Newsletter No. 11 – Business Law
Summary
LEGISLATION
DISPUTES BETWEEN PROFESSIONALS AND CONSUMERS
Law of December 30, 2014
JURISPRUDENCE
… of December 12, 2014
Condition for regularizing the mandatory conciliation clause
… of January 8, 2015
Status as a party to an approved settlement
… of December 16, 2014
Offsetting between a current account and a securities account
… of December 16, 2014
Sanction for the excessive length of insolvency proceedings
… of December 2, 2014
Summons to initiate insolvency proceedings: the status of creditor
… of December 16, 2014
Procedures for extending insolvency proceedings
LEGISLATION
Disputes between professionals and consumers
Law No. 2014-1662 of December 30, 2014, containing various provisions adapting French legislation to European Union law in economic and financial matters, primarily includes provisions authorizing the government to issue ordinances in various areas, particularly regarding the settlement of disputes between professionals and consumers.
The government is thus authorized to adopt, by ordinance, measures to transpose Directive 2013/11/EU of May 21, 2013, on alternative dispute resolution for consumer disputes (ADR). This directive aims to harmonize and generalize ADR systems applied to the resolution of existing contractual disputes between professionals and consumers in the sale of goods or the provision of services.
The directive stipulates that dispute resolution bodies must meet qualitative requirements, particularly in terms of competence, effectiveness, and transparency. Furthermore, ADR mechanisms must be subject to monitoring and evaluation by competent bodies.
National law must be adapted to require businesses to provide consumers with prior information on the various online dispute resolution mechanisms in key commercial documents and on websites.
Finally, it should be noted that the directive must be transposed into national law by July 9, 2015.
JURISPRUDENCE
Condition for regularization of the mandatory conciliation clause
Mix. December 12, 2014 (No. 13-19.684) PBRI:
In this case, a contract between the parties in dispute contained a conciliation clause prior to initiating legal proceedings. The question was whether the conciliation procedure, made mandatory in the event of a dispute by a clause in the contract, could be implemented during the proceedings if it had not been implemented prior to the legal action, in order to remedy the resulting inadmissibility.
The Court of Cassation answered in the negative, on the grounds that "the situation giving rise to the inadmissibility arising from the failure to implement a contractual clause establishing a mandatory procedure prior to bringing the matter before a judge, which promotes a resolution of the dispute through recourse to a third party, cannot be remedied by implementing the clause during the proceedings."
Status as a party to a ratified transaction
1st Civil Chamber, January 8, 2015 (No. 13-27.377) F-PB:
In this case, a settlement agreement concluded between several companies had been approved by the president of a regional court. The director of one of these companies having acted as guarantor, one of the parties initiated enforcement proceedings against him. The guarantor then decided to petition the enforcement judge to have these proceedings set aside.
The judges were asked to determine whether the guarantor was a party to the settlement. The Court of Appeal ruled in the negative and set aside the enforcement proceedings. According to the court, only the companies were parties to the approved settlement agreement. Furthermore, the guarantee, even though included in the agreement, did not confer upon the guarantor the status of a party to the settlement, which had been given the force of law. Consequently, the guarantee required obtaining an enforceable judgment against the guarantor to allow for enforcement proceedings.
The Court of Cassation adopts this reasoning and rejects the appeal against the decision of the Court of Appeal.
Compensation between a current account and a securities account
Com. 16 December 2014 (No. 13-17.046) F-PB:
A company was placed under receivership and then into liquidation. A bank's claim for the debit balance of the current account was admitted. The bank then filed a lawsuit seeking authorization to offset this balance against the balance of a securities account held in the debtor's name. The Court of Cassation held that the lack of fungibility between the terms of a current account agreement and the terms of a securities account agreement precluded the possibility of combining these two accounts into a single account.
Collective proceedings: excessive duration
Com. 16 December 2014 (No. 13-19.402) FP-PBRI:
A debtor was placed under judicial administration and then liquidation of assets on July 23, 1976, and October 26, 1979, respectively. He subsequently filed a petition with the court on March 24, 2011, requesting the closure of the proceedings on the grounds that their duration exceeded the reasonable time limit within the meaning of Article 6 § 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms and constituted a violation of his property rights protected by Article 1 of Protocol No. 1 to that Convention. The Court of Appeal upheld the closure of the liquidation proceedings due to the excessive length of the proceedings.
Pursuant to Article L. 643-9 of the French Commercial Code, as amended by the Law of 26 July 2005 on the Safeguarding of Businesses, and Article 6 § 1 of the European Convention on Human Rights and Article 1 of Protocol No. 1 to that Convention, the Court of Cassation quashes the judgment of the Court of Appeal. In support of its decision, the Court clarifies that when there are realizable assets capable of fully or partially satisfying the creditors, the violation of the debtor's right to a trial within a reasonable time and the resulting violation of their right to manage and dispose of their property is not sanctioned by the closure of the liquidation proceedings but entitles them to bring an action for damages under Article L. 141-1 of the French Code of Judicial Organization, which they may exercise as part of their own legal rights.
Summons to initiate insolvency proceedings: the status of creditor
Com. 2 December 2014 (No. 13-20.203) F-P+B:
Due to non-payment of a debt, a debtor was ordered in summary proceedings to pay a provisional sum. Subsequently, the Milan court opened main insolvency proceedings against the debtor. The creditor then filed a request with a French commercial court to open secondary insolvency proceedings.
The question arose as to whether the creditor had standing to request the opening of these insolvency proceedings.
According to the Court of Cassation, because the creditor could not demonstrate a certain, liquid, and due debt owed by the debtor on the date of the summons to open these secondary insolvency proceedings, the creditor did not have the status of creditor required by Article L. 640-5, paragraph 2, of the French Commercial Code, nor, consequently, the status referred to in Article 29(b) of Regulation (EC) No 1346/2000 on insolvency proceedings.
Terms and conditions for extending insolvency proceedings
Com. 16 December 2014 (No. 13-24.161) F-PB:
Three companies linked by capital each separately declared themselves insolvent. The court then opened a joint insolvency proceeding for all three companies.
The Court of Appeal found that the companies were integrated in terms of their legal ties and activities, and were bound by a cash pooling agreement; that funds were being transferred to the parent company; that the request for conciliation had been made at the group level; that no possibility of a partial sale of business activities appeared; and that the companies had not demonstrated any benefit to them in pursuing the proceedings with separate assets.
The Court of Cassation overturned the Court of Appeal's decision. The Court of Cassation held that the elements considered by the Court of Appeal were insufficient to establish the commingling of the companies' assets or the fictitious nature of some of them, which were the only grounds for justifying, by extension, the existence of a single insolvency proceeding.
