Introduction
Shortcomings of blocking statute
Gauvain Report's reform proposals
Decree of 18 February 2022
Caution regarding penalties


Introduction

Under the terms of the decree of 18 February 2022,(1) which came into force on 1 April 2022, the system for implementing the blocking statute has been overhauled. The government's stated objective is to guarantee the effectiveness of this regulation by simplifying the reporting procedures for the companies concerned.

Statute No. 68-678 of 26 July 1968,(2) the subject of the recent reform, is more commonly known as the "blocking statute".

Originally, the purpose of this statute was two fold. On the one hand the aim was to provide companies faced with discovery requests from foreign jurisdictions, in particular the United States, with a legal excuse to refuse to disclose certain documents. On the other hand the aim was to encourage parties to use international cooperation mechanisms for the exchange of evidence, primarily that of the Hague Convention of 18 March 1970.

Thus, the blocking statute prohibits communication to foreign authorities of documents or information of a commercial, industrial, financial or technical nature, when such a communication is likely to affect the sovereignty, security or essential economic interests of France or public order,(3) unless this communication takes place within the framework of specific channels of international cooperation.

Any violation of the blocking statute is punishable by a maximum penalty up to six months' imprisonment and a fine of €18,000. In this way, the legislature aimed to provide French companies with a justification, before foreign courts, for the impossibility of producing the requested documents or information.

Furthermore, and it is undoubtedly this last aspect which is the most affected, the statute provides for an obligation to inform the "competent minister"(4) when a request for communication falls within its scope.

Shortcomings of blocking statute

However, the blocking statute has not been able to stop communication requests from foreign authorities. On the contrary, both the United States and United Kingdom have held that it cannot be enforced.

In this respect, the US Supreme Court ruled in its 1987 Aérospatiale decision(5) that recourse to the mechanisms of the Hague Convention for the purpose of obtaining evidence on French territory was purely formal for US courts. A discovery request could lead the French company to violate the blocking statute, but in view of the low risk of prosecution, as well as the mildness of the penalty incurred,(6) the threat was, therefore, not considered sufficiently serious.

Consequently, since the penalties incurred abroad for refusing to comply with a request for information are more severe than those incurred in France for violating the blocking statute, the latter has not had the expected protective effect for French companies.

The old system, unchanged since 1981,(7) still suffered from a lack of clarity as to which authority should be consulted in order to obtain an opinion on the applicability of the blocking statute. The companies concerned – by a foreign communication request – had to notify the Ministry of Foreign Affairs, but could also consult the Strategic Information and Economic Security Department (SISSE). Additionally, since 2016, the French Anti-Corruption Agency has been responsible for ensuring compliance with the blocking statute when companies are required to transmit sensitive information in the context of corruption monitorship.(8)

Finally, failure to consult the French authorities was not sanctioned to such an extent that alerts remained very marginal, despite the growing number of discovery requests in the context of international litigation.(9)

Gauvain Report's reform proposals

In June 2019, the Gauvain Report proposed several modernisation options to enable domestic companies to effectively resist foreign authorities refusing to use international cooperation channels.(10)

In particular, the report recommended designating a single government department, the SISSE, to receive and process the declarations of French companies requested by foreign authorities, and to make the obligation to declare much more restrictive, making dereliction of this obligation punishable up to six months' imprisonment and/or a €50,000 fine.

Additionally, to strengthen the credibility of the statute in the eyes of foreign jurisdictions, the report highlighted the need to increase the penalties for communication outside authorised channels to two years' imprisonment and implement a fine of €2 million (€10 million for legal persons).

Finally, the report suggested the creation of a specific provision relating to the monitoring of French companies ordered by a foreign court decision, by systematically involving a French authority (in addition to corruption prevention and detection issues), in order to control the flow of information.

Decree of 18 February 2022

The decree has taken up some of the proposals of the Gauvain Report, particularly by formally designating the SISSE, which is attached to the Directorate General for Enterprises, as the one-stop shop for issuing an official opinion from the French administration on the applicability of the blocking statute. From now on, companies receiving requests for the communication of strategic information must seek the opinion of this national service prior to any communication.

Although the SISSE will be the sole contact person of the company, its opinion will nonetheless be transversal in that it will be delivered after consultation with the Ministry of Justice, the Ministry of Foreign Affairs and the ministry to which the company making the referral belongs. To ensure that the system is quick and in line with the timetable for administrative and legal proceedings, the decree also provides that the opinion of the SISSE must be delivered within one month of the referral.

In parallel with the implementation of this new system, professional federations (ie, Afep and Medef) and the SISSE have published a guide to enable companies to determine the data likely to fall within the scope of the blocking statute and to encourage them to classify and organise the storage of their information according to their degree of sensitivity.

Caution regarding penalties

The most controversial recommendation of the Gauvain Report, which was to significantly increase the penalties for violating the blocking statute, was not retained.

Some may regret this, on the grounds that this measure would not be a sufficient deterrent for both French companies and foreign authorities. Nevertheless, a prudent approach that encourages and facilitates communication between companies receiving foreign requests for information and the French authorities, without unnecessarily increasing the pressure on companies that are faced with choosing between the risk of being convicted in France for violating the blocking statute and the risk of being convicted abroad for refusing to disclose would be welcomed.

For further information on this topic please contact Rémi Kleiman or Alexis Werl at Eversheds Sutherland LLP by telephone (+33 1 55 73 40 00) or email ([email protected] or [email protected]). The Eversheds Sutherland LLP website can be accessed at www.eversheds-sutherland.com.

Endnotes

(1) Decree No. 2022-207 of 18 February 2022 on the communication of economic, commercial, industrial, financial or technical documents and information to foreign natural or legal persons.

(2) Law No. 68-678 of 26 July 1968 relating to the communication of documents and information of an economic, commercial, industrial, financial or technical nature to foreign natural or legal persons, as amended by law No. 80-538 of 16 July 1980.

(3) Article 1 of the law No. 68-678 of 26 July 1968 relating to the communication of documents and information of an economic, commercial, industrial, financial or technical nature to foreign natural or legal persons.

(4) Interpreted as referring to the minister of foreign affairs.

(5) US Supreme Court, Société Nationale Industrielle Aérospatiale v District Court, 482 U.S. 522 (1987).

(6) In 50 years, the law has only led to one real conviction on its basis in the Executive Life case, Cass Crim 12 December 2007, No. 07-83.228.

(7) Decree No. 81-550 of 12 May 1981.

(8) Article 3(5) of Law No. 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of economic life.

(9) Daniel Barlow, "La loi du 26 juillet 1968 relative à la communication de documents et renseignements d'ordre économique : un état des lieux", Semaine Juridique Entreprise et Affaire, 25 October 2007, 2330.

(10) Report by Mr Raphaël Gauvain, Restoring the sovereignty of France and Europe and protecting our companies from laws and measures with extraterritorial reach, 26 June 2019, p 67.