Automotive industry disputes in France

Overview

Describe the significance of, and developments in, the automotive industry in the market.

France is a major automotive market. OEMs and the entire automotive and mobility industry play a significant role in the French economy due to the impact of intermediate consumption, distribution and car-related services and production along the supply chain. Nearly 150,000 industrial companies compose the French automotive sector, with over 400,000 direct employees in France, and 2.3 million people employed in related activities. Estimates of global turnover of this sector are in the region of €155 billion.

For several years, the automotive industry has recovered from the aftermath of the 2008 financial and economic crisis. In particular, French manufacturers have achieved growth and substantial increase in production volumes. In 2017, the global production of French car manufacturers represented 7.8 million passenger vehicles produced (ie, a 17 per cent increase compared with 2016). Production levels in 2017 exceeded those of 2007 by nearly 30 per cent. Eighty-one per cent of the production of French manufacturers is sold abroad.

As of 1 January 2018, France has 39.5 million vehicles, including over 32 million passenger vehicles and over six million professional vehicles. In total, there are around 600 vehicles for 1,000 inhabitants. The number of vehicle registrations rose by 4.7 per cent in 2017, reaching 2.1 million new passenger vehicles, which is almost equal to the numbers in 2007. There has been a substantial decrease in the number of registrations of diesel vehicles in France, which in 2017 represented 61 per cent of all vehicles registered but only 47.3 per cent of newly registered passenger vehicles versus 70.8 per cent in 2010. On the other hand, the registration of electric vehicles rose by 14.5 per cent in 2017 to reach 25,000 vehicles.

The French automotive industry is constantly making efforts to increase competitiveness, in particular through high pressure to mitigate costs at every level as well as strong investment in R&D (with spending in excess of €5 billion annually).

This being said, recent months have shown less positive results in terms of sales and registration of vehicles.

What is the regulatory framework for manufacture and distribution of automobiles and automobile parts, such as homologation process as well as vehicle registration and insurance requirements?

The regulatory framework applicable in France arises from European legislation.

Type approval

Vehicle type approval is regulated by Directive 2007/46/EC of 5 September 2007, establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles. It has been transposed into French law by a Decree dated 4 May 2009.

The Directive contains administrative provisions and general technical requirements for the approval of all new vehicles falling under its scope and of the systems, components and separate technical units intended for those new vehicles, with a view to facilitating their registration, sale and entry into service within the European Union.

Article 5 of the Directive provides that it is the car manufacturer’s responsibility to ensure compliance with the type-approval process, as well as to ensure the conformity of production of the vehicle. This is the case whether or not the manufacturer has produced all the technical components of the vehicle.

European Regulation (EC) 715/2007 and Regulation (EU) 2017/1151 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) further establish harmonised requirements for the type-approval process in terms of emissions. The Regulation also establishes rules for in-service conformity, durability of emission control devices, onboard diagnostic systems and measurement of fuel consumption.

The manufacturer has the obligation, pursuant to article 4 of the Regulation, to prove that all vehicles placed on the European market are type-approved in compliance with the said Regulation. Car manufacturers must notably demonstrate that they meet all emission limits as set out in Annex I.

European Regulation (EC) 661/2009 concerning type-approval requirements for the general safety of motor vehicles, their trailers and systems, components and separate technical units intended therefor on the other hand aims to ensure a high level of road safety throughout the EU.

Pursuant to article 5 of the Regulation, car manufacturers have to ensure that their vehicles are manufactured ‘to minimise the risk of injury to vehicle occupants and other road users’.

The above-mentioned Regulations further provide that the national authorities of EU member states can grant the EC type approval once the concerned vehicles comply with the applicable Regulations. In France, it is the Ministry of Transport, pursuant to article R 321-9 of the French Highway Code, that grants type approvals to vehicles that comply with the above-mentioned European Regulations.

A new European Regulation 2018/858 was adopted in May 2018 by the European Parliament and Council. This new Regulation will apply from September 2020 and repeal and replace the current Framework Directive 2007/46/EC to ‘make vehicle testing more independent and increase surveillance of cars in circulation’.

Registration requirements

The registration of a vehicle is an obligation for all owners of motor vehicles pursuant to articles R 322-1 et seq of the French Highway Code.

However, pursuant to article R 321-15 of the French Highway Code, the registration of the vehicle can only succeed if the vehicle has been type approved by the authorities.

Insurance requirements

European Directive 2009/103/EC of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability repealed and consolidated the five previous Directives on this matter: Directive 72/166/EEC, Directive 84/5/EEC, Directive 90/232/EEC, Directive 2000/26/EC and Directive 2005/14/EC.

The provisions of the consolidated Directive are essentially transposed in the French Insurance Code under article L 211-1 et seq and article R 211-1 et seq. Pursuant to these provisions, car owners have the obligation to insure their vehicles.

Insuring motor vehicles is not an obligation devolved on manufacturers but on the owners of vehicles.

How do automotive companies operating in your country generally structure their development, manufacture and supply issues? What are the usual contractual arrangements?

Design is usually done internally except for some niche vehicles where manufacturers use freelance designers. In some very rare cases, the development - including vehicle design, manufacture and supply - can be entirely outsourced.

Development of collaboration agreements for connected and autonomous vehicles is bringing to the market new contractual structures, which go beyond usual licensing and joint development agreements. Ownership of data, data-sharing agreements and value-added supervision and support agreements for these vehicles are adding a further layer of complexity to the development, manufacture and supply arrangements in this sector (for instance, for the manufacture of sensors (eg, LiDAR), deployment of AI platforms and communication systems).

As for manufacturing, 80 per cent of the vehicle value is produced by the manufacturer’s subcontractors through OEM partnerships. Internal manufacturer rules require the issuing of calls for tender between the manufacturer’s major partners for compliance purposes and to optimise commercial deals. Specific tooling is usually provided by the manufacturer to its OEM.

Manufacturers can also share plants or in some rare cases use local plants through cost-plus agreements.

The assembly of a vehicle is usually done internally by the manufacturer or in a joint venture abroad.

Supply logistics for vehicle spare parts is usually managed by the manufacturer using carrier services. Transport of vehicles is often done by the manufacturer’s internal services.

How are vehicles usually distributed? Are there any special rules for importers, distributors, dealers (including dealer networks) or other distribution partners? How do automotive companies normally resolve restructuring or termination issues with their distribution partners?

New vehicles are distributed by dealers, dealer networks and agents under different contractual arrangements (eg, manufacturer’s subsidiary or independent owner; exclusivity or non-exclusivity). Second-hand vehicle markets are generally not under manufacturers’ control. In large or major cities, manufacturers sometimes provide financial support to distributors to compensate for the high costs of rent. Importers are often referred to as independent dealers abroad in countries where manufacturers have no subsidiary.

Commercial policy is under the manufacturer’s control: product, price, promotion and place.

Until 1 June 2013, vehicle distribution was excluded from the general regulation on vertical restraints and solely governed by third sector-specific exemption regulations. Therefore, some contracts concluded before this date still contain provisions complying with these specific regulations (eg, Regulation 1400/2002).

Since then, vertical agreements related to the purchase, sale, resale of spare parts and repair and maintenance services for motor vehicles must, on a cumulative basis, fulfil the requirements for exemption laid down in the general Regulation 330/2010 on vertical restraints and in the specific Regulation 461/2010 applicable since 1 June 2010. Pursuant to the latter, three hardcore restrictions can never benefit from the exemption:

• restrictions on the sales of spare parts for motor vehicles by members of a selective distribution system to independent repairers;
• restrictions, agreed upon between a supplier of spare parts, repair tools or diagnostic tools or other equipment and a manufacturer of motor vehicles, on the supplier’s ability to sell those goods to authorised or independent distributors or to authorised or independent repairers or end users; and
• restrictions agreed upon between a manufacturer of motor vehicles that uses components for the initial assembly of motor vehicles and the supplier of such components, on the supplier’s ability to place its trademark or logo effectively and in an easily visible manner on the components supplied or on spare parts.

This specific regulation is supplemented by Guidelines 2010/C 138/05. The automotive market is also governed by non-mandatory rules implemented by manufacturer associations’ codes of good practice (ACEA and JAMA).

Agreements with distributors are usually terminated at the end of the fixed term or freely in a non-fixed-term relationship.

Regulation 1400/2002, applicable to contracts concluded between 1 June 2010 and 31 May 2013, sets out a notice period of one to two years depending on the definite or indefinite term of the contract. Codes of good practice provide for a notice period of two years.

Compliance with legal or contractual notice periods is not always sufficient to end a relationship, especially in case of an established relationship. To estimate the length of the notice period, other criteria must be taken into account (eg, percentage of turnover, retail revenue, economic dependency).

Are there any particularities for M&A or JV transactions that companies should consider when preparing, negotiating or entering into a deal in the automotive industry?

There are no particularities other than the control of the European Commission and the Competition Authority over concentrations.

Attention should be paid to the range of products sold by the target. Indeed, should some of these products have a dual use (including military vehicles) that would trigger the need for prior authorisation of the French Ministry of Economy (quite similar to the US Committee on Foreign Investment in the United States process); this approval, if required, will become a condition to closing. It generally takes between two and three months.

In addition, should the seller want to go through a locked box transaction, possible variation of inventories and cash between the date of the binding offer and the date of the contemplated closing should be carefully examined by the buyer.

Are there any incentives for investment in the automotive market? Are there barriers to entry into the market? What impact may new entrants into the market have on incumbents?

There is no specific incentive for investment in the automotive market. General incentives can apply subject to the following:

• research tax credit (CIR), which applies to French companies incurring R&D expenses regardless of their activity or size. Such tax credit is assessed on all the R&D expenses (including notably salaries, social security contributions, operating costs, etc). The CIR is equal to (i) 30 per cent for the portion of R&D expenses below €100 million and (ii) 5 per cent of R&D expenses exceeding €100 million. It can be offset against French corporation tax due for the year during which the R&D expenses are incurred;
• the innovation tax credit (CII),which applies to French small and medium-sized innovative enterprises, is assessed on all innovation expenses and is equal to 20 per cent;
• companies located in certain areas and eligible for regional aid, which are usually companies carrying out new industrial, commercial or, in certain circumstances, non-commercial activities, may be fully exempt from French corporation tax during their first two fiscal years and then partially exempt from French corporation tax for the next three fiscal years (up to 75 per cent, 50 per cent and 25 per cent of their taxable income, respectively); and
• an additional 40 per cent depreciation, which may apply to the value of certain industrial assets acquired or manufactured by a company from 15 April 2015 until 14 April 2017.

Specific incentives to the automotive market are implemented for automotive consumers (eg, environmental incentive).

Product safety and liability

What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?

See question 2 where we detail the most relevant regulations regarding product safety and environmental issues, which are: European Directive 2007/46, Regulation (EC) 715/2007, Regulation (EU) 2017/1151 and Regulation (EC) 661/2009.

Member states ‘shall take all measures necessary to ensure that they are implemented’, including setting penalties under national laws to sanction non-compliance. Such penalties ‘must be effective, proportionate and dissuasive’.

Directive 2007/46/EC has been implemented in the French Highway Code which provides that:

• if the French Ministry of Transport considers that even if compliant with the type approval Regulation, a vehicle presents a serious risk to road safety or seriously harms the environment or public health, the EC type approval may be refused (article R. 321-9 of the French Highway Code);
• if, after the French Ministry of Transport granted EC type approval, new tests show non-compliant results, the Ministry may take all necessary actions, including withdrawal of the type approval (article R. 321-10 of the French Highway Code); and
• more generally, manufacturers must recall all vehicles already sold, registered or put into service if the model in question presents a serious risk to road safety, public health or the environment In addition, they have to immediately inform the authority that issued the type approval thereof (article R. 321-14-1 of the French Highway Code). The General Product Safety Directive 2001/95/EC provides general guidelines that apply to recall of type approval vehicles.

Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?

Product laws are very significant for the automotive sector: defective cars (or parts) are a source of particularly serious risks, which can potentially lead to road accidents, severe bodily injuries and significant material losses.

Under French product liability law, claimants bear the burden of proof to assess the product defectiveness and causation with the damage. This being said, there is a trend in French case-law making this burden of proof easier to meet for claimants by the resort of presumptions.

The automotive industry is one of the areas where product recalls and maintenance campaigns are very frequent. In 2018, on RAPEX (ie, the European Rapid Alert System for non-food products), 23 per cent of recalls originating from France related to motor vehicles. This includes recalls associated with defects and environmental issues.

Many questions are floating around concerning potential reforms of product laws. At European level, a consultation process is being led by the European Commission since spring 2017 to analyse whether the Defective Products Directive is still fit for purpose. One of the key questions is with respect to autonomous driving and the transposition of the notion of product and producer in this context. If the Commission considered that there was no need to change the Directive, it decided to elaborate guidelines with the assistance of two expert groups to clarify the main concepts of the Directive in the new technology context.

Class actions are an increasing risk for automotive manufacturers in France. This procedural option was introduced into French law by the Hamon Law of 17 March 2014, which came into force on 1 October 2014 and is available to consumers who are placed in a similar situation and have suffered a financial loss resulting from material damage caused by a professional. Only a limited number of registered associations can bring class actions where consumers can opt to join after a general judgment on the defendant’s liability has been made. It is worth noting that this system cannot be used to obtain compensation for bodily injuries.

Disputes

What competition and antitrust issues are specific to, or particularly relevant for, the automotive industry? Is follow-on litigation significant in competition cases?

The European Commission has fined eight price-fixing cartels in the automotive industry a total amount exceeding €5 billion over the last five years. All these cases were initiated by leniency applications filed by suppliers, which revealed the existence of the cartel and provided the supporting evidence (and which, in return, were not fined).

In July 2016, the European Commission imposed record fines of €2.9 billion on five European truck manufacturers, including a €1 billion fine, which is the highest fine ever imposed on a single company in a cartel case. Over a period of 14 years, truck manufacturers colluded on prices and on passing on the costs of compliance with stricter emission rules imposed by an EU regulation.

The European Commission punished seven other cartels that involved car parts manufacturers for coordinating price increases to be passed on to car manufacturers, bid rigging, allocating customers and exchanging sensitive commercial information. These practices concerned seven categories of products: wire harnesses; alternators and starters; parking heaters; automotive bearings; thermal systems; occupant safety systems; and flexible foam used in vehicle seats.

The European Commission’s decisions gave rise to numerous follow-on damage actions, in particular, in the truck manufacturers’ case. The implementation in March 2017 of EU Directive 2014/104 on actions for damages under antitrust issues into French law should encourage the development of such actions in France.

The French Competition Authority also showed interest in automotive spare parts. It issued a detailed opinion in 2012, pointing out that spare part prices were higher in France than in Germany or in the UK and making recommendations in order to stimulate price competition between car manufacturers and spare parts suppliers for the supply of car parts.

What kind of disputes have been experienced in the automotive industry, and how are they usually resolved? Are there any quick solutions along the supply chain available?

Apart from competition/antitrust and intellectual property issues, most disputes in the automotive industry relate to consumer matters, supply chain issues and criminal liability allegations.

There are several grounds in French consumer law enabling a consumer to sue an automotive manufacturer, such as defective product rules (article 1245 et seq of the French Civil Code), hidden defects (article 1641 et seq of the French Civil Code), non-conformity (article L. 217-4 et seq and L. 411-1 of the French Consumer Code) and general safety obligations (article L. 421-1 of the French Consumer Code).

In most cases, consumer disputes are resolved in court and settlement agreements are less frequent.

In the past, commercial disputes along the supply chain remained limited. This has changed quite drastically in recent years. In the context of shrinking margins, fiercer competition, increased likelihood of defective technology and growing remediation costs, pressure is high on all actors, which results in more frequent litigation to share the costs or recover them from another party. The causes of such issues may also lie in insolvency or bankruptcy cases.

As a result, one sees more frequent tensions between suppliers and OEMs or Tier 1 companies, sometimes even leading to threats to stop supplying car manufacturers or to terminate the business relationships at the other end. In some situations, the dependency of an OEM in a single source situation enables suppliers to charge higher prices for the remainder of the supply cooperation.

Summary proceedings are available to obtain court injunctions where either in cases of urgency or when the claim cannot be seriously challenged. Interim payments can also be sought through this type of proceedings.

Both automotive companies and their representatives have potential criminal liability exposure in case of bodily injuries caused by their products (on grounds of involuntary bodily harm, manslaughter or placing someone under an immediate risk of injury or death). Corporations and legal persons may be prosecuted where the company financially benefited from the offence that one of its employees or representatives. Representatives can be prosecuted when there is either a manifest and deliberate violation of a specific safety rule or in the case of gross negligence causing serious danger.

What is the process for dealing with distressed suppliers in the automotive industry?

Typically, distressed suppliers do their best to avoid pre-insolvency and insolvency proceedings and may seek to obtain price increases, sometimes putting pressure by threatening to stop or actually stopping deliveries. The customer can seek court orders in summary proceedings in an attempt to force the supplier to resume the supply and comply with orders regularly placed. Courts can also acknowledge settlement agreements, where some commercial provisions may be included re timing and organisation of the deliveries. Such acknowledgment increases the chances of the agreement being complied with by the distressed supplier as well as facilitates the forced enforcement of the agreement in case of failure to comply.

If the supplier is cash-flow insolvent (or anticipates difficulties it cannot overcome) it must or may (depending on the circumstances) file for insolvency proceedings with the local commercial court. An administrator is appointed by the court and typically assists the management (but does not replace them save in specific circumstances).

The administrator will often ask customers to provide support by funding the insolvency period until an investor can be found or at least to give him or her a chance of finding an investor. The administrator cannot force such support but customers do not have much choice when they need to ‘buy’ time until a new investor can be found or they have qualified another supplier. This financial support is often structured in price increases, limited in time, sometimes through an escrow account to ensure the cash advance by a customer is dedicated to its production, or in raw materials pre-payment, tooling financing, etc. All customers are usually asked to participate in the effort proportionately to their share in the volumes. French insolvency law provides tools to facilitate an investor process through an asset sale whereby the investor can cherry-pick the number of jobs and contracts needed to continue the business. The employees who are made redundant as a result of the sale process are paid by the state indemnity fund (not by the purchaser).

Rather than filing for insolvency, distressed suppliers can seek the opening of ‘preventive proceedings’. These are not insolvency proceedings with publicity and automatic stay but rather confidential proceedings led by a court-appointed ‘mediator’ who will assist the company in its discussions with its main stakeholders (in the automotive sector it is often its main customers - often the OEMs but not only (eg, shareholders, creditors) - all bound by confidentiality to try to reach a solution to avoid formal insolvency. This is a commonly used tool for financial or industrial restructurings in the automotive sector.

The public authorities are often involved in distressed supplier issues through various channels. In significant cases which involve more than 400 employees, the department of the Ministry of Economy dedicated to industrial restructurings (CIRI) will oversee the negotiations and request customers (mainly French customers) to participate in the discussions. In smaller situations, which are still important locally, local representatives of the state can be involved.

Dedicated funds to support distressed suppliers in the automotive sector have been created since 2008 by the French public authorities, together with French OEMs and major Tier 1 suppliers. The state-owned bank BPI is also regularly called to support major suppliers in the automotive sector.

The process will, therefore, depend on how distressed the supplier is and how politically sensitive the issue is (how many jobs are at stake).

Are intellectual property disputes significant in the automotive industry? If so, how effectively is industrial intellectual property protected? Are intellectual property disputes easily resolved?

There is a fair number of intellectual property disputes in France. These usually do not involve car manufacturers but rather OEMs and suppliers. The intellectual property rights most commonly relied upon in the automotive industry are utility patents, designs and trademarks.

Intellectual property rights in France are effectively protected. French law on intellectual property rights is the result of national statutory and regulatory provisions, statutory provisions implementing international and multilateral agreements and European regulations having direct effect in France as a member state of the European Union. The implementation of these international rules is codified with French national substantive law in the French Intellectual Property Code.

Among other things, French law includes provisions regarding utility patents, trademarks, designs, manufacturing secrets, authors’ rights and database producer rights. Car manufacturers have traditionally been among the top filers of utility patents in France and they also extensively use registered design rights to protect vehicle body parts.

Intellectual property enforcement in France is for courts to ascertain. As regards utility patents as well as EU trademarks and EU designs, the Paris Civil Court has exclusive jurisdiction. This allows for harmonisation of case law beginning at first-instance level. Cases are decided in 12 to 18 months depending on the complexity of the matter. Decisions can be appealed before the Paris Court of Appeal and a further appeal on legal issues is possible before the Supreme Court.

Intellectual property law in France provides for a specific means of obtaining evidence, the infringement seizure (saisie-contrefaçon). The infringement seizure is a highly effective evidence-gathering procedure whereby an intellectual property rights holder, suspecting an infringement of its rights, applies ex parte for an order of the presiding judge of the Civil Court authorising a bailiff and possibly an independent person knowledgeable in the art to enter any premises (including those of competitors or suppliers) where the evidence of the infringement could be found, to seize samples of the allegedly infringing product, or to describe it.

On the merits, intellectual property rights holders will mainly seek a permanent injunction and compensatory damages. Intellectual property rights holders may choose to apply for a preliminary injunction in summary prima facie cases before or while an infringement case is pending on the merits.

Similar evidence gathering means and remedies are available for trade secrets since July 2018, when Directive (EU) 2016/943 on the protection of undisclosed know-how and business information against their unlawful acquisition, use and disclosure was implemented in France. Alternative dispute resolution is also available in intellectual property rights infringement issues. Ad hoc mediation enables the parties to reach a settlement. Additionally, French intellectual property law now clearly states that the exclusive jurisdiction of the Paris Civil Court ‘does not preclude the use of arbitration’.

Employment issues

Are there specific employment issues that automotive companies should be aware of, such as with trade unions and works councils?

There are effectively some specific employment issues or trends that the automotive industry (OEMs and car manufacturers) must be aware of.

Owing to the tense and complicated employment law climate in France, cost pressures and reduction in French production, many automotive companies in France had to negotiate forced or voluntary mass redundancy plans.

This happened to most of the OEMs’ French sites, which faced a significant decrease in importance in the European market over the past 10 years.

Instead of negotiating strict mass redundancy plans, the cost of which is extremely high in France and could give rise to important disputes with terminated employees, Peugeot and Renault negotiated various voluntary departure plans with unions to cut job positions and to reach agreements with unions to restore competitiveness.

Agreements on the restoration of competitiveness involve significant and tough negotiations with major French unions (CFDT, FO, CGT, CFTC and CFE-CGC) and works councils to agree on:

• voluntary departures;
• salary freezes;
• increases in working time; and
• increases in working time flexibility.

This strategy has been widely endorsed by successive French governments that recognise the role of French car manufacturers in promoting the country’s international development, while preserving to a certain extent local employment and using a concerted strategy with regional authorities, unions, manufacturers, suppliers, subcontractors, distributors, service providers, research centres, etc to maintain excellence and R&D centres in France.

New technologies

What are the most important legal developments relating to automotive technological and mobility advances?

The development of autonomous vehicles is certainly the most challenging legal development of the moment. An autonomous car is a vehicle equipped with intelligent onboard systems that allow it to limit driving tasks under certain conditions and, in terms of development, enable the car to be used on public highways in automatic mode without the driver being involved.

The reasons for developing these vehicles are manifold: improving road safety, making traffic more fluid, promoting eco-driving and making mobility accessible to all. However, many issues remain to be resolved, from both a technical and legislative standpoint.

In addition, for French law to be perfectly suited for completely autonomous driving, new legislation will be needed in light of the Vienna Convention on Road Traffic of 8 November 1968, as recently amended in 2016 to allow for driving with automated features. Discussions are ongoing in this respect to provide for a tailored framework that will fully allow autonomous vehicles to operate (and hence to improve road safety which is a major objective of the Convention).

Regulatory aspects

However, on 3 August 2016, an Order was issued authorising manufacturers to conduct tests with autonomous vehicles on French roads. This was a first step towards the arrival of autonomous vehicles on the French market. Following that, a Decree was issued in March 2018 to set out the authorisation regime for the testing of automated driving vehicles on public roads. The authorisation regime is made of two-levels of authorisation, one for the testing, which can cover one or several vehicles involved in the testing and a specific registration of each vehicle involved in the testing. The testing must relate to at least (i) technical tests and development, (ii) evaluation of the performance in situation for the use for which the vehicle with driving automation is intended, or (iii) public demonstration, notably during events. Authorisations will be granted for maximum two years but can be renewed. This testing framework is not adapted to SAE Level 5, as the presence of a driver who can operate the vehicle and take control of the vehicle at any time is required. However, the driver can be outside the vehicle.

The Law on the growth and transformation of companies adopted in April 2019 provides further details on this experimental regime. In particular it states that the driver must be able to neutralise or deactivate the automated driving system at any time. The authorisation holder must provide all information to prove that when a driver is outside the vehicle, he or she will be ready to take control over the vehicle at all times and be able to do so.

The automotive industry is also challenged by the discrepancy between French data protection law and the fast development of ‘connected’ vehicles. Connected vehicles, through various onboard intelligent systems such as geolocation, camera radar, digital keys, etc, may lead to the recording and transfer of personal data of drivers but also of surrounding vehicles and pedestrians.

One of the key principles of French data protection law is transparency. Data subjects (ie, drivers) must be informed by the data controller (ie, car manufacturer) of how their personal data will be used. Therefore, the French Data Protection Authority published in October 2017 guidelines on the use of personal data collected by connected vehicles through vehicles’ sensors, telematics devices or mobile applications. Such guidelines provide guidance to OEMs on how to integrate the data protection by design and by default requirements into the production pipeline.

Liability aspects

France has not (yet) implemented a specific liability regime that would be applicable to series deployment of autonomous vehicles in France. As a general matter of principle, civil liability is incurred under French law if (i) a wrongdoing or negligence (including putting on the market or selling a product deemed defective or unsafe), (ii) a damage and (iii) causation between the two are established. This being said, a Bill is currently being examined by the French parliament that will enable the government to adopt rules within one year to define the liability regime applicable to autonomous driving so that the current liability rules do not hinder innovation. The current wording of the Bill provides that the government will be enabled to regulate both ‘partially or fully’ autonomous vehicles (therefore regardless of any specific autonomy level and whether they are driverless or not). No particular guidelines are given as to the content of these upcoming liability rules that the government will enact. In particular, it has not been determined whether a completely new and special regime of liability will be adopted or whether current statutory provisions will be merely amended to cover situations involving autonomous vehicles.

One of the key questions will be whether Law No. 85-677 of 5 July 1985 improving the situation of victims of traffic accidents will need to be amended because this law imposes a specific regime of liability for drivers and vehicle custodians that is designed to ensure the compensation of victims of traffic accidents. Indeed, even if this law does not directly impact product liability, it could impact the liability of the car manufacturers or software developers if they were to be considered drivers or custodians of the vehicles in case of an accident involving an autonomous vehicle. The 1985 Law notably does not precisely define who must be considered the driver of the vehicle. Also, this law imposes that any person who can be held liable for damages suffered resulting from a traffic accident must be insured accordingly. It is yet to be determined how such obligation could transpose to L4 automated vehicles.

With regards to product liability stricto sensu, the main question will be to assess, in the case of an accident, in which equipment it originated and therefore which operator or person should be held liable (car manufacturer, software developer, other components suppliers, custodians, authorities who must put in place infrastructures for the autonomous vehicle to operate safely). In this respect data recorders will have a significant impact to determine the origins of the accident involving automated vehicles. This question impacts all potential defendants and their potential cross-claims against each other depending on the nature of the issue. French courts will likely request potential defendants (or data holders) to provide this data after an accident.

Update and trends

Are there any emerging trends or hot topics in automotive regulation in your jurisdiction?

The Bill on ‘orientation of mobilities’ is considering regulating free-floating vehicles under an authorisation regime as well as a multimodal travel information service.