Author: Azizur Rahman
6 April 2022
4 min read
Rahman Ravelli assesses how France’s revision of the Blocking Statute provides clear, concrete guidance for companies facing information requests from foreign authorities.
For law practitioners, the French Blocking Statute has long been the object of derision: enacted in 1968 and amended in 1980, this criminal statute that had been introduced to counteract the overreaching effect of US laws was, in fact, rarely enforced and thus often discarded.
French lawmakers have often called for its enhancement, notably in relation to the protection of trade secrets. In 2019, Congressman Raphaël Gauvain submitted his report in which he called for the modernization of the French Blocking Statute. In particular, Gauvain advised strengthening the notification duty incumbent upon French actors targeted by foreign document or information requests, hardening the Blocking Statute’s criminal enforcement and enhancing the support to companies through a dedicated agency.
Though the French government ultimately decided not to significantly amend the law itself, its latest decree (of 18 February 2022) and order (of 7 March 2022) address some of the recommendations put forward in the Gauvain report.
In particular, these orders introduce clarification as to the notification duty and the release of opinions on the applicability (or lack thereof) of the French Blocking Statute by the competent authority, thus aiming at strengthening legal security. Though one may welcome the increased support granted to French companies when facing such communication requests by foreign entities, success of this revised Blocking Statute will mainly depend, in practice, on its criminal prosecution enforcement (or lack thereof, as previously witnessed).
Statute No. 68-678 of 26 July 1968, as amended in 1980, is a short criminal law that prohibits French nationals, residents or directors of French companies from:
More than a “blocking” statute, this law calls for a “triage” and makes it mandatory for foreign authorities to make use of available judicial communication channels to request information or documents located in France. Such communication tools include, in particular, the 1970 Hague Convention on the taking of evidence abroad in civil or commercial matters, and existing legal assistance treaties for criminal matters (for instance the Mutual Legal Assistance of 10 December 1998 between France and the United States).
Failure to comply with the law exposes individuals or entities to criminal proceedings, which may result in up to 6 months in prison (for individuals) and up to €18,000 (for individuals) or €90,000 (for legal entities) in criminal fines.
The 2022 orders, which took effect on April 1, do not change the gist of the law. However, they introduce useful, practical guidance to support companies faced with such foreign information requests.
More precisely, they compel companies to report foreign information requests as quickly as possible to the Strategic Information and Economic Security Service (SISSE), the authority created in 2016. SISSE’s mission includes ensuring the application of the provisions of the French Blocking Statute by the persons subject to it, with the exception of those powers conferred by the law in this field to another authority. Such other authority refers to the French Anticorruption Agency (AFA), whose role also includes ensuring compliance with the Blocking Statute, in particular in connection with the execution of a deferred prosecution agreement or the conduct of a monitorship.
The SISSE is presented as a “one-stop-shop” to be promptly notified of any foreign communication request. The SISSE will have one month from notification to issue an opinion on whether the requested information may leave the country and be handed over to a foreign agency.
At the time of the adoption of these orders, France’s largest employer federation (MEDEF) and the French association of private enterprises (AFEP) published joint guidelines providing useful tips to companies on how to classify their corporate information and identify those that would qualify as “state sensitive” and thus be governed by article 1 of the Blocking Statute.
These concrete guidelines aim to cover the various sources of such communication requests, which may come either directly from foreign authorities (e.g., through a subpoena) or indirectly via third parties acting on behalf of foreign authorities (e.g., auditors or monitors). They may also come from independent third parties, such as lawyers, in connection with discovery requests. Confirming that the aim of the latest revision is to protect French nationals or companies from overzealous American probes, the guidance notes that these extraterritorial requests mostly result from a self-assignment of judicial or administrative jurisdiction arising from norms with extraterritorial effects, on the basis of an extensive interpretation of the criteria for territorial jurisdiction and connection with the national territory (for example: use of a currency, component, or computer server; connection with a State under embargo or a designated person or entity, etc.).
The French Blocking Statute represents a dilemma for French companies facing litigation abroad. They are left to choose between complying with their national statute but risking adverse consequences in their foreign trial or complying with foreign information requests and committing a criminal offense at home.
The main issue with the French Blocking Statute is that it was only ever enforced once, when a lawyer was fined €10,000 in 2007 after he tried to obtain information from a member of the board of French insurance company MAAF, where such information was to be used in proceedings in the United States regarding MAAF’s purchase of a US insurance company.
Consequently, raising the Blocking Statute excuse to avoid producing documents before US courts has, until now, carried little effect. In a number of decisions, US courts have indeed ruled that its Federal Rules of Civil Procedure take precedence over the French Blocking Statute, noting France’s rare enforcement of the law.
It remains to be seen whether prosecutions before French courts for alleged violations of the Blocking Statute will increase, thus boosting compliance with the law - and urging foreign authorities to use alternative judicial communication channels, which often prove to be too slow compared to the timeframe of an administrative or judicial investigation and trial. Alongside enforcement, the raising of penalties that Congressman Gauvain suggested (up to two years’ imprisonment, €2 million fines for individuals and €10 million for companies) could have also enhanced compliance.
These recent changes do bring some much-needed clarity to the law; which is important given that the US Securities and Exchange Commission (SEC) and the UK’s Financial Conduct Authority (FCA) could seek information from French companies as a routine part of investigations. How such foreign authorities react to the changes will become clear in the future.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.