Legal framework

Relevant legislation

What statutes or regulations govern procurement of defence and security articles?

Contracts for defence and sensitive security equipment and services (MPDS) are public procurement contracts. Three public procurement codes have been implemented since 2001, and so the French government has recently integrated public procurement rules into the Public Procurement Code (PPC). MPDS are public procurement contracts (PPC, article L. 2) and therefore governed, since 1 April 2019, by articles L. 1113-1, L. 2300-1 to L. 2397-3, and R. 2300-1 to R. 2397-4 of the PPC.

The EU Defence and Security Directive (DSPCR) (2009/81/EC) has been incorporated into French law resulting in the development of three legislative acts governing defence procurement dated 2004, 2011 and 2016.

General principles derived from the EU Treaty also apply to defence procurement, including the principles of equal treatment, non-discrimination, transparency, proportionality and mutual recognition. However, due to the strategic nature of some defence procurement, many MPDS are subject to classification measures in accordance with the regulations governing the protection of secrecy (arising in particular from the Criminal Code and the Defence Code). Such contracts are, as a result, excluded from the public procurement rules (subject to certain exclusions detailed below).

Identification

How are defence and security procurements identified as such and are they treated differently from civil procurements?

Article L. 1113-1 of the PPC defines MPDS as contracts concluded by the state or one of its public institutions that have one of the following activities:

  • the supply of military equipment, including any parts, components or subassemblies thereof;
  • the supply of sensitive equipment, including any parts, components or subassemblies thereof;
  • works, goods and services directly related to military or sensitive equipment for any and all elements of its life cycle; and
  • works and services for specifically military purposes or sensitive works and sensitive services.

However, some defence procurement is excluded from the application of the PPC. According to article 2515-1 of the PPC, this is the case in particular for:

  • public procurement of financial services, excluding insurance services;
  • public procurement of arms, ammunition or war materiel where the protection of the essential security interests of the state so requires; and
  • public contracts for which the application of the regulation would require the disclosure of information contrary to the essential security interests of the state.
Conduct

How are defence and security procurements typically conducted?

The PPC provides three main procedures for awarding MPDS.

First, those that are not subject to the PPC and can be directly awarded without the use of competitive procedures. These are expressly listed in article L. 2515-1 of the PPC.

Second, for MPDS falling within the scope of the PPC, a distinction is made between those that can be subject to a negotiated procedure and those that are subject to a formalised procedure.

For MPDS covered by a negotiated procedure, the availability of the negotiated procedure without prior publication or competition is greater than for public procurement in the traditional sector (see articles R. 2322-1 to R. 2322-14 of the PPC). In such case, the public entity is free to organise this procedure, but shall proceed in accordance with the normal principles of public procurement law.

Above certain specific thresholds (up to €443,000 HT for supplies and services and €5,548,000 HT for works contracts), the contracting authority may freely choose one of the following formalised procedures with publication and competition: restricted invitation to tender, competitive procedure with negotiation or competitive dialogue.

Finally, for MPDS not expressly falling into these two categories and when the estimated value of the needs of the contracting authority is below the thresholds of the formalised procedure, the contracts will be subject to an adapted procedure that enables the public entity to award their contracts according to a transparent competitive tendering procedure freely determined according to the subject matter and special features of the contract.

Proposed changes

Are there significant proposals pending to change the defence and security procurement process?

The European Commission reviewed the MPDS regime in 2016 and determined that no legislative changes were necessary. However, it has indicated that it will take a stricter approach to enforcing compliance with the rules, as it found too many MPDS contracts were awarded without any competition.

Information technology

Are there different or additional procurement rules for information technology versus non-IT goods and services?

There are specific rules that relate to IT procurement. Most IT procurement will be undertaken under the general administrative clauses (CCAG) applicable to IT procurement (IT procurement CCAG), which was published on 16 October 2009 by a ministerial order of 16 September 2009. In many instances, the IT procurement CCAG will apply only to contracts that expressly refer to them.

If the contracting authority chooses to refer to the IT procurement CCAG, it will have to adapt the provisions of the contract to reflect the specific features of IT procurement. This will be done through a set of special administrative clauses (CCAP), either to supplement or to derogate from the IT procurement CCAG (article R. 2112-3 of the PPC). If the contracting authority chooses not to refer to the IT procurement CCAG, it will have to include in its CCAP the provisions necessary for the management of these kind of contracts.

It should be noted that the IT procurement CCAG was not adapted to the provisions of the ordinance of 23 July 2015 on public procurement and its two implementing decrees of 25 March 2016, which entered into force on 1 April 2016. The first decree relates to public procurement contracts in general, and the second, the MPDS Decree, to public procurement in the defence sector. However, this mechanism is still enforceable if the contracting authority chooses to refer to the IT procurement CCAG (see article 151 of the MPDS Decree).

Relevant treaties

Are most defence and security procurements conducted in accordance with the GPA or other treaty-based procurement rules, or does this jurisdiction commonly use the national security exemption to procure them?

The majority (70 per cent) of defence and security procurement in France is negotiated by mutual agreement. The predominance of this mode of contract award is explained by the complexity of the trans­actions at stake, the necessity for comprehensive exchange of information prior to the contract being awarded, as well as by the willingness of the public authorities to support the industrial defence sector (‘Choice of contract type and performance: The case of public defense contracts’ by Jean-Michel Oudot, Économie publique/Public economics, issue 21, 2007/2). However, the statistics published by the French Ministry of Defence do not provide for specific percentages regarding the use of the national security exemption. The Observatory of European Defence and Security Procurement published an eight-year review of the application of the DSPCR in June 2019. This review does not mention the amount of contracts that are exempt from the normal requirement to compete openly, but it does show that 24 per cent of French defence contracts use a procedure without prior publication.

Disputes and risk allocation

Dispute resolution

How are disputes between the government and defence contractor resolved?

Two types of dispute settlement are usually used to resolve disputes: a conciliation procedure or a procedure before a French administrative judge. However, most defence and security contracts provide for an amicable settlement of disputes before the case is referred to the competent court.

In France, amicable settlements of defence and security disputes are referred to the National Committee for the Amicable Settlement of Disputes in Public Procurement (CCNRA). This committee is neither a court of law nor an arbitration body. Its mission is to seek legal and factual elements with a view to proposing an amicable and equitable solution (articles R. 2197-1 of the PPC). The CCNRA then issues opinions, which the parties are free to follow or to disregard.

Where a dispute is referred to a conciliator, the referral suspends the limitation period, which resumes if the solution proposed by the conciliator is rejected by the contracting authority. If the conciliation fails, the party who initiated it can refer the matter to the administrative court within the time limit that runs from notification of the administration’s decision to refuse to follow the opinion of the conciliation committee. If a party prefers to bring the dispute before the administrative court, it must do so within two months of the rejection of its prior administrative complaint.

To what extent is alternative dispute resolution used to resolve conflicts? What is typical for this jurisdiction?

The procedures described in question 7 only concern disputes between the administration and the contractor or the defence consortium and security contractor, so this referral is only possible for the administration and the contractor. Referral to the CCNRA is not possible if the dispute is among members of the defence consortium holding the contract, or between a contractor with a Tier 1 subcontractor, or a Tier 1 subcontractor with a Tier 2 subcontractor. However, there is nothing preventing any of the latter parties from trying to reach out-of-court settlements. If they choose to pursue litigation, the case can only be brought before a judicial judge, not an administrative judge.

Indemnification

What limits exist on the government’s ability to indemnify the contractor in this jurisdiction and must the contractor indemnify the government in a defence procurement?

Public procurement is subject to an extensive system of law characterised by a balance of power that gives the public contracting party the means to enable it to impose its will on its contracting partner. The government has the right (even if there is no contractual clause stipulating it) to terminate the contract unilaterally for public policy reasons, subject to the total indemnification of the operator for the damage suffered (which is composed of the loss incurred and the lost profit). The government also has extensive power to impose uni­lateral modifications on the contract. The use of this prerogative must, however, not lead to the economic disruption of the contract. A judicial tool - unpredictability theory - provides an essential guarantee for the contractor against the risk of economic uncertainties. It provides that if certain conditions are met (in the case of an event that is unpredictable, independent from the will of the parties and that leads to the economic disruption of the public contract) the operator is obliged to continue to perform the contract. However, the government is required to pay a fee to the operator relative to any increased cost of performing the contract. In general, French administrative jurisprudence has set this percentage at 90 per cent of the losses caused by the unforeseen event. Furthermore, the French administrative courts provide compensation in a situation where the contractor carries out, under its own initiative and outside the scope of the contract, work that it considers necessary for the proper performance of the contract.

The government may request indemnification from the contractor in case of third-party claims for loss or damage to property, personal injury, death, or damage to government property. The CAC Armement contains specific indemnities relating to damages resulting from aircraft, missiles and ammunition.

Limits on liability

Can the government agree to limit the contractor’s liability under the contract? Are there limits to the contractor’s potential recovery against the government for breach?

The government usually limits its own liability under the contract. The public entity may stipulate a clause in a CCAP that limits the contractor’s right to compensation in the event of unilateral termination of the contract on grounds of public interest. (See CAA Versailles, 7 March 2006, No. 04VE01381, Cne Draveil and CE, 4 May 2011, No. 334280, CCI of Nîmes, Uzès, Bagnols, Le Vigan). Furthermore, there is nothing to prevent contractual provisions from entirely excluding any right to compensation in the event of unilateral termination on grounds of public interest (CE, 19 Dec. 2012, No. 350341, AB Trans).

With regard to the reciprocal limitation of the contractor’s liability, the contract may also provide that the public body’s right to compensation for direct damage is limited in the case of a single contract to the total amount of the contract, or in the case of a split contract to the minimum amount of the contract with a purchase order. The contract award procedure will determine the extent to which this limit is negotiable.

Risk of non-payment

Is there risk of non-payment when the government enters into a contract but does not ensure there are adequate funds to meet the contractual obligations?

The risk of non-payment for an undisputed, valid invoice by the DGA is perceived to be very low. The government’s commitment to incur expenditure is subject to the availability of credit payment provided by the finance laws and the amending finance laws.

Parent guarantee

Under what circumstances must a contractor provide a parent guarantee?

If a bidder is a special purpose vehicle set up specifically for a contract, the terms and conditions of the initial tender documentation usually require that the contractor must execute a parent guarantee for the benefit of the public entity and in accordance with a specific template. In such a case, failure to provide this guarantee will result in the disqualification of the contractor from the procurement process. Under French law, the granting by a company, in whatever form, of a guarantee to secure the obligations of an affiliated company must comply with its corporate purpose and corporate interest. If the contractor wishes to transfer its contracts to a special purpose vehicle after it is awarded, the Ministry of Defence usually requests that the shareholders of the special purpose vehicle execute a parent guarantee.

Defence procurement law fundamentals

Mandatory procurement clauses

Are there mandatory procurement clauses that must be included in a defence procurement contract or that will be read into the contract regardless of their actual inclusion?

The standard administrative clauses (CAC) are specific to the French Defence Procurement Agency (DGA). This document is part of the procurement contract and is common to all defence services. The DGA will typically seek to include certain standard clauses in its contracts. Primarily, these are the DGA standard clauses of 2014, which constitute a collection of standard contractual clauses relating to the most frequent cases encountered in defence or security contracts awarded under the previous Public Procurement Code of 2006.

Cost allocation

How are costs allocated between the contractor and government within a contract?

The CAC Armement does not provide any pricing methods. The allocation of costs will, therefore, be contained in a commercial agreement between the parties. Fixed or firm prices are the most common pricing methods for MPDS (in 98 per cent of the cases, see the article by Jean-Michel Oudot cited in question 6). However, under public procurement rules, the procuring entity may conclude a framework agreement and then issue individual purchase orders for each required service. This volume-driven pricing is common in long-term MPDS contracts.

In order to take into account particular circumstances, such as urgency or the technical, functional or economic characteristics of a defence equipment or service, a joint decision of the minister responsible for defence and the minister responsible for the budget may authorise the insertion of a clause providing for a deferred payment (article L. 2391-5 and article R. 2391-18 of the PPC).

Disclosures

What disclosures must the contractor make regarding its cost and pricing?

According to article 7.2 of the CAC Armement, the contractor is required to report on the costs that it will incur or has incurred in performing the contract. It must keep all accounting documents and data for at least five years from the date of completion of the contract. When it is subject to a cost control, it is required to provide, at the request of the procuring entity, cost statements showing a breakdown of the cost components, including volume of hours, hourly rates, procurement expenses and overhead costs.

Audits

How are audits of defence and security procurements conducted in this jurisdiction?

Under the CAC Armement, the contract and related records shall be accessible to the contracting authority or its designated representative. The right of audit can be exercised at any time.

IP rights

Who gets the ownership rights to intellectual property created during performance of the contract? What licences are typically given and how?

In France, in general, the private contracting party obtains the intellectual property resulting from the contract. Contractual relationships between public and private entities are governed by the French PPC and Chapter VII of the CAC Armement relating to intellectual property. The main difference regarding contractual relationships concerns the use of the services produced, rather than their property rights. In return for the ownership of intellectual property rights, the Ministry of Defence expects the right to disclose and use the intellectual property for government purposes (including security and civil protection). By way of derogation from article 62 of the CAC Armament, the clauses of the contract may provide for certain scenarios where intellectual property rights will be granted to the public entity.

Economic zones

Are there economic zones or other special programmes in this jurisdiction commonly utilised by foreign defence and security contractors for financial or other procurement related benefits?

In France, there are no special defence units located in special economic zones and benefiting foreign defence and security contractors.

Forming legal entities

Describe the process for forming legal entities, including joint ventures, in this jurisdiction.

Under French law, the term ‘joint venture’ does not correspond to any specific legal situation. It refers, in fact, to any form of cooperation between companies that have in common their contractual and associative natures. The structure of a joint venture can be either purely contractual (collaboration agreement), or both contractual and corporate (collaboration agreement and a joint subsidiary). When this cooperation is expected to last, partners may wish to set up a new legal structure (usually a simplified joint-stock company (SAS) or a company with limited responsibility (SARL) structure is used for this). To establish a company, the parties must carry out the formalities of constitution required by the legislation applicable to the specific type of legal entity.

Access to government records

Are there statutes or regulations enabling access to copies of government records? How does it work? Can one obtain versions of previous contracts?

Under the French Code of Relations Between the Public and the Administrations (CRPA), there is a general right for the public to access information held by public bodies. As the Ministry of Defence is a public body, its contracts and records may, in principle, be requested by any involved entity. With regard to the rules of public procurement, a signed contract may be disclosed. However, this right of access must be exercised in compliance with industrial and commercial confidentiality protected by the provisions of article L. 311-6 of this Code. In addition to the information protected by industrial and commercial secrecy, the secrecy of documents classified as national defence secrets pursuant to article 413-9 of the Criminal Code are also protected by law. In addition, national defence secrets are considered to be heavily classified by article L311-5 of the CRPA, which provides that ‘other administrative documents whose consultation or disclosure would prejudice . . . national defence secrecy . . . shall not be disclosed’.

Compliance with the principle of access to administrative documents is monitored by the Commission for Access to Administrative Documents (CADA), which has developed a doctrine on access to the various documents that may be involved in the award, conclusion and performance of public contracts.

Supply chain management

What are the rules regarding eligible suppliers and supply chain management and anti-counterfeit parts for defence and security procurements?

There are no specific rules regarding eligibility for MPDS contracts. Suppliers are generally considered eligible for public contracts if they meet the standard requirements of public procurements (both on the professional and the financial and economic side). Subject to limited exceptions, the defence procurement rules oblige an authority to reject tenders from bidders who have been convicted of certain serious offences (see question 36).

Regarding supply chain management, the PCC and the CAC Armement include specific commitments by the contractor to ensure the security of supply. Furthermore, the first paragraph of article L. 2393-1 of the PPC defines the legal regime applicable to subcontracts for defence or security contracts. It provides that ‘the holder of a defence or security contract may, under his responsibility, entrust another economic operator, referred to as a subcontractor, with the performance of part of his contract, including a supply contract, without this consisting in an assignment of the contract’. The concept of subcontractor used by the DSPCR is broader than in national law, which excludes from its scope standardised contracts for goods or services that are not specifically designed to meet the needs of the public entity. The rules expressly permit authorities to consider the same exclusion grounds for sub-contractors, as well as giving them broad rights, for example, to require a supplier to openly compete some of the sub-contracts or to flow down obligations regarding information security (article 2393-3 of the PCC).

There are no specific rules regarding anti-counterfeit parts.

International trade rules

Export controls

What export controls limit international trade in defence and security articles? Who administers them?

The French regulation implementing Council Common Position 2008/944/CFSP defining common rules governing control of exports of military technology and equipment (the Common Position) and the Arms Trade Treaty, are contained within the French Defence Code (articles L2331-1 and s.).

The production and trade of defence items is subject to a specific authorisation. An export licence is necessary to export defence articles outside the EU and a transfer licence is necessary to export such items within the European Union. The licences are delivered by the prime minister after advice from the Commission for Export of Defence Goods (CIEEMG), which assesses each project taking into account:

  • their consequences on peace and regional security;
  • the respect by the country of destination of human rights;
  • the protection of sensitive technologies; and
  • the risk of use by non-authorised final users.

A specific regulation applies to dual-use items (ie, goods, software and technology that can be used for both civilian and military applications). On the basis of EU Regulation 428/2009, and its Annex I giving the list of the items concerned by this regulation, the export of such items outside the EU is subject to the grant of a licence.

Domestic preferences

What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?

The Minister of Defence has stated that contracts awarded by the ministry must comply with the procurement rules described in the legislation on public procurement. The latest legislative text prohibits the introduction of a criterion based on national preference. In fact, so long as the foreign contractor undertakes to comply with the protocols, in particular that of the International Labour Organisation, nothing prevents it from bidding on a French procurement directly, even if the activity is located in its territory. Moreover, reserving contracts for national suppliers can lead to a non-competitive situation, or even to a monopoly situation (Parliamentary Question No. 84337, Rep. Min of 16 September 2010).

Favourable treatment

Are certain treaty partners treated more favourably?

The principle of European preference is stated in article L. 2353-1 of the PPC for defence and security contracts. This principle permits the exclusion of economic operators that are not EU member states or who do not belong to the European Economic Area (article L. 2342-7 of the PPC).

Sanctions

Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?

The EU implements embargoes and sanctions directed by the UN and also imposes its own autonomous embargoes and sanctions. The French government also has the power to impose national sanctions.

Embargoes and sanctions, depending on their type and ultimate aim, are targeted at individuals, entities, sectors or countries.

The map of all countries affected by embargoes and sanctions and a consolidated list of all persons subject to financial sanctions can be found on the French government website.

Trade offsets

Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?

Offsets are not part of France’s defence and security procurement. Indeed, according to the interpretation set forth in the guidance note on offsets issued by the European Commission, ‘offset requirements are restrictive measures which go against the basic principles of the Treaty [on the Functioning of the European Union] because they discriminate against economic operators, goods and services from other Member States and impede the free movement of goods and services’. Although the guidance note mentions that offset requirements could, in certain strictly limited circumstances, be justified on the basis of article 346 of the Treaty, provided that the relevant member state can ‘demonstrate that these requirements are necessary to protect its essential security interests’, France has not, to our knowledge, relied on these provisions.

Ethics and anti-corruption

Private sector appointments

When and how may former government employees take up appointments in the private sector and vice versa?

The High Authority for Transparency in Public Life (HATVP) is responsible for controlling the new private activities of former ministers, former presidents of local executive authorities, and former members of independent administrative authorities. For a period of three years, any person who has held one of these positions must refer the matter to the Authority for consideration as to whether the new private activities are compatible with his or her former functions.

The HATVP checks whether the planned activity raises criminal or ethical challenges.

On a criminal level, it examines whether the proposed activity exposes the person concerned to a criminal risk (ie, article 432-13 of the Penal Code prohibits a former public official from working for an undertaking that was subject to the supervisory or control powers of that former official when they still performed public functions, with which it has concluded contracts or in respect of which it has taken or proposed decisions).

On an ethical level, HATVP ensures that the activity envisaged does not undermine the dignity, probity and integrity of functions previously held, and examines whether the activity would lead the person involved to fail to comply with the requirement to prevent conflicts of interest enforced on him or her during his or her former public service, in particular when that activity is carried out in the same economic sector. Finally, it checks that the activity does not jeopardise the independent, impartial and objective functioning of the public institution in which he or she has carried out his or her duties.

Depending on the risks identified, the HATVP may declare the activity incompatible or formulate the necessary reservations. The law provides that the HATVP may make public the opinions it issues after having received the comments of the person concerned and after having removed any information that infringes a secret protected by law.

Employees of the private sector who wish to join a public office are not subject to any specific regulation. They should, however, be mindful of any potential conflict of interest.

Addressing corruption

How is domestic and foreign corruption addressed and what requirements are placed on contractors?

Corruption consists of two main actions - passive and active corruption - each constituting a separate offence, made up of different elements.

The offence of passive corruption as conceived in the field of public procurement is punishable by article 432-11 of the Criminal Code. This article states that the offending conduct is divided into two distinct, but similar, offences: passive corruption and influence peddling. These offences have in common the quality of the person likely to commit them, that of the corrupt.

Active corruption is provided for under French law by article 433-1 of the Criminal Code. The persons likely to commit active corruption are the same as those concerned by passive corruption. Furthermore, to comply with France’s international commitments, the offences of foreign and international public corruption are provided for by articles 435-1 and seq of the Criminal Code.

With regard to related offences relevant to public procurement (eg, bribery, embezzlement and misappropriation of public property and funds, revolving doors between public office and the private sector (pantouflage), forgery and use of forgeries, fraud, concealment and money laundering), French law has fairly similar definitions, even if the sanctions regime is more or less severe. In particular, bribery is provided for by article 432-10 of the Criminal Code and is punishable by five years’ imprisonment and a fine of €75,000.

The Sapin II Law broadened the protection afforded to whistle-blowers. However, whistle-blowers are required first to inform their managers, then a public authority and, only as a last resort, the public media. Any abusive reports (ie, reports made in bad faith) will incur civil liability. Moreover, the French Anti-Corruption Agency (AFA) has developed recommendations to assist public and private entities in the corruption prevention process (Act No. 2016-1691 of 9 December 2016 on transparency (Sapin II Law, article 3-2°). The AFA published its Best Practice Guidelines on the prevention and detection of breaches of the duty of probity online in 2017. It particularly insists on the need for contractors to set up an ‘internal alert system’.

Lobbyists

What are the registration requirements for lobbyists or commercial agents?

Regulation of interest representation and lobbying, and of the professionals who undertake these activities was first introduced in French Law by Sapin Law II. This law entrusts responsibility for the implementation and management of a monitoring system to a specially created authority, the HATVP.

Since 1 July 2017, it is mandatory for interest representatives to be registered in a detailed numerical list overseen by the HATVP, where they must provide information on their organisation, lobbying activities and the resources allocated to them. A ministerial order of 4 July 2017 established the list of ranges relating to the detailed numerical list of interest representatives.

Limitations on agents

Are there limitations on the use of agents or representatives that earn a commission on the transaction?

In the public procurement sector, it is uncommon to use success-fee-based agents and intermediaries in a way that is comparable to other markets. In practice, some contractors use external assistance to help them understand the procurement process. They should, however, be mindful of any specific disclosure requirements. Registration may also be required where the agent’s activity falls within the requirements described in question 29.

Aviation

Conversion of aircraft

How are aircraft converted from military to civil use, and vice versa?

As military aircraft are designed with a certification basis that is very different from civil requirements, obtaining of a civil type certificate for military aircraft would often be too difficult and costly. Certificates of airworthiness can, nevertheless, be granted for specific use on a case-by-case basis. The process for obtaining a certificate of airworthiness is delegated to OSAC.

The conversion of civil aircraft for military purposes would require meeting the certification specifications set by military standards.

Drones

What restrictions are there on manufacture and trade of unmanned aircraft systems or drones?

Drones designed or modified for military use require a licence for Export from France (see question 22).

Civil drones will often be considered as dual-use goods and therefore be also subject to export control (see question 22). Indeed, civil drones often contain items covered by Category 6 of Annex I of EU Regulation 428/2009, such as infrared video cameras, lasers and other regulated parts.

Miscellaneous

Employment law

Which domestic labour and employment rules apply to foreign defence contractors?

There are no specific statutory employment rules that apply exclusively to foreign defence contractors in France. The parties can choose the governing law that applies to the employment contract. Nevertheless, to ensure maximum protection for the worker, the employee could not be deprived of certain mandatory provisions if he or she habitually works in France (including working time provisions, days off, paid holidays, minimum salary, overtime and rules relating to health and safety). Foreign employees temporarily seconded to France will also benefit from certain French labour legal requirements during the secondment. This will ensure that the secondment will not deprive the seconded employee of the rights they would have been granted under a French employment contract.

Defence contract rules

Are there any specific rules that contractors, foreign or domestic, are bound by in defence contracts?

The answers above provide the detail of the laws, regulations and policies applicable to defence contracts, most notably the CAC Armement and the technical note of the Legal Affairs Department of the Ministry of Finance dated 1 August 2019.

Do contractors avail themselves of these rules when they perform work exclusively outside of the jurisdiction?

If a contractor provides goods or services to the French government, the laws, regulations and policies detailed above will apply even if the work is performed outside France.

Personal information

Must directors, officers or employees of the contractor provide personal information or certify that they fulfil any particular requirements to contract with a government entity?

Companies will be asked to provide information about their directors and certain other employees as part of the pre-qualification questionnaire process, and will usually be required to sign different statements certifying that directors and certain other personnel have not been convicted of certain offences and that the contractor, or each member of the defence consortium, is not subject to the categories of exclusion provided for in articles L. 2341-1 to L. 2341-3 or articles L. 2141-7 to L. 2141-10 of the PPC. Moreover, any candidate for contracts where national defence secrecy is at stake must submit a file allowing his or her company to be authorised at the various levels of defence secrecy. In such cases, employees’ personal information would need to be provided to the Ministry of Defence so that relevant checks could be carried out.

Licensing requirements

What registration or licensing requirements exist to operate in the defence and security sector in the jurisdiction?

There are no specific licensing or registration requirements to operate in the defence and security sector in France. However, depending on the nature of the particular project and its degree of sensitivity, there are specific rules governing security clearances. In addition, under the terms of article L. 2331-1 of the Defence Code, war materiel, weapons and ammunition are classified into four categories (A to D). In this respect, the Internal Security Code provide for a specific regime for the detention of each category. Finally, as mentioned above, the production and trade of defence items is subject to the grant of a specific authorisation (see question 22).

Environmental legislation

What environmental statutes or regulations must contractors comply with?

In France, defence contractors will face different environmental legislation depending on their operations, product or service. They could be subject to regulatory restrictions in relation to as air emissions, water discharge, water pollution, noise and waste disposal, and face responsibility for electrical waste and electronic equipment and restrictions on hazardous substances within such equipment. Applicable requirements may also incorporate energy efficiency, carbon emissions and energy consumption. Contractors involved with nuclear substances are subject to a separate and additional set of environmental obligations, as well as strict nuclear waste disposal restrictions. Furthermore, France has a fairly elaborate framework for extra-financial transparency and declaration on corporate social and environmental responsibility. Several laws have introduced mandatory non-financial reporting for listed companies (2010 NRE Law, 2012, 2015 energy transition law and 2017). Defence contractors will also have to comply with social and environmental soft law rules governing their strategies and activities (article 1833 of the Civil Code as amended by the Action Plan for Business Growth and Transformation (the PACTE Law)). In addition, France looks set to deepen its legislative framework in this area by adopting a bill that will create a process for public certification of social performance and environmental issues.

Must companies meet environmental targets? What are these initiatives and what agency determines compliance?

In France, companies do not have mandatory environmental targets to meet. Meeting a standard of environmental and social responsibility is voluntary. Yet the harmonisation of methodologies, making the reporting exercise more streamlined, and working on accompanying guides are essential to ensure that the environmental impacts of companies’ activities are better taken into account.

Do ‘green’ solutions have an advantage in procurements?

French public procurement law takes into account sustainable development and environmental protection. In particular, the PPC allows environmental considerations as award criteria, provided they are related to the subject matter of the contract or to its conditions of execution (article R2152-7 of the PPC). The special conditions for the performance of an MPDS contract may, in particular, include elements of a social or environmental nature that take into account the objectives of sustainable development by reconciling economic development, protection and enhancement of the environment and social progress’ (article R2312-4 of the PPC).

Updates & Trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year

Key developments of the past year 41 What were the key cases, decisions, judgments and policy and legislative developments of the past year?

In the judgment of the European Court of Justice dated 19 December 2018, Case C-216/17, the Court has interpreted article 1(5) and the fourth subparagraph of article 32(2) of former Directive 2004/18/EC on public procurements of 31 March 2004 and has stated that a contracting authority may act on its own behalf and on behalf of other contracting authorities that are specifically indicated but are not direct parties to a framework agreement, provided that the requirements as to advertising and legal certainty and, consequently, those relating to transparency are complied with; and it cannot be accepted that contracting authorities that are not signatories to the framework agreement refrain from determining the quantity of services that may be required when they conclude contracts pursuant to the framework agreement or determine that quantity by reference to their usual requirements, because, if they do so, the principles of transparency and equal treatment of economic operators with an interest in the conclusion of that framework contract will be infringed.

In another judgment of the European Court of Justice dated 21 March 2019, Case C-264/19 concerning civil defence, civil protection and danger prevention services, the Court has interpreted the article 10(h) of Directive 2014/24 in these terms. First, that it precludes public aid associations recognised in national law as civil protection and defence associations from being regarded as ‘non-profit organisations or associations’, within the meaning of that provision, in so far as, under national law, recognition as having public aid association status is not subject to not having a profit-making purpose. Second, that organisations or associations whose purpose is to undertake social tasks, which have no commercial purpose and which reinvest any profits to achieve the objective of that organisation or association constitute ‘non-profit organisations or associations’ within the meaning of that provision.