For the first time, an Australian court has confirmed that the French statute preventing enforcement of discovery orders has no legal effect in Australian proceedings. Like the courts in England and the US before it, the Australian Federal Court has held that French entities must comply with Australian procedural orders for discovery.
On 17 January 2014 in ACCC v Prysmian Cavi E Sistemi Energia SRL (No 7)1Justice Besanko dismissed the application of French company Nexans SA RCS Paris 393 525 852 (Nexans) to be exempt from complying with a discovery order.
Nexans unsuccessfully attempted to argue that the discovery order was contrary to the Loi no 68-678 du 26 July 1968 (known as the “loi de blocage” or “French blocking statute”)2 – a law which essentially makes the communication of documents in overseas legal proceedings a criminal offense. Nexans proceeded to submit that the procedure of for taking evidence as set out in the Convention on Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention)3 should be applied.
The ACCC claimed that Nexans would not breach the French blocking statute by complying with the order for standard discovery. In the alternative, they pleaded that should Nexans breach the French blocking statute the possibility of prosecution to conviction is negligible.
Justice Besanko ultimately found in favour of the ACCC- compliance with an ordinary discovery order is not prohibited by the blocking statute as the orders for discovery were not overbearing and were by reference to a list of required documents, which was similar to the suggested protocol in the Hague Convention. Further, Besanko J also held that in any event, the two unsuccessful attempts to apply the French blocking statute and the solitary instance of its enforcement evinces that the French courts were unlikely to ever prosecute a company complying with a standard discovery order.
French blocking statute
Article 1bis of the French blocking statute “prohibits all entities to ask, research or communicate by writing, orally or in another form of all documents or information of an economic, commercial, industrial, financial or technical nature which are used as evidence in any foreign judicial or administrative case.”4
Under Article 3, failure to comply with the statute can be punished by 6 months imprisonment and/or a fine of 18 000 €.5
Application of blocking statutes
Prior to this case, Australia had previously dealt with a similar, Kazakhstani blocking statute in Michael Wilson & Partners Ltd v Nicholls & Ors 6. ThereBrereton J found that the law of the forum (lex fori) should apply. He held that although consideration should be given to the national penalty, ultimately it is not sufficient to prevent the court from making an order that is otherwise within the law of the forum.
Common law jurisdictions almost unanimously hold that the French blocking statute is unlikely to be enforced. British and American cases had reached the conclusion that where the French blocking statute is cited, as a reason to prevent discovery, the penalties for not enforcing discovery are far greater than the likelihood of convictions or charges imposed by the French government.
In coming to that conclusion, both Besanko J in ACCC v Prysmian and Roth J in National Grip Electricity Transmission PLC v ABB Limited & Ors7 relied on the fact that there had only been one successful prosecution since the law was enacted in 1968- and even then, it arose in exceptional circumstances: in the case of re Christopher X,8 a case involving the litigation between the Californian Insurance Commissioner and French insurance company MAAF, the Cour de Cassation imposed a €10,000 penalty on a French lawyer (acting for the Commissioner) for inappropriately questioning a MAAF board member on the circumstances surrounding the acquisition of an American life insurance company. The Cour de Cassation held that the lawyer’s questions amounted to “requesting information of a financial nature to be used as evidence in a foreign proceedings” and therefore contrary to Article 1bis of the French blocking statute.
Legal Professional Privilege in France
In this respect, it should be noted that legal-professional privilege (LPP)- as far as in-house counsel is concerned- does not exist in Europe. The European Court of Justice case Akzo Nobel is authority for the proposition that communications of in-house counsel are not protected by LPP.10 As a result therefore, a French company subject to a discovery order may be required to hand over documents and information which would ordinarily and otherwise be protected by LPP in the place of proceedings. This is commonly one of the reasons that French companies have resisted common law discovery requests so vigorously (however is yet to be tested).
As a result of the infrequent incidents of prosecution coupled with common law courts’ reluctance to apply it in any meaningful manner, the French blocking statute is deemed “obsolete and ineffective”.11 This has resulted in an inquiry by the French government who are considering limiting its application to “secret des affaires” or trade secrets since the existing “scope of application is too large and insufficiently precise.”12
Should this proposed amendment come to pass, French companies will be limited to resisting applications for discovery on the grounds of business confidentiality only. The default position will therefore be that the law of the place of proceedingswill govern questions of procedure.
Until then, however, clients should assume that an order for discovery will be enforceable in Australia against French companies. Whether it is equally enforceable in France is questionable (at best) and the possibility of a court battle to obtain documents remains.