The Paris office of Hogan Lovells is pleased to provide this English language edition of our monthly e-newsletter, which offers a legal and regulatory update covering France and Europe for June 2017.
Please note that French legal concepts are translated into English for information only and not as legal advice. The concepts expressed in English may not exactly reflect or correspond to similar concepts existing under the laws of the jurisdictions of the readers.
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Bruno Knadjian Avocat la Cour, Partner
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Summary of miscellaneous French draft legislation
Draft constitutional law to amend the Environment Chart to specify the scope of the precautionary principle filed at the Senate on December 3, 2013 Adopted in first reading by the Senate on May 27, 2014. Transmitted to the National Assembly on July 6, 2017.
Draft law, adopted by the Senate, relating to the protection of victims of of defamation, n21, filed again with the National Assembly on July 6, 2017.
Draft enabling law to take measures for the reinforcement of social dialogue by ordinance, n4, filed with the National Assembly on June 29, 2017 In debate in public session from July 25 to August 3, 2017.
Draft law to reinforce home security and the fight against terrorism: filed at the Senate on June 22, 2017 - accelerated procedure used by the Government on June 28, 2017 in debate in first reading on July 18 and 19, 2017.
Organic draft law to restore faith in the public service: filed at the Senate on June 14, 2017 - accelerated procedure used by the Government on June 14, 2017 adopted in first reading on July 11, 12 and 13, 2017.
Draft law to ratify ordinance n2017-644 of April 27, 2017 relating to the adaptation of legislative provisions in connection with the functioning of associations of health-care professionals, filed on June 29, 2017 in debate in first reading on July 19, 2017.
Draft law to ratify ordinance n2017-31 of January 12, 2017 to ensure the consistency between texts and provions of law n201641 of January 26, 2016 of modernisation of our health system, filed on June 29, 2017 in debate in first reading on July 19, 2017.
Ordinance n2017-1117 of June 29, 2017 relating to the rules of preservation, selection and study of archaeological and movable heritage OJ n0152 of June 30, 2017.
Ordinance n2017-1107 of June 22, 2017 relating to the financial instruments markets and the separation of the legal regime of portfolio management companies from that of investment firms OJ n0149 of June 27, 2017.
Ordinance n2017-1092 of June 8, 2017 relating to the components of the remuneration of pharmacists OJ n0134 of June 9, 2017.
Ordinance n2017-1090 of June 1, 2017 relating to real estate loans which are subject to the domiciliation requirement of the borrower's salaries or assimilated incomes on a payment account OJ n0130 of June 3, 2017.
1. Corporate France - Implementation of the register of the beneficial owners of legal entities
Decree n2017-1094 of June 12, 2017 regarding the register of beneficial owners of legal entities, as defined in Article L. 561-2-2 of the monetary and financial code, put in place the mechanism established by Ordinance n2016-1635 of December 1st, 2016 strengthening the French system on fight against money laundering and terrorism financing. This Decree applies to companies, economic interest groups, associations and foundations subject to registration with the trade and companies register and prcises, in particular: - the filing procedure and the content of the document relating to beneficial owners of legal entities and conditions of its submission to the
competent entities and entities subject to anti money laundering and fight against terrorism financing; - the procedure by which all person having a legitimate interest may bring an action before the judge committed to the supervision of the trade
and companies register; - the applicable rules of procedure for the injunction mechanism provided by the Ordinance in case of failure to file the document regarding
beneficial owners. The Decree shall enter into force on August 1st, 2017. Legal entities registered prior to such date shall file the document relating to beneficial owners on April 1st, 2018 at the latest. European Law - Directive relating to certain aspects of company law
Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law was published in the Official Journal of the European Union on 30 June 2017. This Directive contains provisions relating to: - coordination, within the member States, of provisions regarding the formation of public limited liability companies and the maintenance, increase
or reduction of their capital, in order to ensure minimum equivalent protection for shareholders and creditors; - coordination, within the member States, of provisions regarding the disclosure, the validity of obligations entered into by, and the nullity of
companies limited by shares or otherwise having limited liability; - the disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another
State; - cross-border mergers of limited liabilities companies; and - mergers and divisions of limited liability companies.
2. Data protection & IT European Law The Article 29 Working Party adopts an opinion on data processing at work
The Article 29 Working Party (Working Party) has adopted an Opinion n2/2017 (WP249) on data processing at work under Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 and with respect to the GDPR which will apply from 25 May 2018. The opinion assesses the risks incurred by workers due to the use of new technologies especially on their right to privacy, as it already did in
previous opinions (8/2001 / and WP 55). The Working Party recalls the difficulties induced by using consent as a legal ground for the processing of data, the right of workers to be informed of every data processing operations (right to transparency) and the principle of proportionality of data processing operations.
Finally, the G29 addresses issues related to recruitment, collecting information about employees on social networks, monitoring devices used by workers outside and at work, CCTV usage, geo tracking, sharing of data with third parties, and monitoring vehicles used by employees.
European Law The EESC adopts an opinion on artificial intelligence
The European Economic and Social Committee (EESC) has adopted on 30 May 2017 an Opinion nINT/806 containing a series of recommendations concerning the impact of artificial intelligence on the single market (digital), production, consumption, employment and society.
The EESC recommends that the application of artificial intelligence to personal data does not restrict individuals' freedom and that the guarantees provided by the GDPR should be implemented in practice.
The EESC also advocates for the introduction of European standards governing artificial intelligence through the creation of a pan-European ethical code as well as an artificial intelligence infrastructure system. On the other hand, it is against the establishment of a legal personality for robots.
3. Insolvency proceedings
European Law The new European regulation on insolvency proceedings is effective
The Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings is applicable to proceedings opened as of 26 June 2017. It proceeds to an overhaul of the Council Regulation (EC) n1346/2000 of 29 May 2000.
France - Life insurance Decree relating to the modalities for suspending and restricting operations on unit-linked life insurance contracts
The Decree n2017-1104 dated 23 June 2017 ("Decree") specifies the modalities pursuant to which insurance companies, mutual insurance companies and pension institutions may suspend or restrict operations on unit-linked life insurance contracts, if and when these units of account are constituted of shares of a collective investment undertaking being subject to a suspension, restriction or temporary capping of the surrender right. The Decree came into force on 26 June 2017.
France - Life insurance Decree relating to the functioning of unit-linked life insurance contracts
The Decree n2017-1105 dated 23 June 2017 relating to the functioning of life insurance contracts ("Decree") modifies the regulations applicable to unit-linked life insurance contracts' exposure to certain categories of relatively illiquid assets. The valuation of the exposure limits of these contracts to the different categories of relatively illiquid assets will now be determined on the basis of the outstanding balance of the contract, and not anymore on the basis of the premium paid. The Decree will apply to premiums and switches made as from 1 November 2017.
France - Payment protection insurance Specifications on the format and content of the standardised information sheet and recommendation from the French Insurance Supervisory Authority ("ACPR")
The Order dated 14 June 2017, modifying the Order dated 29 April 2015 specifying the format and content of the standardised information sheet to be provided in relation to payment protection insurance ("Order"), modifies the content of this standardised information sheet. This modification is made by the addition to this sheet of a specific wording on the possibility (and modalities of exercise of this possibility) for borrowers to substitute to the payment protection insurance contract written at the time of writing of the loan a payment protection insurance with a similar level of coverage. This Order will come into force on 1 October 2017.
In addition, the ACPR published a Recommendation n2017-R-01 on 26 June 2017 ("Recommendation"), under which it recommends good practices regarding (i) client information, (ii) the modalities for handling external insurance requests and (iii) internal control of the compliance with
the principle of free choice of payment protection insurance. The Recommendation will come into force on 1 January 2018.
France - Solvency II Form relating to the nomination or the renewal of directors of insurance sector entities not subject to Solvency II
The ACPR published an Instruction n2017-I-10 dated 19 June 2017 ("Instruction"), which modifies the instruction n2015-I-02 relating to the form to be used for purposes of notifying the ACPR of the appointment or renewal of directors of insurance undertakings ("Form"). Under the Instruction, the ACPR limits the obligation to disclose the appointment or renewal of directors through the Form to insurance undertakings that are not subject to "Solvency II regime". As a reminder this notification obligation was previously, under instruction n 2015-I-02, also applicable to insurance undertakings subject to the "Solvency II regime". In addition, the ACPR modified the list of directors falling under the scope of the notification obligation, and the Form. The Instruction came into force on 19 June 2017.
France Anti-Money Laundering and Countering the Financing of Terrorism
The ACPR published an Instruction n2017-I-11 dated 4 July 2017 relating to information on the AML-FT prevention system ("Instruction"), under which the ACPR abrogates the previous instruction applicable in this respect. This Instruction, applicable notably to insurance undertakings operating life insurance business, including the new supplementary professional pension funds, specifies which BLANCHIMT tables must be transmitted to the ACPR by these undertakings, as well as the modalities of transmission of these tables. The new tables BLANCHIMT as well as a methodology guide are attached to the Instruction.
France Electronic signature of documents remotely transferred to the ACPR
The ACPR published an Instruction n2017-I-12 dated 4 July 2017 ("Instruction") which modifies the Instruction n2015-I-18 relating to the electronic signature documents remotely transferred to the ACPR. Under the Instruction, the ACPR (i) extends the scope of the Instruction n2015-I-18 to all the ACPR's instructions referring to electronic signature and (ii) amends the conditions applicable to the electronic certificate as well as the rules relating to persons authorised to proceed to electronic signature. The Instruction will come into force on 1 July 2017.
France Insurance Distribution Directive Project of implementation Ordinance
The draft of the Ordinance for reimplementation in France of Directive (EU) 2016/97 dated 20 January 2016 on insurance distribution prepared by the Treasury Directorate (Direction Gnrale du Trsor) has been made public. This draft is a working document and is likely to be amended.
European Law FinTech - European Insurance and Occupational Pensions Authority ("EIOPA")'s response to a public consultation
The EIOPA published its response to the European Commission's public consultation on FinTech on 16 June 2017. The EIOPA notably emphasises that it will continue considering emergent supervisory issues, including in the areas of Big Data, cyber risks and supervisory approaches to financial innovation, and sets out in an annex more details in relation to the above together with other topics including automation of financial advice, blockchain, artificial intelligence, and peer-to-peer insurance. The EIOIPA mentions that while it is still early days for some of these financial innovations, EIOPA will closely monitor them in view of their potential impact and take action as necessary.
European Law - EIOPA Consultation on its first set of advice on the Solvency II review
The EIOPA has launched a consultation paper on 4 July 2017 ("Consultation") regarding EIOPA's first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation. This Consultation aims at ensuring a proportionate and technically consistent supervisory regime for (re)insurance undertakings and at looking for possible simplifications in the Solvency Capital Requirements standard formula as well as ensuring the proportionate application of the requirements. Answers to the Consultation can be submitted until 31 August 2017.
5. Intellectual Property
France - Clarifications regarding the Courts of appeal having exclusive jurisdiction to deal with the appeals initiated against the decisions taken by the General Director of the French National Institute of Industrial Property in terms of approval, rejection and withdrawal of homologation of the product specification for geographical indications
Taken as a result of Decree n2015-595 of 2 June 2015 on geographical indications protecting industrial and artisanal products, Decree n2017-
1097 of 13 June 2017 amends article D. 311-8 of the code of the judicial organization and its Annex VI in order to specify the courts of appeal with have exclusive competence to rule on the appeals formed against the decisions regarding the approval, rejection and withdrawal of homologation of the product specification for geographical indications.
Pursuant to article R. 411-19 of the same code, which states that the court of appeal which is territorially competent to hear this type of appeal is the one of the place where the person lodging the appeal resides, Decree of 13 June 2017 provides that the 10 Courts of Appeal exclusively competent to rule on appeals against decisions of INPI's General Director regarding trademarks or designs shall also have jurisdiction regarding geographical indications.
This Decree entered into force on 16 June 2017.
France - Annulment of the provisions relating to the digital exploitation of unavailable books
Pursuant to the judgment of the Court of Justice of the European Union in Case C-301/15 of 16 November 2016, the Conseil d'Etat (French supreme court competent for public law litigation) in its Decision n368208 of 7 June 2017 annulled article 1 of the Decree of 27 February 2013 in so far as it created articles R. 134-5 to R. 134-10 of the Intellectual Property Code establishing a mechanism for the digital exploitation of works reproduced within books considered as unavailable.
The Law of 1st March 2012 regarding the digital exploitation of unavailable books, had authorized the scan and exploitation of the works reproduced inside books published in France before 1 January 2001, under the condition that they are no longer subject of a commercial distribution by a publisher or of a publication under a printed or digital form.
Such exploitation was possible 6 months after the registration of the works by the author rights management society SOFIA in the register of unavailable books being electronically republished, managed by the Bibliothque Nationale de France, without opposition from the author and the publisher. Beyond this period, the author, to prevent such exploitation, must demonstrate that the reproduction or representation of the book was likely to harm his honor or reputation.
Noting that such a mechanism did not ensure effective and individualized information for the authors of the registration of their work in the public databases prior to the initiation of the opposition period and required authors wishing to exercise their right of withdrawal to demonstrate that they were the sole owners of the reproduction rights, the Conseil d'Etat considered that these provisions were contrary to Directive 2001/29 / EC of 22 May 2001.
If the annulment is effective as of June 7, 2017, the contracts which have been signed under these provisions prior to cancellation shall nevertheless remain valid.
Finally, the provisions of the contested decree relating to the setting up of the database of the so-called unavailable books, as well as those relating to the procedure and conditions for approval of a collecting authority, are maintained since, under the terms of the decision of the Conseil d'Etat, the law of the European Union as interpreted by the Court of Justice, does not in principle preclude the collective management of the reproduction rights of the so-called unavailable works.
European Union- Codifications of the provisions of the "Trademark package"
On 14 June 2017, the European Parliament and the Council of the European Union adopted Regulation (EU) 2017/1001 on the European Union mark, codifying the provisions of the "Trademark Package" (Legislative and Regulatory News - December 2015) composed of Directive (EU) 2015/2436 of 16 December 2015 to approximate the laws of the Member States relating to trade marks (recast) and Regulation (EU) 2015/2424 of 16 December 2015.
This Regulation repeals Regulation n207/2009 and makes a complete renumbering of the Articles.
This Regulation shall enter into force on 1 October 2017.
6. Real Estate France - Fire safety rules softened from 1st July in stores and shopping centers
Order n0145 of 13 June 2017, published in the Official Journal on 22 June 2017, amending the Order of 25 June 1980 approving the general provisions of the safety regulations against fire and panic risks in public-access buildings (ERP), has softened the fire safety rules applicable to this category of ERP (establishments of type "M") as of 1 July 2017.
The changes are mainly related to the rules for calculating the number of persons who can have access to the store or shopping center, the dimensioning of exits and clearances accessible to the public, the moving arrangement between the tills and the pooling of fire safety services agents on premises.
The purpose of this Order is to take account of changes in the operation of retail stores and shopping centers, the stakes related to the safety of the public, workers and relief workers, as well as the economic stakes in line with the principles of normative simplification.
The Order of 13 June 2017 has for main objective to:
- adapt the theoretical assessment of the number of the present public in relation to actual attendance on the basis of accounting items;
- simplify administrative procedures;
- reduce structural management constraints;
- rationalize and adapt the back-up resources on the basis of feedback;
- facilitate the use of innovative technological solutions; and
- promote a global approach of thoughts related to public safety by facilitating pooling of resources.
France - Harmonization between ERP and IGH limit thresholds of electric power of elevators
Order n0140 of 8 June 2017, published in the Official Journal on 16 June 2017, amending the Order of 25 June 1980 approving the general provisions of the safety regulations against fire and panic hazards in public-access buildings (ERP), simplifies the regulation concerning the thresholds of electrical power of the elevators.
The Order harmonizes the thresholds for the electric power installed in the seed elevator of public-access buildings with high-rise buildings.
The Order entered into force on 1 July 2017. Its provisions apply to public access buildings whose application for a building permit or a prior declaration of works is filed as from that date.
France - Property loan offers: income domiciliation is limited to 10 years
Banks often provide for clauses of income domiciliation when granting a property loan.
Ordinance n2017-1090 of June 1, 2017, taken pursuant to Law no. 2016-1691 of 9 December 2016 known as the "Sapin" Law, which authorised the government to legislate by order the conditions of the subscription, by a consumer, of a property loan, and its implementing decree n2017-1099 of 14 June 2017, provide for a framework of property loan offers clauses relating to the domiciliation on a payment account of the lending institution, of salaries or income of the borrower by introducing new provisions in the Consumer Code (Articles L.313-25 10, L.313-25-1, L313-39 paragraph 2, L.341-34-1 and R.313- 21-1).
In this respect, the decree sets the maximum period of the domiciliation requirement at 10 years, and subject to not exceeding the duration of the loan. This time period runs from the execution of the loan agreement or, as the case may be, from the amendment to the initial loan agreement.
The ordinance provides that if the lender provides that its loan offer is subject to the borrower's domiciliation of its income, then the borrower must, in return, benefit from an individualized advantage. It may grant the borrower, for instance, with a particularly advantageous borrowing rate.
The lender will also be required to indicate in the loan offer whether it is subject to the domiciliation requirement and specify the duration, the opening and management fees of the account on which the salaries will be domiciled as well as the nature of the individualized advantage and the rate or other conditions regarding the advantage and the conditions which would apply by the lender in case the borrower breaches the domiciliation
A domiciliation clause which does not mention the individualized advantage or which will exceed a 10 year period will be deemed unwritten.
The provisions of the ordinance and the decree will come into force on 1 January 2018 and will be applied to loan offers issued as from that date and to the amendments to contracts entered into further to theses offers.
The ordinance shall be ratified by a ratification Law to be tabled before Parliament no later than 3 September 2017. Failing to do so, the ordinance will be void.
France - Publication of the decree relating to obligations to improve energy performance in tertiary buildings
Article 3 of Law n2010-788 of 12 July 2010 (inserted in Article L.111-10-3 of the French Construction and Housing Code) had provided that works to improve energy performance be carried out in existing buildings for tertiary use or in which a public service activity is carried out within eight years from 1 January 2012, i.e. no later than 1 January 2020.
A decree from the Conseil d'Etat was supposed to determine the nature and the modalities of this obligation to perform works.
This decree was finally published in the Official Journal on 10 May 2017 (Decree n2017-918 of 9 May 2017), after waiting more than six years. The implementing measures are now included in Articles R. 131-38 and seq. of the French Construction and Housing Code.
This decree, which entered into force on the day following its publication in the Official Journal, defines the obligation to reduce the energy consumption of these buildings by 25% by 2020 and by 40% by 2030.
This obligation applies to buildings or parts of existing buildings belonging to a sole owner, used as offices, hotels, shops, schools and administrative buildings, regrouping premises with a surface area of 2,000 sqm or more of useful surface area. Certain types of buildings are excluded from the scope of the decree, including notably temporary constructions and historical monuments.
The decree provides, in particular, that owners or, in case of leased premises, landlords and tenants must simultaneously:
- have an energy audit carried out in relation to all the consumption items of the buildings by a contractor who will have to notably suggest "works for energy savings and recommendations prioritized according to their return on investment time ",
- define and implement an action plan to achieve the energy consumption reduction targets referred to in the decree on the basis of this audit, and
- provide these documents to a public body (to be appointed by a future ministerial order).
As it stands, the decree does not provide for any sanction in the event of non-compliance of these provisions.
It is expected that an order will specify, according to the categories of buildings, the implementing measures of the decree and in particular the consumption thresholds, the content and the methods to carry out the energy audits and the methods and formats of the electronic transmission of the documents to the public body.
Currently, this order has not been published.
Moreover, this decree has been subject to a legal recourse before the French Administrative Court, which is currently still pending.
France - Tax treatment of attendance fees (jetons de prsence) paid to supervisory board members in French SCA
The French Tax Authorities (the "FTA") updated their guidelines in order to clarify the tax treatment of attendance fees (jetons de prsence) paid to members of the supervisory board of French socit en commandite par actions (tax ruling n2017/01 dated 7 June 2017 published in the FTA's official guidelines under the reference BOI-BNC-CHAMP-10-30-50-20170607, n15).
In this respect:
- attendance fees are subject to French individual income tax as non-commercial income (pursuant to Article 92 of the French Tax Code the
- attendance fees are treated as non-commercial non-professional income, which does not trigger social charges and value added tax;
- the 25% surcharge provided by Article 158 of the FTC does not apply; and
- supervisory board members are not required to file a professional tax return (tax return n2035) with respect to attendance fees.
France - Young innovative businesses: R&D expenses incurred by European permanent establishments
The FTA updated their guidelines and confirmed that research and development expenses incurred by permanent establishments located within the European Union (or in a Member state of the European Economic Area which has entered into an agreement on administrative assistance with France) are taken into account for the purposes of qualifying a company as a "young innovative business" pursuant to Article 44 sexies-0 A of the FTC (BOI-BIC-CHAMP-80-20-20-10-20170607, n247).
As a reminder, young innovative businesses for French tax purposes may benefit from (i) full or partial exemption from corporate income tax, and (ii) subject to a decision from local authorities, seven-year exemption from property tax and territorial economic contribution.
In this respect, a company may qualify as a young innovative business if, among other requirements, it incurs research expenses (as defined by Article 244 quater B of the FTC) for an amount equal to at least 15% of the tax deductible expenses incurred throughout the fiscal year (excluding expenses incurred in relation to other young innovative businesses).
France - Impatriates: extension of the duration of the favourable tax regime
The FTA updated their guidelines to draw the consequences of the extension of the duration of the French favourable tax regime applicable to impatriates as provided for by article 71 of the finance Act for 2017 (n2016-1917 dated 29 December 2016).
As a reminder, pursuant to Article 155 B of the FTC foreign employees and corporate officers hired by a French company in order to work in France may benefit from a favourable tax regime under which they are exempt from French individual income tax on their impatriation bonus and on a fraction of their foreign passive income.
In this respect, the finance Act for 2017 extended the duration of this favourable tax regime from 31 December of the fifth year to 31 December of the eighth year following the year during which they started working in France.
International - Updates to the FTA's official guidelines with respect to certain tax treaties
The FTA updated their guidelines to take into account the following modifications regarding certain tax treaties entered into by France:
- the tax treaty entered into in 1985 by France and the former Union of Soviet Socialist Republics ceases to apply to Tadjikistan as of 31 December 2014 (BOI-INT-CVB-TJK-20170627);
- the information sharing system between France and the Philippines is updated following the signature of an amendment to the tax treaty entered into on 25 November 2011 between France and the Philippines (BOI-INT-CVB-PHL-20170627); and
- a new tax treaty between France and Singapore has been entered into on 15 January 2015. It replaces the tax treaty entered into on 9 September 1974, as amended by the amendment dated 13 November 2009 (BOI-INT-CVB-SGP-20170627).
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