FRANCE Trends and Developments Contributed by: Thierry Laloum, Jordan Pontal, Julie Sarny and Gabin Dupont-Guianvarch, Willkie Farr & Gallagher LLP
adopted by the administrative authority, such as unilateral modifications or contract termination measures. The only exception accepted so far by the Coun - cil of State relates to action that seeks the rein - statement of contractual relations when faced with termination measures. This action can, if strict conditions are met, lead not to the annul - ment of the unilateral termination measure but to the reinstatement of contractual relations (Council of State, 21 March 2011, Commune de Béziers, case No 304806, known as the “Béziers II” case). Since the conditions for reinstatement of con - tractual relations are rarely met, the general rule is that challenging the performance measures adopted by the administrative authorities entitles the private contracting party to compensation only. However, for about ten years now, the Council of State has acknowledged that the terms for compensating damage suffered by a private contracting party can be determined by the pro - visions of the contract. Nonetheless, in compli - ance with the principle of prohibiting gifts, the contract must not provide for a significant differ - ence between compensation decided between the parties and the amount of damage suffered by the private contracting party. Prohibition of Gifts in Contractual Matters Since the Mergui case ruling of 19 March 1971, the Council of State affirms the public order pro - hibition that “administrative authorities can never be required to pay amounts they do not owe” . When applied to contract matters, this rule means that, if a contract is terminated for public benefit, the compensation clause cannot result
in any “manifest disproportion” between the amount of compensation and the harm suffered by the private contracting party (CE, 4 May 2011, CCI de Nîmes, Uzès, Bagnols, le Vigan, case No 334280). Incorporating the “manifest disproportion” between an indemnity clause and damage suf - fered to a gift was justified by the protection of public funds and also for practical reasons, with examination of only certain significantly dispro - portionate indemnities, even if these were con - tractual, to prevent any unnecessary intervention by the judge in the parties’ contractual relation - ships. This particular approach was overlooked by the Council of State the Grasse Vacances case of 16 December 2022, which ruled that an admin - istrative authority cannot grant compensation exceeding the amount of the damage suffered by a private contracting party, including lost profit and losses incurred. The reporting judge in the above case justified the case ruling primarily on the grounds of the need to ensure the proper use of public funds, which is a constitutional requirement. This new approach is frequently applied by the lower courts, and, due to the administrative authority’s exercise of extraordinary powers, makes it quite difficult for a private contracting party to seek compensation. Banning compensation that exceeds the dam - age suffered by a private contracting party results in compensation being systematically lower than the actual damage incurred. The dif - ficulty in practically calculating the exact amount of damage suffered, particularly lost profit, could lead the administrative authority to adopt the
127 CHAMBERS.COM
Powered by FlippingBook