Analysis
14 July 2019

MP provides PM with guidelines to reassert French and European Sovereignty and shied companies from the long arm of (US) law

Bastille Day Newsletter 2019 - Legislative, Regulatory & Policy Updates

 

On June 26, 2019, at the request of the French Prime minister, Edouard Philippe, the Député Raphaël Gauvain published recommendations to “[r]e-establish French and European Sovereignty and protect [French] businesses from of extraterritorial law and measures1” in response to US enforcement actions against French companies.

French sovereignty jeopardized by US extraterritorial measures

During the past years, French and European companies have paid billions of dollars in fines on the ground that their business practices, customers and some of their payments did not comply with US laws. Even in cases where the misconduct did not occur on US soil and cases in which the company was compliant with local regulation, French and European companies have been subjected to US extraterritorial reach.

Considering this, the parliamentary committee headed by Député Gauvin stresses the lack of legal tools available to French companies to defend themselves against the US criminal proceedings.

The report denounces the selective prosecution methods and the disproportionate fines imposed, in that “only European and Asian companies which are direct competitors of American companies are pursued”, seemingly “motivated by economic reasons”.

It also assesses that US prosecutions infringe upon the sovereignty of foreign countries to which prosecuted companies belong and neglect the Conventions on Mutual Assistance in Criminal Matters and Administrative Cooperation.

The report adds that this trend poses the considerable risk that other countries establish extraterritorial laws allowing them to act in the same way.

French sovereignty to be reasserted by Report recommendations

The report issues three recommendations and six additional suggestions for reforming French protection law.

A. Legal privilege for in-house lawyers

France is one of the world’s largest economies that does not award confidentiality to in-house counsel communications – placing French companies at a competitive disadvantage and leading to the outsourcing of their legal department to other jurisdictions2.

The main reform suggested by this report is to introduce legal privilege to protect in-house counsel documents and particularly legal consultations on defense strategy through the establishment of a new in-house counsel status.

These counsels will be registered at the French Bar on an ad hoc list and will work exclusively for the company without however being authorized to argue in court.

B. Anti-cloud act provisions

The report also calls for the extension of the GDPR3 to protect European company data against the new US 2018 Cloud Act4.
The new law suggested by the Gauvain Report is to sanction hosting companies from communicating French company data by imposing administrative fines of up to of 4% of their global turnover. Private individuals will risk fines of up to 20 million euros5.

C. Strengthening the Blocking Statute

As stated by the report, the French Blocking Statute6 needs to be strengthened to force foreign entities to cooperate with French authorities.

In this regard, the Statute must provide for a mandatory alert system, the establishment of a governmental authority that will lend support to companies and an increase in the sanctions for violations of the Statute.

The report includes six other recommendations, including the broadening of the scope of the French equivalent of the Deferred Prosecution Agreement7 to allow France to pursue French financial misconducts more efficiently and independently, and turning to the International Court of Justice and the Organization for Economic Cooperation and Development to establish international rules on extraterritoriality.

Raphaël Gauvain underlined that it is now up to the French government to bring forward a legislative proposition.

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