France

Introduction

“Class actions” for consumers were introduced in France by Law 2014-344 of 17 March 2014, and their scope has been broadened by successive laws.

The class actions for consumers which have been initiated in France relate to real estate, banking, insurance and telecommunications, but various laws have subsequently broadened the scope for class actions. Collective redress is now also available in the fields of health law, discrimination, discrimination at work, environmental damage and protection of personal data (the Law of modernisation of justice of the 21st century 2016-1547, called "Loi J21").

At this stage, the only collective redress procedure available to shareholders is via constitution of an association in application of the provisions of the French Commercial Code; no specific legislation is planned with respect to shareholder class actions. Some recent cases have shown that the assessment of the financial loss suffered by investors and shareholders in cases of false information have become a major concern for companies; although proposals have been made to implement a new method of assessing compensation, no new legislation is expected in this regard.

Litigation funding arrangements have only recently started to be used in France, but statutory limits on class actions in France mean that actions by shareholders cannot be funded in this way.

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General features
  • Representative actions are allowed in France in limited circumstances, but are not common.

    “Class actions” were introduced in France by Law 2014-344 of 17 March 2014. These can only be brought by consumer protection associations in order to compensate individual consumers for losses arising from their relations with professionals (Article L623-1 of the French Consumer Code). The procedure is only available for recovering tangible damages and cannot be used for claims based on personal injuries. The law came into force on 01 October 2014.

    Pursuant to Article L623-8 of the French Consumer Code, this is an opt-in mechanism.

    US style “opt out” class actions are not, at present, permitted in France.

    Other collective redress mechanisms are available under French law, although they are not strictly group actions. For example, company shareholders can form associations to represent their interests and initiate an “ut singuli” action.

    While not strictly a group action, multiple parties can bring joint claims seeking compensation for losses which they have all allegedly suffered. However, such an action does not provide the benefits of a class action, each claimant being a separate party not benefiting from the collective representation of any association or other organisation.

    Under French law collective actions are heard by a Judge. Should both parties be trading parties the Commercial Court will hear the case, otherwise the matter will be heard by a civil judge.

    As in many other European jurisdictions, France has no general pre-trial disclosure obligations, no punitive damages, no jury (except in criminal cases) and the losing party usually pays the winner's costs.

    Damages can be awarded in representative actions, as can injunctions prohibiting unlawful practices. Under French Law, in assessing the level of damages to award, judges have to refer to the principle of the right to full compensation.

    There is no specific mechanism for assessing the damage suffered by shareholders and investors in companies, therefore the court will usually award a fixed sum, using the principle of “loss of opportunity” to assess the damage. This means that individual victim’s circumstances are usually not taken into account.

Types of collective redress
  • The specific consumer “class action”

    Consumer “class actions” were introduced in France by Law 2014-344 of 17 March 2014 (also known as the “Hamon Law”) and Decree 2014-1081 dated 24 September 2014, and can only be brought by consumer associations approved by the Ministry of Economy and Finance.

    Currently, 15 accredited consumer associations can legally take action to protect consumers who have suffered loss arising from a common cause. Organisations may only act where they have obtained written powers of attorney from those they represent and may not seek out claimants through any form of advertising.

    This action is limited to consumer law and competition, and includes areas such as telecommunications, banking, insurance, energy, housing, etc.

    The framework is also limited by the nature of the injuries suffered. Only material damages are likely to be compensated. Article L623-1 of the French consumer code excludes moral damages and non-patrimonial damages (such as pain and suffering) from the scope of compensation.

    Since this right of action is quite recent, there has only been one first instance judgment, but no final judgments. However, several actions have been launched by consumers’ associations. For example, the insurance company AXA is the target of a class action in which the collective damages, to be determined during the proceedings, could amount up to 300m and 500m Euros if the consumers are successful. Another class action on housing led to a settlement agreement. Other class actions have also been launched against companies such as SFR (telecommunications), Foncia (housing), BMW (car manufacturer), and BNP Paribas (bank).

    General framework for class actions in France

    Various laws have broadened the scope of class actions, which are now available in the fields of health law, discrimination, discrimination at work, environmental damage and protection of personal data (Law of modernisation of justice in the 21st century, 2016-1547, called "Loi J21").

    Background

    At the time of adoption of the Hamon Law, the French government stated that it would review the new law within 30 months to determine whether to extend the procedure to health and environmental claims.

    A class action procedure was then inserted into the National Health Law which was published on 26 January 2016 (Law 2016-41) and further detailed by Decree 2016-1249 on 29 September 2016.

    Since then, Law 2014-344 dated 14 March 2014 and Decree 2017-888 dated 6 May 2017 have introduced a general framework for different kind of class actions ranging from health law, discrimination, discrimination at work, environmental damage to protection of personal data.

    General framework

    Regardless of the area concerned, a duly authorised organisation will have to be mandated in order to issue a claim instigating a liability action, which will be divided into two distinct phases.

    First, the judge will rule on whether any liability is found and will determine the type of compensation, such as compensation on an individual basis, or taking a collective approach to the damages (Article 826-15 of the French Civil Procedure Code).

    It is only during the second phase that the judge will assess damages and decide on the compensation.

    Alongside these two steps, another way to achieve redress is through an amicable dispute resolution process (mediation).

    For all types of action, by law the class action must be based on "individual cases presented by the applicant". Regarding the action introduced before the judicial court, it can be engaged when several people placed in a similar situation have suffered damage caused by the same entity.

    Actions can be brought in either civil or administrative courts, depending on the nature of the defendant.

    Each of the five categories of actions that may now be subject to a class action are governed by common rules established by the Act dated 18 November 2016 and Decree No 2017-888 of 6 May 2017 for both civil and administrative proceedings, such as:

    • the necessity of prior notice before any action is taken (except for class actions in the field of health)
    • an obligation to specify the individual cases in support of the claim, with the sanction for failure being nullity (Article 826-4 of the Civil Procedure Code, “CPC”)
    • experts’ fees have to be paid by the defendant (Article 826-8 CPC)
    • an obligation for the individuals to inform the organisation that they choose to ask directly the defendant for indemnification (Article 826-18 of the CPC)
    • the necessity of a mandate for the purpose of compensation (Article 826-20 of the CPC)
    • an obligation for mandatory information to appear in the judgment that recognises the defendant’s liability (Article 826-16 of the CPC)
    • fixing the date on which publicity measures at the expense of the defendant shall be published (Article 826-14 of the CPC)
    • an obligation to create an account at the “Caisse des dépôts et consignations” if no legal representation (Article 826-23 of the CPC)
    • conditions for the enforcement of the judgment (Article 826-21 of the CPC)
    • an obligation to specify the identity of the people involved in the class action under penalty of nullity (Article 826-22 of the CPC), and
    • conditions for transfer of the claimant’s rights (Article 826-24 of the CPC).

    Particular requirements are then specified for each type of class action:

    • Health-related class actions

    The general framework described above applies to health related class actions. It is governed by specific provisions: Article L.1143-1 of the French Public Health Code (“CSP”) and seq. and article R.1143-1 and seq.
    Such an action can be commenced by an approved healthcare users' association, with the purpose of compensating for any physical damage caused by the breach of a legal or contractual obligation by a producer or a supplier of health products, or a provider using one of these health products.

    The procedure provides for two different phases:

    Step 1 - admissibility and collective liability: the civil or administrative judge, depending on the case, determines whether the conditions required for the application to be admissible are met or not and, if necessary, renders a judgment on the liability of the defendant (producer, supplier or user of the product) in light of the individual cases represented by the approved association.

    Step 2 - individual compensation procedure: as a result of a breach as held in the judgment, people fulfilling the criteria for joining the group (the "opt-in" system) obtain individual compensation for the damage suffered.

    However, an amicable dispute resolution procedure is possible. Indeed, mediation can be initiated with the parties' consent, in order to find an amicable agreement on the claims of the applicants.

    In the context of health law, compensation for damages can only be awarded through an individual compensation procedure, because personal injuries must be reviewed by medical experts on an individual basis.

    For class actions in the field of health, as opposed to the four others, prior notice is not necessary before action is taken.

    The law was examined by the Constitutional Council, which stated on 21 January 2016 that the provisions of the Law on class actions for personal injuries caused by health products were constitutional. In particular the Council considered that (1) the retroactive effect of the new setup is constitutional, since it merely opens a new kind of procedure for pre-existing losses or claims (as opposed to retroactively modifying the content of the law), and (2) the judgment on liability does not need to detail further how each individual indemnification shall be calculated.

    Many questions remain unanswered: can these proceedings allow for compensation of non-pecuniary damages, such as for anxiety? Can multiple associations of healthcare users act simultaneously or intervene voluntarily in ongoing class action proceedings? What about multiple associations bringing actions before different jurisdictions simultaneously?

    • Discrimination

    With regard to class actions in the area of discrimination, the legislator has laid down general rules, but also specific rules concerning discrimination in employment relations attributable to an employer.

    Under the general rules, a class action can be initiated for any damage that may lead to any kind of discrimination, but which is outside the professional framework: e.g. discrimination in access to housing, education or health. The class action is then only open to associations of at least five years standing involved in combating discrimination or working in the field of disability (Law no 2008-496 dated 27 May 2008 “portant diverses dispositions d'adaptation au droit communautaire dans le domaine de la lutte contre les discriminations”).

    Class actions for discrimination can be introduced only if the operative event or breach took place after the law came into force.

    • Discrimination at work

    As regards discrimination at work, the law provides that a representative trade union may take action before a civil court in order to establish that candidates for employment, training or work experience, or employees, have been discriminated against, directly or indirectly, for a recognised reason and by the same employer.

    This action may also be initiated by an association of at least five years standing involved in combating discrimination or working in the field of disability.

    The action must be preceded by a request for the discrimination to stop, and may therefore be initiated only after the expiry of a six-month period from the date of the request or from the date of the notification of the rejection of the application by the employer.

    Class actions for discrimination can be started only if the operative event or breach took place after the law came into force (Articles L1134-6 to L1134-10 in the French Labour Code).

    • Environmental damage

    The law provides that class actions may be brought against those who cause environmental damage on the basis of Article L. 142-3-1 of the Environment Code.

    This action is open to approved environmental protection associations whose statutory purpose is to protect victims or to approved associations on physical damages or financial interests.

    The purpose of a class action is to obtain the cessation of a breach and/or compensation for any environmental damage.

    However, this notion of “environmental damage” is not defined by the legislator, potentially broadening its scope considerably.

    Class actions for environmental damage can be introduced only if the operative event or breach took place after entry into effect of the law.

    • Protection of personal data

    According to article 43ter of Law No78-17 dated 6 January 1978 “relative à l'informatique, aux fichiers et aux libertés”, class actions specific to the protection of personal data allow any approved consumer association, any representative trade union or any association of five years’ standing (having as its object the protection of privacy and personal data) to initiate collective actions.

    Thus, these designated bodies can act when several “natural persons” in a similar situation suffer damage resulting from a breach of the law on information technology and individual freedom by a person liable for processing personal data or by a subcontractor.

    However, this class action is limited to requiring the cessation of a breach, which means that no compensation for victims is provided for by the law.

    Collective redress for shareholders

    In France, “class actions” are limited to consumers. However, under French law, shareholders have some procedural mechanisms which allow for collective redress and could be similar in effect to a group class action. 

    Company shareholders can form associations to represent their interests and initiate an “ut singuli” action (Article L. 225-1201 and article L. 225-252 of the French Commercial Code2). Article L. 452-1 of the French Monetary and Financial Code3 grants the same right to authorised shareholder defence associations of publicly traded companies.

    Nevertheless, the purpose of this type of "action in defence of the collective interest" is very limited because the associations are empowered to exercise social action: the judgment is given to the group, and not for the benefit of individuals who make up its membership. The association may secure compensation for the collective harm, that is to say the damage suffered by the sum of individual interests.


    1 Article L. 225-120 of the French Commercial Code:

    I. - In companies whose shares are admitted to trading on a regulated stock market, shareholders whose shares have been registered for at least two years and who hold at least 5% of the voting rights may form associations to represent their interests within the company. In order to exercise the rights to which they are entitled under Articles L. 225-103, L. 225-105, L. 823-6, L. 225-231, L. 225-232, L. 823-7 and L. 225-252, such associations must have notified the company and the French Financial Markets Authority [Autorité des Marchés Financiers] of their legal status.

    II. - Where, however, the company's capital exceeds €750,000, the share of voting rights to be represented pursuant to the preceding paragraph is reduced according to the number of the voting rights relating to the capital, as follows:

    1° 4% over €750,000 and up to €4,500,000

    2° 3% over €4,500,000 and up to €7,500,000

    3° 2% over €7,500,000 and up to €15,000,000

    4° 1% over €15,000,000.

    2 Article L. 225-252 of the French Commercial Code

    The directors and managing director shall have individual, joint or several responsibility to the company or third parties either for infringements of the laws or regulations applicable to limited companies (sociétés anonymes), or for breaches of the constitution, or for tortious or negligent acts of management. If more than one director, or more than one director and the managing director, have participated in the same acts, the court shall determine the share to be contributed by each of them to the compensation awarded.

     3 Article L. 452-1 of the French Monetary and financial Code:

    "Properly declared associations having as their explicit purpose, as defined in their company constitutional documents, the defence of investors in financial securities or financial products may bring legal proceedings before any court, even though the filing of civil actions, in relation to facts which cause direct or indirect prejudice to the collective interests of investors in general or to certain categories of investors. 

    Where a practice contrary to the laws or regulations is likely to compromise the rights of investors, the shareholders' associations … may apply to the court for an order compelling the individual or legal entity responsible to comply with said provisions and end the irregularity or eliminate its effects. 

    The application shall be brought before the presiding judge of the regional court having jurisdiction at the place where the company has its registered office, who shall give an immediately enforceable summary ruling. The presiding judge shall be competent to hear and determine objections of illegality. He may, even without consultation, take any protective measure and impose a coercive fine payable to the Trésor public for execution of his order."

Funding and costs
  • In France, no specific provisions as to the funding or allocation of costs apply to representative actions. Consequently, the ordinary rules apply as for any dispute, meaning that the loser pays the winner's costs of proceedings (including lawyers' fees, court appointed expert's fees, etc.). In practice, the judge is reasonably free to determine the amount to be granted to the winner, irrespective of the actual costs incurred. Costs awards are typically very low compared to the parties' actual costs.

    The use of litigation funding arrangements is very recent in France. There is no legislation on this topic; these arrangements are governed by general contract law. Some litigation funders (eg Alter Litigation) offer funding for a wide range of disputes. Given the statutory limits on class actions in France, however, this offer cannot extend to actions by shareholders.

Recent developments, trends and predictions
  • Recent and imminent developments with respect to class actions in France are limited to the field of consumer law and in the health industry, although there has been some recent case law which indicates how the courts will assess shareholder losses.

    Some recent cases have shown how the assessment of the financial loss suffered by investors and shareholders who have received false information has become a major concern for companies. The Courts have taken different approaches to assessing loss suffered by shareholders. For example:

    • The “Sidel” case in 20084, involved about 700 shareholders partly represented by associations. It included individual actions which were brought by associations under individual and written mandates. The allegation related to criminal offences: inaccurate financial statements and spreading false information. In that case the holders of “Sidel” shares were compensated with a lump sum of €10 per share. Sidel was sentenced to pay €1.6m by the Court of Appeal of Paris.
    • The “Gaudriot” case of 20105, has established a dual principle of compensation: the investor’s reparable damage results either from the acquisition and/or the conservation of financial securities made on the basis of incorrect, inaccurate or misleading information about the issuing company. Whether it is an acquisition or retention of financial securities, the damage is confined to the loss of opportunity.
    • In the “Vivendi” case, shareholders had suffered significant losses because of misleading financial information from the company. On the basis of the principles mentioned above, the first instance Court also allocated a lump sum of 10 euros per share to Vivendi shareholders. This judgment has since been reversed by the Court of Appeal of Paris6 (12 May 2014), which ruled that the offence of disseminating false or misleading information was not made out.
    • In the “Marionnaud case” of 06 May 20147, Marionnaud’s shareholders had acquired shares based on falsely optimistic information, losing the chance to realise a more advantageous investment. A lump sum was awarded based on a fixed assessment: the share price had suffered a 30% drop and the claimants were ultimately compensated at 51% of the share price decline.

    To conclude, the assessment of the financial loss suffered by shareholders has become a key concern. In this context a report from the “Club des Juristes” proposes a new method, designed to ensure the fair compensation of shareholder victims. The study recommends removing systematic reliance on the concept of loss of opportunity, and establishing a clear and predictable methodology in order to evaluate the damage suffered by the shareholders. To implement this new methodology, the study suggests setting a precise definition of “recoverable damage”, and recommends the use of appropriate methods of statistical analysis to determine the impact of false information on the share price and on the loss suffered by shareholders. Finally, it also plans to encourage alternative dispute resolution (amicable settlement and mediation).

    These suggestions are currently only academic. No new law is expected imminently.



    4 Paris Court of Appeal, 17 October 2008, n°06/09036 
    5 French Cour de Cassation, Commercial Chamber, 09 March 2010, n°08-21547 & 08-21793 
    6 Paris Court of Appeal, 12 May 2014 
    7 French Cour de Cassation, Commercial Chamber, 06 May 2014, n°13-17632

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