years.

These constant changes show no sign of decreasing, leading us to believe that the next 20 years we will also witness major developments.

Alerion Avocats will be here at all times to guide and support you through every new development that may come your way, as it has for the last 20 years.

Jean-Christophe Brun, Partner, Anaïs Edet, and Anne-Sophie Houbart, Associates.

The aim of social and environmental performance confronted with economic performance

Far from being an oxymoron, this title exposes two aims, one of which has tended to take place at the expense of the other or, at best, one before the other.

Even if it is true that a company with more wealth will always be in a better position to share it with its employees than the reverse, it is still true that it would hardly be rational to require a CEO to take care of the environmental impact of his company’s activities before its economic performance.

Back to the past

Once we look past this cliché, the fact remains that this has always been emphasised when adopting major international standards in labor law.

The International Labor Organization was built around a double postulate:

• Social progress should be subject to state action in order to adopt specific labor law standards (international conventions, recommendations, etc.);
• But taking into account the fact that this action in favor of social progress should be left to the voluntary intervention of States through the ratification of conventions by each country benefiting from sufficient economic progress to have the means to achieve it.

To date, no economic integration or free trade treaty has provided common social standards; the objective has only been to seek a convergence of standards.

At European level, the harmonization of social standards is carried out according to two processes:

• either by the European regulation which is integrated directly into the legal framework of each Member State and is the subject of an exclusive interpretation by the Court of Justice of the EU;
• or by the directive which, to be applicable, must be transposed into domestic law, under the control of the Court which verifies the quality of the transposition.

This harmonization process is carried out through the adoption of common minimum standards contributing to the creation of a common basis for the protection of employees.

The objective is also to fight against social dumping based on the reduction of costs linked to weak protection of the health and safety of employees within the Union and thus avoid distortions of competition.

Back to the future

The exponential development of CSR for the last fifteen years is intended to respond to this challenge: faced with the inability of States to establish new coercive social standards, companies have designed their own self-regulation standards considered as ‘soft law’.

Whatever one’s opinion of these debatable standards, their transnational application, for example via codes of conduct or other ethical charters, has made it possible to introduce new guarantees in countries where social protection rules are not provided by local legislation.

The normative value of CSR commitments as a real issue

The central question remains the binding value of the commitment made in terms of CSR by the company and its responsibility in this regard.

• The prerequisite of integration and compliance with domestic legislation

To be both socially and legally relevant, these commitments must first and foremost integrate local regulations as a fundamental starting point; the voluntary standards that the company imposes on itself must be integrated into the national or international legal order and therefore respect the local  legal order in.

• The need for transparency

To date, no certification appears to have the legitimate authority to declare a particular company globally, socially and environmentally responsible.

Thus, the very nature of the standard to which the company agrees to submit via a charter, a label or a specific certification resulted from a selective choice, which relativized its scope as a global standard.

However, only the implementation of a global assessment and reporting process allows effective control of the sustainable commitments made on a qualitative and quantitative level.

Also, the very title of the new European Directive of December 16, 2022 (Corporate Sustainability Reporting Directive) is far from insignificant: such a commitment made according to the selective goodwill of the company will no longer be enough to become virtuous; a real impact analysis of the company’s activities will have to be carried out, which will be accompanied by reporting whose nature is no longer only declarative but will lead to concrete achievements.

In conclusion, if many agree to maintain that the commitments made by companies in terms of sustainability are vectors of growth, employers will still have to learn to manage these new constraints inducing the implementation of evaluation processes and reporting allowing the effective qualitative and quantitative control of their commitments with their economic performance objectives.

Jacques Perotto, Partner and Maxime Hermes, Associate

CORPORATE SUSTAINABILITY REPORTING DIRECTIVE

The climate emergency, and the raising of awareness by the authorities on the paramount necessity for strong corrective actions at the State and corporate levels, have contributed to a political consensus at the EU level, which resulted in this European Directive, December 16, 2022.

It came into force on 5 January 2023; members have until July 6, 2024 to transpose it into national law.

We have taken this occasion to launch the publication of our chronicles on the topic of CSR in companies confronted with sustainability issues.

Why this new Directive?

The EU ultimately wishes to bring the level of information on sustainability, to the same level as financial information, to contribute to its objective of climate neutrality in 2050.

In this regard, the CSRD extends the ambitions of the previous NFRD directive of 2014: with more companies falling into its scope, and more detailed reporting obligations.

Who is impacted?

CSRD applies to the following companies:

• All big companies, including companies outside the EU listed on the European market, and not-listed companies, meeting two out of the three following criteria:

i.    250 employees

ii.   40M€ net of net turnover

iii.  20M€ total balance sheet

All parent companies of a big group fall within the scope of CSRD.

• Small and medium size companies listed on the European market and meeting two out of the three following criteria:

i.    Between 10 and 250 employees

ii.   Net turnover between 700K€ and 40M€

iii.  Total balance sheet between 350K€ and 20M€

• Non-EU companies generating at least 150M€ of net turnover within the EU with a branch or subsidiary (big companies or small and medium size listed companies).

Not-listed companies and listed small and medium size companies (including subsidiaries of non-EU groups) are exempt from  publishing a sustainability report at their level if they belong to a group publishing a consolidated report compliant with CSRD.

Which information to report?

In a nutshell, the report shall mention information which allows a clear understanding of the interactions between the activity and sustainability:

• How the company’s activities impact sustainability matters;

• How the sustainability may impact the growth of the company, its performance, and its position compared to its competitors.

The company will support its report by:

• Identifying the main negative impacts – current or potential – generated by the company’s activities and its value chain;
• Providing a reminder of the commitments taken and the actions performed on sustainability;
• Describing the main risks for the company in relation to sustainability matters and the way these risks are managed.

This is not so different from the process applicable under French law to fight occupational risks in the workplace: the construction of the health and safety risk assessment leads to identifying the risks for employees generated by the company’s activities, as well as actions to be taken to eliminate the risks, or mitigate their occurrence and the consequences.

To be followed…

Jacques Perotto, Partner and Maxime Hermes, Associate

Cass. 1^st Civil Chamber, 28 September 2022, No. 20-20.260, Kabab-Ji v. Kout Food Group

Ten years after the Dallah v. Pakistan case, French and English courts once again rendered opposite decisions on the determination of the rules governing the application of an arbitration agreement to a non-signatory.

In 2021, the United Kingdom Supreme Court declined to recognize and enforce an award which extended the arbitration agreement to a non-signatory third party, on the ground that such an extension was not allowed under English law, the governing law of the contract.

By contrast, in a much-commented decision dated 28 September 2022, the Cour de cassation (French Supreme Civil Court) upheld the same award, considering that before French courts, the validity and effects of the arbitration agreement were not governed by English law but by French substantive rules (règles matérielles).

These opposite decisions illustrate a profound difference in the French and English conceptions of the autonomy of the arbitration agreement. More generally, it could be an incentive for practitioners anticipating enforcement in several jurisdictions, to specify in the contract which law is applicable to the validity and effects of the arbitration agreement. 

Background

In 2001, the Lebanese company Kabab-Ji SAL (hereafter, “Kabab-Ji”) entered into a ten-year franchise agreement with the Kuwaiti company Al-Homaizi Foodstuff Co. (hereafter, “AHFC”) for the exploitation of Kabab-Ji’s restaurant brand in Kuwait. The franchise agreement and subsequent agreements contained governing law clauses providing for English law, and arbitration agreements providing for International Chamber of Commerce (ICC) arbitration seated in Paris.

In 2005, Kout Food Group (“Kout Food”) became the holding company of the AHFC group. Kout Food did not become a signatory party to the agreements but took part in its performance.

In 2011, the parties failed to renew their agreements which expired.

Arbitration proceedings seated in Paris

In 2015, Kabab-Ji commenced arbitration proceedings in Paris against Kout Food, claiming damages for breach of the agreements and unauthorized appropriation of know-how.

Kout Food challenged both the jurisdiction of the arbitral tribunal and the merits of Kabab-Ji claims, on the ground that it was not a signatory party to the agreements.

In 2017, by majority decision, the arbitral tribunal:

• held that it had jurisdiction considering that under French law, the law of the seat of the arbitration, Kout Food was a party to the arbitration agreement;
• found that Kout Food was bound by the agreements, held Kout Food liable for their breach and awarded Kabab-Ji USD 7 million in damages and legal costs.

Interestingly, the only English-qualified lawyer member of the arbitral tribunal issued a dissenting opinion, considering that the strict wording of the agreements precluded Koot Food from becoming a party to the agreements.

This award gave rise to parallel state court proceedings on both sides of the Channel: Kabab-Ji filed an application for an enforcement order before English courts and Kout Food filed an application to set aside the arbitral award before French courts.

U.K. courts refused to recognize and enforce the award

In 2018, Kabab-Ji obtained an ex parte order allowing the enforcement of the award in the United Kingdom. Kout Food appealed this order. On 27 October 2021, the United Kingdom Supreme Court ruled in favor of Kout Food.

The Supreme Court first considered which law applied to the issue at stake and decided that the answer would be found in the law governing the arbitration agreement rather than the law of the seat of arbitration. In the absence of a specific choice of law to govern the arbitration agreement, the Court considered that the parties’ choice of law to govern the contract (lex contractus) also applied to the arbitration agreement (see previously Enka v. Chubb case, schematically resorting to the law of the seat only if there is no other express choice of law). The parties had chosen English law to govern the agreements and therefore, the Court applied English law to determine the scope of the arbitration agreement.

Then, the Supreme Court held that Kout Food was not a party to the arbitration agreement under English law. The terms of the agreements provided that any modification had to be in writing, and the Court found that there was no evidence of such a written agreement of Kout Food.

The Supreme Court concluded that the arbitral tribunal lacked jurisdiction and refused recognition and enforcement to the arbitral award in the United Kingdom.

French courts dismissed the application to set aside the award

In parallel, in 2017, Kout Food filed an application to set aside the award before the Paris Court of Appeal, mainly for lack of jurisdiction of the arbitral tribunal. On 23 June 2020, the Court of Appeal upheld the arbitral tribunal’s jurisdiction and dismissed Kout Food’s application.

Firstly, the Court of Appeal did not seek to determine a law which would govern the arbitration agreement, but instead applied the well-established French substantive rule under which, as a result of the autonomy of the arbitration agreement from the contract containing it, the existence, validity and effects of the arbitration agreement are determined without any reference to a domestic law but exclusively by reference to the common will of the parties, subject to mandatory rules of French law and international public policy (see Dalico v. Khoms et El Mergeb case).

In the case at hand, the specific provisions contained in the agreements did not reflect, according to the Court, an express designation of English law to govern the arbitration agreement. Therefore, French substantive rules applied.

Secondly, the Court of Appeal recalled the French substantive rule allowing the extension of arbitration agreements to non-signatory parties which directly participated to the performance of the contract and the resulting disputes (see ABS case), “as long as their contractual situation and activities justify the presumption that they accepted the arbitration agreement, the existence and scope of which they were aware”.

The Court found that Kout Food had participated in the performance of the main agreement, notably by taking part in the exploitation of Kabab-Ji’s restaurant brand in Kuwait and paying invoices addressed to AHFC, and concluded that Kout Food had become a party to the arbitration agreement.

Kout Food challenged this decision before the Cour de cassation.

On 28 September 2022, the Cour de cassation confirmed the Court of Appeal’s decision, endorsing the Cour of Appeal’s position and adding that if parties wish to apply a specific domestic law to the arbitration agreement, they must expressly provide for it.

Comments

The outcome of this matter before French and British courts calls for several comments.

Firstly, after these conflicting decisions on both sides of the Channel, Kabab-Ji is now confronted to a race to enforce the award around the world.

Secondly, both courts agree that parties can choose the law applicable to the arbitration agreement. The case at hand shows that this choice has consequences, notably when determining the parties bound by such agreement. However, in the absence of an express provision designing the law applicable to the validity and effects of the arbitration agreement, French courts apply their substantive rules while British courts principally apply the law chosen by the parties to govern the main contract, or failing such a choice, the law of the seat.

Finally, by contrast to the Dallah case where British courts applied French law but reached a decision opposite to that of the French courts, in this case, each court applied its own rules. It would be interesting to know what the position of the French courts would be if they were to apply English law to the existence and the validity of an arbitration agreement.

In any event, parties choosing arbitration in Paris, or anticipating enforcement of a future award in France, must be aware that French courts always review the arbitration tribunal’s jurisdiction under French substantive rules, unless otherwise expressly provided. In the latter case, the given provision would have to clearly designate the law governing “the arbitration agreement.” The designation of a law to govern the “arbitration” would not be considered specific enough to override the applicability of the substantive rules of French law (see Pharaon case).

Jacques Bouyssou, Partner, Marie-Hélène Bartoli Vallet, Counsel, and Juan Diego Niño–Vargas, Associate.