France: What happened in 2020 and significant events in 2021

The Year in Review 2020 and Year to Come 2021 summarises some of the major developments in France last year, and a selection of key changes that we anticipate over the coming year.

Key updates to

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major legal developments in 2020 and 2021

Significant events in 2020

The Covid-19 outbreak did not only have an impact on our societies, businesses and personal lives, it also resulted in substantial changes in the French legal landscape, as in many other jurisdictions. Unsurprisingly many – but not all - of the reforms that took place in 2020 came in response to this unexpected health crisis. But if Covid-19 has certainly been the hot legal topic of the year, other significant reforms were implemented, and this publication is the perfect opportunity to remind us about those non-Covid – but still important - topics!

Arbitration

Paris Court of Appeal clarifies place of international sanctions in French international public policy: In a decision of 3 June 2020 denying an action to set aside an arbitral award, the Paris Court of Appeal clarified the test for determining whether an international sanctions regime should be considered a part of French international public policy. The Court upheld the award against the contention that it failed to consider international sanctions against Iran. The Court held that US sanctions against Iran do not form part of French international public policy, as they do not reflect an international consensus and are opposed by both European and French authorities. On the contrary, UN sanctions and EU sanctions against Iran were found by the Court to carry values which fall within French international public policy, but the Court determined that the dispute did not fall within the material and/or temporal scope of those sanctions, and so the Court held that the award did not breach French international public policy.

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Banking

Loan agreements to include LIBOR transition provisions: In April, the Working Group on Sterling Risk-Free Reference Rates recommended that by the end of Q3 2020 lenders should be in a position to offer non-LIBOR linked sterling loans, and that all new or refinanced sterling LIBOR-referencing loans entered into from 1 October 2020 include either pre-agreed conversion terms, or an agreed process for renegotiation, to SONIA or other alternatives.

Financial support to business: In the context of the Covid-19 global pandemic, emergency measures were taken to provide the best support to companies impacted by the crisis. The French government has announced a set of financial support to businesses measures aimed at alleviating difficulties linked to the health crisis. The three main measures are loans guaranteed by the State (“PGE”); factoring facilities of confirmed orders guaranteed by the State; and the direct financing from the State to SMEs (excl. micro businesses) and mid-sized companies that have not been able to obtain a PGE.

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Competition

Retail and digital sectors under FCA scrutiny: The French Competition Authority (“FCA”) remained active in the field of merger control. The FCA prohibited its first transaction (in the retail sector) since 2009, when it was first empowered to do so, besides clearing various transactions conditional upon structural divestitures. The FCA also issued its first commitment decision in the field of joint purchasing agreements (in the retail sector) since 2018, when it was first empowered to review them (to avoid weakening suppliers such as SMEs, some products from the agri-food sector have, inter alia, been excluded from the scope of the joint purchasing agreement between Auchan, Casino, Metro and Schiever). In the field of antitrust, the FCA pursued the intensification of its enforcement in the digital sector by handing down its biggest fine ever (€1.24 billion, including €1.1 billion against Apple for having limited retailers’ freedom) and imposing interim measures on Google (to hold good faith negotiations with publishers and news agencies regarding the remuneration they are entitled to get for the re-use of their protected content). The FCA also monitored the correct implementation of commitments taken by former infringers and fined two companies (€1.1 million in total) that failed to comply with their commitments.

Covid-19

Financial support to business: In the context of the Covid-19 global pandemic, emergency measures were taken to provide the best support to companies impacted by the crisis. The French government has announced a set of financial support to businesses measures aimed at alleviating difficulties linked to the health crisis. The three main measures are loans guaranteed by the State (“PGE”); factoring facilities of confirmed orders guaranteed by the State; and the direct financing from the State to SMEs (excl. micro businesses) and mid-sized companies that have not been able to obtain a PGE.

Read more...

Temporary adaptation of proceedings relating to the treatment of the difficulties faced by businesses: The proceedings relating to the treatment of the difficulties faced by businesses provided for in Book VI of the French commercial code have been amended by ordinances dated 27 March, 20 May 2020, 25 November and by law dated 17 June 2020. Many changes and additions have been introduced to the proceedings relating to the treatment of the difficulties faced by businesses, and are still applicable, or still in effect in December.

Read more…

Employment aspects of the governmental recovery plan: As part of employment law measures to address the Covid-19 pandemic, the French government has set up a recovery plan of 100 billion euros over two years. This plan includes an “employment and territorial cohesion” section with specific measures on employment and training, meant to develop the competitiveness of companies and employment, with a stated objective of creating 160,000 jobs in 2021.

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Shareholders’ meetings “behind closed doors”: The Covid-19 outbreak and associated lockdown restrictions gave birth to a brand-new concept in corporate law: shareholders’ meetings without shareholders. Companies were authorised, under an exceptional and temporary regime, to hold their shareholders meetings “behind closed doors”, i.e. without shareholders being present, whether physically or remotely, and with votes being cast in advance. This flexibility has been widely used in 2020.

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Covid-19 and cookies: Covid-19 was undoubtedly the number one topic of 2020, raising several important data protection issues relating to the processing of employees’ health data, with specific issues such as automatic temperature screening, declaration of contacts with exposed persons, health surveys or contact tracing mobile applications. While it took some time for data protection authorities to publish substantial guidance, companies are now in possession of a clearer framework for addressing those issues. Additionally, in October, the French data protection authority published its highly anticipated amended guidelines and recommendations on the use of cookies and other trackers. It notably reaffirmed its recent position (such as: continued browsing does not constitute appropriate consent, necessity to display a “reject all” cookies button by the “accept all” button). It also subtly inflected some of its previous positioning, notably considering from now on that cookie walls (the practice of gating content behind the acceptance of cookies on a website) are likely to hinder freely given consent (where it formerly considered this to always be the case).

Tax answers to address Covid-19 pandemic: In the context of the Covid-19 global pandemic, various tax measures (deferral of payments, rebate of taxes, accelerated repayments of tax credits, etc.) have been implemented by the French government in order to support French businesses.

Read more….

Corporate

Shareholders’ meetings “behind closed doors”: The Covid-19 outbreak and associated lockdown restrictions gave birth to a brand-new concept in corporate law: shareholders’ meetings without shareholders. Companies were authorised, under an exceptional and temporary regime, to hold their shareholders meetings “behind closed doors”, i.e. without shareholders being present, whether physically or remotely, and with votes being cast in advance. This flexibility has been widely used in 2020.

Read more…

Data Protection

Covid-19 and cookies: Covid-19 was undoubtedly the number one topic of 2020, raising several important data protection issues relating to the processing of employees’ health data, with specific issues such as automatic temperature screening, declaration of contacts with exposed persons, health surveys or contact tracing mobile applications. While it took some time for data protection authorities to publish substantial guidance, companies are now in possession of a clearer framework for addressing those issues. Additionally, in October, the French data protection authority published its highly anticipated amended guidelines and recommendations on the use of cookies and other trackers. It notably reaffirmed its recent position (such as: continued browsing does not constitute appropriate consent, necessity to display a “reject all” cookies button by the “accept all” button). It also subtly inflected some of its previous positioning, notably considering from now on that cookie walls (the practice of gating content behind the acceptance of cookies on a website) are likely to hinder freely given consent (where it formerly considered this to always be the case).

Dispute Resolution

Reform of the French civil procedure: A comprehensive reform of the French procedural rules came into force on 1 January 2020 in the context of the creation of the Tribunal judiciaire (which reunifies the former Tribunal de grande instance and Tribunal d’instance). One of the key changes is that first instance decisions are now enforceable by virtue of the law – i.e. notwithstanding pending appeal proceedings – except if the judge expressly decides otherwise. This reverses the previous rule according to which first instance decisions were not enforceable pending appeal, unless provisional enforcement had been granted.

Employment

Employment aspects of the governmental recovery plan: As part of employment law measures to address the Covid-19 pandemic, the French government has set up a recovery plan of 100 billion euros over two years. This plan includes an “employment and territorial cohesion” section with specific measures on employment and training, meant to develop the competitiveness of companies and employment, with a stated objective of creating 160,000 jobs in 2021.

Read more…

French Supreme Court rules out "self-employed" status former Uber driver and concludes to the reclassification into an employment contract: On 4 March 2020, the French Supreme Court ruled that the “self-employed” status of a former Uber driver was fictitious so that the partnership contract entered into between the driver and the company Uber BV should be reclassified as an employment contract. This decision should have major implications on the business model of Uber and digital platforms having recourse to “self-employed” individuals.

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Financial Regulation

France anticipates ESG European rules, waiting on further Brexit measures: In a political context still uncertain as to a Brexit deal or no-deal, the year has been busy for UK financial institutions implementing their no-deal contingency plans to reorganise and relocate their business in Europe including France. It is worth noting that a law no 2020-734 dated 17 June 2020 was issued to enable the French Government to take certain measures to address the consequences of the Brexit transition ending soon. Article 59 of this law aims at (i) securing the continuity of insurance contracts, (ii) adapting certain rules applicable to asset management and (iii) protecting UK-based companies’ business in France. An implementing draft ordinance supplemented by two draft decrees are expected to be published shortly. Furthermore, environmental and social governance regulations have been a focal point in 2020. In particular, France anticipated the topic by issuing in mid-2020 an AMF Position DOC-2020-03 dealing with ESG considerations for funds distributed in the French market.

IP/TMT

Changes in patent rules and significant damages award in Court: In the context of the Pacte law, the patent procedural landscape was substantially modified, notably by the creation of an opposition procedure before the French patent office and the introduction of the assessment of the inventive step in the examination procedure following a French patent application. However, it remains too soon to assess the impact of such changes on French patent prosecution. A decision of the Paris Tribunal dated 11 September awarded the Eli Lilly group €28 million in provisional damages in relation to patent infringement and unfair competition from the Frenesius Group. The amounts awarded are unprecedently high in French caselaw and illustrate a trend in granting higher damages for patent infringement

Public Law

Foreign investment control: 2020 saw the entry into force of the latest step of the reform of foreign investment control (see our client alert of 21 January 2020). The Government also lowered the threshold for a transaction to be subject to control from 25% of the voting rights to 10% but only in limited cases and only for the duration of the Covid-19 crisis (see our client alert of 31 July 2020). 2020 was also notable for the press reporting several cases of the Minister refusing to authorise a planned transaction, which was a very rare occurrence before 2020.

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Real Estate

Application of the “tertiary” decree: obligation for the tenants or the landlords to provide information on their energy consumption: The “tertiary” decree, applicable since 2019 requires tenants and landlords of office and commercial buildings to take actions to reduce their energy consumption by at least 40% in 2030, 50% in 2040 and 60% in 2050 as compared to 2010. From 2021, the landlords or the tenants will have to report annually, by 30 September, information on their energy consumption (notably on their consumption over the past year) on the platform called “OPERAT”. Failure to do so may attract sanctions from the administrative authorities ranging from serving formal notice to the publication of the formal notice on the state’s public service website, and ultimately the payment of fines (up to € 7.500).

R&I

Temporary adaptation of proceedings relating to the treatment of the difficulties faced by businesses: The proceedings relating to the treatment of the difficulties faced by businesses provided for in Book VI of the French commercial code have been amended by ordinances dated 27 March, 20 May 2020, 25 November and by law dated 17 June 2020. Many changes and additions have been introduced to the proceedings relating to the treatment of the difficulties faced by businesses, and are still applicable, or still in effect in December.

Read more…

Funds of an absorbing company in receivership proceedings: For the first time, the Cour of cassation stated that a creditor of an absorbed company, against whom the merger has been declared unbinding, may recover their claim by seizing the funds of the absorbing company even if the latter is in receivership.

Tax

Tax answers to address Covid-19 pandemic: In the context of the Covid-19 global pandemic, various tax measures (deferral of payments, rebate of taxes, accelerated repayments of tax credits, etc.) have been implemented by the French government in order to support French businesses.

Read more…. 

Postponement of DAC6 reporting obligations: France has decided to postpone the entry into force of the DAC6 directive regarding mandatory disclosure rules of certain cross-border arrangement to the beginning of 2021 instead of July/August 2020. The French tax authorities have published draft statement of practice regarding the French implementation of DAC6.

Significant events in 2021

One of the lessons learned from 2020 is certainly that the future is always difficult to predict but sometimes it can be “very unpredictable”… However, beyond further reforms that may be adopted next year in response to the Covid-19 outbreak, 2021 is expected to bring numerous changes for security, insolvency and copyright laws and many reforms will have a major impact on financial firms.

Arbitration

New ICC Rules of Arbitration: The International Chamber of Commerce (ICC)’s revised Arbitration Rules will take effect on 1 January 2021. Revisions concern, among others, provisions on consolidation and joinder, conflicts of interest, electronic filings of submissions, virtual hearings, and a new threshold of US$3 million (instead of US$2 million) for the application of the expedited procedure rules.

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Treaty to terminate intra-EU BITs enters into force: On 29 August 2020, the Agreement for the Termination of Bilateral Investment Treaties (BITs) between the Member States of the European Union came into force. The Agreement was signed by France and other EU Member States except for Austria, Finland, Sweden, Ireland and the United Kingdom. It remains to be seen whether foreign investors may still rely on the protection afforded by intra-EU BITs and what alternative mechanisms will be implemented to protect intra-EU cross-border investments.

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Banking

Security law reform: The law relating to security will be reformed by way of an order in the first semester. The aim is to simplify and reinforce the effectiveness of the law. This reform will be undertaken in co-ordination with the reform of insolvency law carried out by the implementation into French law of the Insolvency Directive.

Competition

More merger control ahead: The French Competition Authority (“FCA”) welcomed the fact that the European Commission (“EC”) allowed national competition authorities to refer sensitive transactions (for example, killer acquisitions in various sectors such as the digital economy and pharma) to the EC, even when these transactions are not subject to national merger control (e.g. because the monetary thresholds are not met). According to the FCA, this mechanism is an initial response to what it calls the “loopholes” of non-reportable predatory or consolidating acquisitions, but other mechanisms are still being explored – such as the possibility to compel companies that are in a structuring position to inform the FCA of any planned transaction and to introduce an ex-post regime through which the FCA could call-in for review transactions raising substantial competition concerns. In the field of antitrust, one can expect the FCA to continue intensifying its scrutiny of the digital economy (such as digital abuses made by platforms acting as gatekeepers) following the creation of a dedicated unit within the FCA, the release of its opinion on competition and e-commerce and the various ongoing initiatives at European level (such as the draft Digital Services and Digital Markets Acts).

Corporate

What’s next for shareholders’ meetings in 2021? Companies will watch to what extent the exceptional and temporary measures adopted in 2020 to allow companies to hold their shareholders’ meetings “behind closed doors” because of the Covid-19 outbreak (see Year in review) will be continued in 2021.

New regulations for shareholders’ activism? Following several publications advocating for further regulation of shareholders’ activism, the Financial Market Authority proposed last year limited changes to securities law, including the lowering from 5% to 3% of the lowest major shareholding notification legal threshold. These proposals may be implemented in 2021, although no legislative proposal has been published by the French government yet.

Foreign subsidies in the Single Market In June 2020, the European Commission published a White Paper on foreign subsidies. This Paper explores measures to address the distortive effects caused by foreign subsidies in the single market generally, in acquisitions of EU companies and during EU public procurement procedures. Legislative proposals are expected in Q2 2021.

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Covid-19

A tax credit for lessors who cancel part of their rents: The draft of the Finance bill for 2021 as recently amended includes the right for the lessors to benefit from a 50% tax credit of the total amount of rents they have cancelled or waived. The tax credit resulting from such rents cancellation may not exceed €800.000. This measure applies to lessees with less than 5000 employees whose premises are closed by administrative order and to hotels, restaurants and entities within the cultural sector being impacted by the second lockdown. For companies of 250 and more employees, cancellations or waivers granted to the lessees for one month are limited to the two-thirds of the rent provided in the lease due or to be due for the month concerned. To benefit from such measures, the lessors and lessees must not form part of the same group and lessees must not have been in difficulty as of December 31, 2019 within the meaning of Commission Regulation (EU) No 651/2014 of June 17, 2014 and not be in judicial liquidation as of March 1, 2020.

Data Protection

Remote working and… ePrivacy?: Remote working was implemented on a last-minute basis due to Covid-related lockdowns, and companies who were initially reluctant are now starting to incorporate this practice into their operational day-to-day activities. However, this raises several data protection matters. With considerations including security of communications, videoconferencing, data transfers, remote analysis of employees’ productivity, etc., companies will face challenges related to remote working in the coming year. The topic is important enough for the French data protection authority to organise a colloquium dedicated to these matters and the identification of related prospective issues. Additionally, should Member States finally agree on a wording for the updated ePrivacy Regulation (that is often presented as a counterpart of the GDPR), this could be one of the hottest topics of the year to come. While it seems to be stuck in a redrafting limbo, one can remain hopeful.

Energy and Infrastructure

“Renegotiating” of solar plants power purchase agreements The French Government intends to either reduce the tariffs or the duration of about 850 power purchase agreements which were entered into by solar plant operators with an installed capacity of 250 KV or more under the favourable conditions provided for by pre-2011 regulation. The Government claims this is justified by the excessive rate of return on investment of these projects, but operators fear this could lead to bankruptcies and adversely affect the development of renewable energy projects in France. There is nevertheless a safeguard provision available to protect the “economic viability” of affected projects.

French Hydrogen Strategy: New hydrogen legislation is expected in 2021 to help meet the targets of the French hydrogen strategy. The French Government published its Green Hydrogen Plan in September 2020, providing for a €7bn national strategy for carbon-free hydrogen with three core objectives: (i) installing enough electrolysers to make a significant contribution to the decarbonation of the economy; (ii) developing clean mobility, particularly for heavy vehicles; and (iii) fostering the development of an H2 industrial sector in France, creating jobs and guaranteeing France’s technological expertise. The Government estimates that this Plan will directly create between 50,000 and 150,000 jobs.

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Financial Regulation

Many reforms to come, impacting investment firms and AIFMs: European authorities have reorganised their calendar for 2021 following the Covid-19 crisis. However, many reforms are still on track for the end of 2020. These reforms will have a major impact on financial institutions. CRD V is to be implemented in France by 28 December 2020. In parallel, the Investment firm directive (IFD) is also expected to be implemented into French law by mid-2021. The future reform of AIFM Directive will also constitute a challenge for asset managers. It is expected that the new directive proposal would be issued after the conclusion of the public consultation ending on 29 January 2021.

IP/TMT

Expected implementation of EU copyright directives: After implementing (in July 2019) article 15 of the Directive 2019/790 on copyright and related rights in the digital market, which created rights for publishers of press publications (and gave rise to a French antitrust decision involving Google), France has yet to implement the rest of this Directive before 7 July 2021, as well as Directive 2019/789 on rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes. Matters such as the liability of online content-sharing service providers, fair remuneration of the authors and the new exceptions to copyright notably in relation to text and data mining (useful to IA projects) should be implemented and will change the copyright law landscape. In the patent world, 2021 could also bring new updates on the fate of the (long-expected) Unified Patent Court, which remains unsettled for now.

Real Estate

A tax credit for lessors who cancel part of their rents: The draft of the Finance bill for 2021 as recently amended includes the right for the lessors to benefit from a 50% tax credit of the total amount of rents they have cancelled or waived. The tax credit resulting from such rents cancellation may not exceed €800.000. This measure applies to lessees with less than 5000 employees whose premises are closed by administrative order and to hotels, restaurants and entities within the cultural sector being impacted by the second lockdown. For companies of 250 and more employees, cancellations or waivers granted to the lessees for one month are limited to the two-thirds of the rent provided in the lease due or to be due for the month concerned. To benefit from such measures, the lessors and lessees must not form part of the same group and lessees must not have been in difficulty as of December 31, 2019 within the meaning of Commission Regulation (EU) No 651/2014 of June 17, 2014 and not be in judicial liquidation as of March 1, 2020.

R&I

Implementation into French law of the new insolvency Directive: The deadline for the transposition under French law by way of ordinance of Directive (EU) 2019/1023 is 17 July 2021. This directive introduces notions unknown in French law to date, such as the “commonality of interests” as the main criterion for the constitution of classes of creditors (which at a minimum means that secured and unsecured creditors should be treated in separate classes) rather than the creditors’ capacity (e.g. lender) or the type of their claims (e.g. bonds), the cross-class cram-down (enabling the court-confirmation of the restructuring plan even if all the classes of affected parties have not approved the draft plan under specific conditions) and the best-interest of creditors test (aimed at ensuring that the dissenting creditor is treated under the restructuring plan better than under liquidation or under the next-best alternative scenario). Depending on how it will be transposed into French law, this Directive may significantly affect French insolvency law, especially regarding the approval process of restructuring plans.

SFG

Upcoming implementation of the new Covered Bonds regime: Directive 2019/2162 on covered bonds shall be implemented by EU Member States by no later than 8 July 2021. Conceived as one of the pillars for the Capital Market Union, the aim of this Directive is to ensure investor protection, while enhancing the EU harmonisation of the framework applicable to covered bonds. In this view, the Directive, amongst other features, implements two types of 'European Covered Bond’ labels available to EU Credit institutions issuing covered bonds. Its implementation will partially remain subject to each Member State’s own approach. While we are still awaiting to know how the directive will be transposed into French law, a bill empowering the government to transpose the Directive by means of an ordinance was passed in a new reading by the National Assembly on 18 November 2020 but has not yet been promulgated.

Tax

Reduction of certain local taxes (including business taxes): The draft of the Finance bill 2021 currently being discussed in the French Parliament provides a reduction of certain local taxes in particular with respect to the company value-added contribution (“CVAE”) and the business property contribution (“CFE”) as well as the land tax buildings (“TFPB”).

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Corporate income tax rate evolution: The current version of the Finance bill 2021 does not change the planned reduction of the corporate income tax rate (i.e, (i) 26.5% for financial years opened as from 1st January 2021 (or 27.5% for taxpayers having a turnover of at least EUR 250m for their taxable results in excess of EUR 0.5m) and (ii) 25% as from 2022).

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