FRANCE Law and Practice Contributed by: Elodie Mulon, Jennifer Tervil, Romane Lemaitre and Emmanuelle Bonboire-Barthélémy, Chauveau Mulon & Associés
In the event of a dispute involving a fiduciary or foun - dation, damages may be awarded in the event of mismanagement and/or misappropriation of funds or breach of contract. Generally, in a wealth dispute, the loss is primarily economic, but moral damages may also be awarded in some cases. The amount of damages is set according to the sover - eign judgment of the trial judges. Under the principle of full reparation, common to both contractual and extra-contractual liability, damages must cover the entire loss without exceeding it. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The legal framework is particularly strict regarding fiduciaries, subjecting them to enhanced transparency requirements, including: • registration in the national register of fiducies (French Civil Code, Article 2020); • tax registration within one month of the establish - ment of the fiducie (French Civil Code, Article 2019); and • reporting obligations as part of anti-money laun - dering and counter-terrorism financing regulations (French Monetary and Financial Code, Article L561-2-2). Fiduciaries are also bound by strict conduct obliga - tions, notably the duty to act in the best interests of the settlor and must provide periodic reports on the management of the trust property (French Civil Code, Article 2022). Furthermore, fiduciaries are personally liable for any misconduct in the performance of their duties and are required to carry specialised professional liability insurance (French Civil Code, Article 2026). 6.2 Fiduciary Liabilities Under the principle of estate segregation, assets held in the fiducie may only be claimed by creditors whose
claims arise from the preservation or management of the fiduciary estate. If the fiduciary estate proves insufficient, the settlor’s personal assets may serve as collateral for those debts ‒ unless the fiducie con - tract stipulates otherwise, transferring all or part of the liability to the fiduciary. The contract may also limit the fiduciary’s liability strictly to the fiduciary estate. However, such a clause is only enforceable against creditors who have expressly accepted it (French Civil Code, Article 2025) Although the fiduciary estate is legally distinct, the fiduciary incurs personal liability for any misconduct, even absent fraudulent intent (French Civil Code, Article 2026). As a general rule, under French con - tract law, clauses that exonerate or limit liability are allowed. However, this is restricted by Articles 1170 and 1231-3 of the French Civil Code. Article 1170 provides that any clause depriving a party’s essen - tial obligation of its substance is deemed unwritten. Therefore, any clause that fully exempts a fiduciary from liability, particularly for poor asset management, could be considered contrary to the fiduciary’s essen - tial obligations and declared unenforceable. Article 1231-3 invalidates any clause limiting the number of damages in cases of gross negligence or wilful mis - conduct. 6.3 Fiduciary Regulation Under French law, fiduciary asset management is strictly regulated to ensure prudent, stable and settlor- aligned management. As noted at 6.1 Prevalence of Corporate Fiduciaries , the fiducie is subject to rein - forced tax transparency and numerous reporting obli - gations to combat tax evasion and money laundering. Only authorised professionals may act as fiduciaries, ensuring that the arrangement is carried out within a rigorous legal framework. Due to their regulated sta - tus, these professionals have a duty to provide proper advice and must act prudently and in the settlor’s best interests. Failure to do so may result in their personal liability being engaged. Furthermore, since a fiducie can be established for a maximum duration of 99 years (French Civil Code, Article 2018), it inherently promotes long-term asset
164 CHAMBERS.COM
Powered by FlippingBook