The Pinel Law (June 18 2014) has modified the rules relating to the establishment of businesses on state property. In particular, the reform is intended to make it easier for businesses to be established within French airports.

Previous position

All French airports are built on state-owned land. The rules applicable to state property are strict and largely incompatible with the development of private businesses or commerce. The standard rule has always been that property belonging to the state cannot be alienated or ceded to third parties.

Therefore, the state – or a state-operated entity – can grant only temporary permits for the occupation of public property, which can be revoked at any time.

These rules no longer apply to Aéroports de Paris, the specially created entity which operates the Paris airports of Orly and Charles De Gaulle. However, the commercial development of other airports in France has been hampered by the strict rules applicable to state property.

New reform

One of the principal reforms introduced by the Pinel Law is to give greater rights to businesses within the public domain. This is achieved by giving a business whose permit is revoked the right to indemnification for the loss of its business. The fact that the value of the business itself will now be one of the measures by which the indemnity payable is assessed represents a significant change.

Recognition of the financial value of the business also means that fees or other charges payable by businesses to the airport operator are likely to increase, since they will be based not only on the surface area occupied, but also on the turnover of the business.

Since the property or land concerned remains owned by the state, businesses will still be established within airports pursuant to temporary occupation permits, which remain distinct from commercial leases. Thus, the airport operators retain the right to revoke such permits. However, the main benefit for businesses is that the value of their business will now be taken into account when calculating the indemnity to which they may be entitled on revocation of the permit.

This measure should encourage further commercial investment and promote greater commercial activity within French airports, which should lead to further funding for investment and development by the airport operators.

Limits

The changes introduced by the Pinel Law are restricted to businesses which can demonstrate that they have their own client base. In some respects this is logical: a commercial entity should not be entitled to indemnification on the basis of the financial value of its business if it has no client base of its own, but is entirely dependent on the airport's customers for its trade.

However, this condition limits the potential for business development within airport terminals. Retail or other businesses within airport terminals are inevitably subject to the rules imposed by airport operators, (eg, opening times). Therefore, within airport terminals many businesses will be unable to establish that their client base is distinct from that of the airport's customers (ie, passengers).

Businesses established within the airport domain but outside the terminal buildings may derive greater benefit from this reform, since it is easier for them to establish an autonomous client base. This applies to car rental companies, hotels, car parks and other commercial entities. Many airport operators have plans to develop these types of activity.

Comment

The Pinel Law is intended to provide greater flexibility in the legal regime applicable to the commercial occupation of state-owned property. However, the extent to which this will encourage the establishment of business within airport terminals remains to be seen, as only businesses with their own client base can benefit from the reforms.

The position of state and publicly owned airport operators remains largely unchanged since they are free to revoke the temporary occupation permits at any time. However, this may become more costly to the extent that the value of the business is taken into account in order to assess the indemnity payable when the permit is revoked.

Thus, the reform has both advantages and disadvantages. Further developments in this area are expected, in particular since certain airport operators have now been partially privatised (Toulouse) or are about to be privatised (Lyon and Nice).

For further information on this topic please contact Simon Parier or Olivier Purcell at Holman Fenwick Willan France LLP by telephone (+33 1 44 94 40 50) or email (simon.parier@hfw.com or omp@hfw.com). The Holman Fenwick Willan France LLP website can be accessed at www.hfw.com.

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