The French Blocking Statute and Cross-Border Discovery.

• Author: Rouhette, Thomas
• Position: France Law 68-678

IN VIEW of improving mutual judicial cooperation in civil and commercial matters, 58 countries, including France and the U.S., concluded The Hague Convention of 18 March 1970 which sets out provisions for the communication of evidence in the scope of foreign court proceedings (hereafter "The Hague Evidence Convention"). Despite the ratification of The Hague Evidence Convention in 1972 by the United States, U.S. courts have mainly refused to abide with the provisions of The Hague Evidence Convention and instead authorized parties to the broader discovery permitted under the U.S. Federal Rules of Civil Procedure.

Under the civil law culture, legally-compelled disclosure procedures do not exist: parties to civil litigation have no duty to inform the opposing party of any documents other than those they intend to rely on to support their own case. France has long viewed the recourse of parties to the U.S.-style discovery procedures to obtain evidence in France as an infringement of its national sovereignty. In an attempt to protect French nationals against U.S. discovery procedures, France enacted the so-called "French blocking statute", a criminal statute prohibiting anyone to engage in discovery under a foreign judicial system without using the cooperation mechanisms provided for by The Hague Evidence Convention. Along with data protection and privacy laws, the French blocking statute constitutes another hurdle for the transfer of certain information from the French jurisdiction to the United States.

Lack of enforcement of the French blocking statute since its enactment (only one conviction has been recorded in nearly forty years) led the U.S. courts to believe that the threat of criminal conviction under the statute was largely theoretical. Little deference was therefore given to the French blocking statute.

Although until recently the matter was the object of little debate, it seems to have become a hot topic again lately. The extraterritorial reach of United States laws has indeed been recently under the scrutiny of the French Parliament as a result of strong criticism following successive sanctions imposed on several French companies over the last few years for acts committed outside of the United States. In particular, the payment of an unprecedented fine of nearly 9 billion dollars by BNP Paribas in June 2014 on the grounds of the breach of the embargo on Sudan, Iran and Cuba and the fine of almost $800 million paid by Alstom on the grounds of the breach of the U.S. Foreign Corrupt Practices Act for acts of corruption of foreign government officials, led to public indignation and to an outcry from a large number of politicians. In both cases, the payments had been made on a voluntary basis by French companies following negotiations with the U.S. Department of Justice.

As a result, a parliamentary task force was created by the French National Assembly's commissions for foreign affairs and finances in March 2016 for the purpose of taking an exhaustive inventory of the cases of extraterritorial application of U.S. laws and to analyze the impact of such an application on the French economy, in particular focusing on the distortion of competition and financial damage suffered by French companies. The report (the so-called "Rapport Lellouche") was published on October 5, 2016, and its conclusions are harsh: it blames the United States for using their laws to impose sanctions on the foreign companies that may harm their interests. In particular, it observes that the fines paid by European banks over the past few years amount to several dozens of billions of dollars and denounces "a significant levy on European economies to the benefit of U.S. public finances."

The French parliamentary task force has made suggestions to stop these practices at both national and European levels. One of the suggestions is to strengthen the French repressive arsenal to fight against corruption. Indeed, the absence of sufficiently constraining foreign legal mechanisms (in particular French ones) is one of the criticisms usually asserted by the U.S. to justify the extraterritorial application of its laws.

In this context, France enacted the so-called "Sapin 2" law on December 9, 2016, a new anti-corruption legislation aimed at implementing tangible measures to prevent, detect and sanction corruption. (1) The new legislation is expected to bring a significant change in the legal landscape with a possible impact on the French blocking statute and a better recourse to The Hague Evidence Convention. Indeed, this statute contains provisions that seek to effectively enforce the French blocking statute.

These recent legislative developments are expected to renew interest in the French blocking statute and revive discussions on its enforcement both in France and the U.S. This pending change provides timely support for revisiting the mechanisms set up by both the French blocking statute and The Hague Evidence Convention.

1. The French Blocking Statute

   1. The origins of the French blocking statute

      The French blocking statute (formally known as Law no. 68-678 of July 26, 1968, relating to the Communication of Economic, Commercial, Industrial, Financial or Technical Documents and Information to Foreign Individuals or Legal Entities, as modified by French Law no. 80-538 dated July 16, 1980) results from a two-step enactment. Originally, the statute prohibited the disclosure of documents and information relating to the maritime trade area only. Its scope was extended in 1980 to establish a double prohibition under Article 1 and Article 1bis as follow:

      Article 1

      "Subject to treaties or international agreements, it is prohibited for any individual of French nationality or who usually resides on French territory and for any officer, representative, agent or employee of an entity having a head office or establishment in France to communicate to foreign public authorities, in writing, orally or by any other means, anywhere, documents or information relating to economic, commercial, industrial, financial or technical matters, the communication of which is capable of harming the sovereignty, security or essential economic interests of France or contravening public policy, specified by the administrative authorities as necessary". Article 1bis

      "Subject to international treaties or agreements and laws and regulations in force, it is prohibited for any person to request, search for or communicate, in writing, orally or in any other form, documents or information of an economic, commercial, industrial, financial or technical nature for the purposes of establishing evidence in view of foreign judicial or administrative procedures or in the context of such procedures". While Article 1 is only very rarely invoked by French companies, Article 1bis provided the French companies with a "legal excuse" to resist a foreign court's discovery request when such requests circumvented the judicial cooperation mechanisms provided for by The Hague Evidence Convention. As such, Article 1bis has been regularly invoked in U.S. discovery procedures by French companies.

      Article 1bis does not make any distinction based on the nationality or domicile of the individual or entity searching for or disclosing the information or documents, nor on whether these documents or information are held in or outside of France. However, the scope of Article 1bis is to be interpreted in light of the general provisions on the territorial application of French criminal law. The French Criminal Code notably provides that French criminal law is applicable to criminal offenses committed within French territory (i.e. if at least one of the constitutive elements of the criminal offense is committed in France) or to offenses committed outside French territory when the victim is a French citizen or legal entity.

      Pursuant to Article 3 of the French blocking statute, a breach of provisions of Articles 1 and 1bis is punished by a six-month prison sentence and/or a fine of [euro]18,000 (this amount being multiplied by five for legal entities, i.e. [euro]90,000]. The prohibition applies to "any person", irrespective of whether such person is related, in one way or another, to a party to the United States proceedings.

      Article 2 of the French blocking statute imposes a duty on persons subject to Articles 1 and 1bis "to inform without delay the relevant minister when they are in receipt of any request concerning such communications". A decree on the application of Article 2 of the French blocking statute specifies that the relevant minister is the Minister of Foreign Affairs. (2) The decree, nevertheless, offers the possibility to inform the Minister of Justice, the Minister of the Economy or any minister supervising the company's activities. However, the French blocking statute does not contain any provisions on the procedure to be followed to inform the relevant minister nor on the nature of penalties in the event of breach.

      In practice, it appears that the French authorities are very rarely informed of communication requests: about a dozen alerts are recorded each year by the Minister of Foreign Affairs. This is indeed significantly low compared to the high number of disclosure requests issued by the foreign jurisdictions, in particular the United States. This seems to suggest that, most of the time, when parties receive discovery requests in the context of foreign proceedings, parties choose to respond to the request and not to alert the French authorities.

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