FRANCE Trends and Developments Contributed by: Xavier Pernot, Pierre Linais and Pauline Vitte, Jeantet
This assessment actually requires proceeding with an economic analysis that will depend on each case. The doctrine currently states that two methods could be applied: • an accounting analysis that takes into account the company’s turnover or the salaries and bonuses of individual wrongdoers over the years of illegal practice; or • a counterfactual analysis assessing the differ- ence between the profit gained by the wrongdoer and the profit they would have gained had they respected their obligations. Capped amount and multiplier coefficient Article 1254 provides for a capped amount and a multiplier coefficient in assessing the civil penalty, as follows: • if the wrongdoer is a natural person, the amount of the civil penalty cannot exceed twice the profit realised; or • if the wrongdoer is a legal entity, the amount of the civil penalty cannot exceed five times the profit realised. The amount of the civil penalty can be substantial, particularly for legal entities, where it can reach up to five times the profit obtained. This significant multiplier coefficient ensures that the civil penalty serves as an effective deterrent against lucrative misconduct. Furthermore, the absence of a fixed limitation and the proportional nature of the civil penalty, combined with multiplier coefficients, make it difficult for wrongdoers to anticipate the exact amount they could be ordered to pay and therefore the net profit they might still Despite its broad applicability, Article 1254 contains procedural restrictions that may limit its effectiveness. Sanctions imposed upon request One limitation is the impossibility for the judge to resort to the civil penalty on his or her own initiative; it can only be imposed upon request from the public derive from the breach. Procedural limitations
prosecutor before judicial courts, or from the govern- ment before administrative courts. Neither the victim, any potential third-party funder nor the fund to which the sanction proceeds could be paid are admitted to request it. Private parties cannot initi- ate these proceedings. Whilst this limitation can be criticised, it is important to remember that the primary purpose of the civil penalty is to deter and/or sanction the wrongdoers rather than provide compensation, which explains why victims cannot request its application and why it cannot be Another limitation to Article 1254’s effectiveness is that it provides for a specially motivated decision by the judge to order the perpetrator of a lucrative fault to pay a civil penalty. Article 1254 does not provide guidelines to determine what constitutes a specially motivated decision, and because this is the first time such a requirement has been provided in obligations law, it could be seen as a procedural limitation. Some authors have expressed their surprise at this requirement but have explained it through the nature of the civil penalty: as the sanc- tion has a strong punitive character, it can only be pronounced through a specially motivated decision. Moreover, the express obligation for judges to provide reasoning for civil penalties is an essential guarantee of the right to a fair trial and involves the characteri- sation of lucrative misconduct and evaluation of the quantum, including quantification of illicit profit and particular circumstances justifying the multiplicative coefficient. Allocation and non-insurability Regarding the proceeds from the civil penalty, two elements must be noted. • Article 1254 specifies that the proceeds from these sanctions are allocated to a fund dedicated to financing class actions, thereby creating a self- reinforcing consumer protection mechanism. imposed on judicial initiative. Special motivation requirement
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