Litigation – Arbitration – Mediation
Non-compliance with payment deadlines, non-compliance with the deadline for signing written agreements between suppliers and distributors, non-compliance with telephone canvassing regulations, absence of compulsory information in BtoC general terms and conditions... these are all breaches that used to be punishable under criminal law, but are now punishable by administrative fines... Sometimes to the detriment of company directors.
Reminder of the system of criminal penalties
Since Act no. 92-683 of 22 July 1992 reforming the general provisions of the Criminal Code, it has been possible under French law for legal entities to incur criminal liability.
Initially limited to situations expressly referred to in the Criminal Code, the criminal liability of legal persons was extended in 2004 to all offences committed by their bodies corporate or their representatives, even where there is no express provision for this possibility.
Article 131-38 of the Criminal Code thus lays down the principle that "the maximum fine applicable to legal entities is five times the fine imposed on natural persons by the law that punishes the offence".
The possibility of bringing criminal proceedings against a legal entity does not, of course, prevent the director from also being prosecuted personally for the same acts.
However, one of the aims of extending criminal liability to legal persons was to "limit the liability of natural persons when responsibility for an offence is diluted and it would be unfair to place the burden of responsibility on one person or another" (amendment no. 275 submitted by Senator Fauchon on 30 September 2003).
This is why case law is more demanding when it comes to the criminal liability of a company director than when it comes to the liability of a legal entity.
In this respect, the circular relating to the entry into force on 31 December 2005 of the provisions of Law no. 2004-204 of 9 March 2004 generalising the criminal liability of legal entities reiterated the principles governing the cumulative liability of legal entities and their director(s):
"In the case of an intentional offence, the rule should in principle be that proceedings should be brought against both the natural person who committed the offence or was an accomplice, and the legal entity, if the offence was committed on its behalf by one of its organs or representatives.
On the other hand, in the case of unintentional offences, but also in the case of technical offences for which culpable intent may result, in accordance with the traditional case law of the Cour de cassation, from the simple failure to observe a particular regulation with full knowledge of the facts, prosecution of the legal entity alone should be preferred, and the natural person should only be held liable if personal fault is sufficiently established against him or her to justify a criminal conviction".
In other words, in the case of a simple failure to comply with a specific regulation, the director can only be held criminally liable if personal fault, distinct from that of the legal entity he represents, can be demonstrated. Otherwise, in principle only the legal entity can be prosecuted.
Penalties applicable in administrative matters
Things are very different in administrative matters. Penalties are imposed by the authorities (in this case, the DGCCRF) and not by a judge. It is only once the decision to impose a penalty has been made - and the administrative fine has been paid by the party concerned (whether an individual or a legal entity) - that the latter can have access to the courts by challenging the decision to impose a penalty before the competent administrative court.
As there is no equivalent in administrative law to the aforementioned article 131-38 of the Criminal Code, each of the articles of the Commercial Code or the Consumer Code providing for the possibility of imposing an administrative fine sets a penalty amount for natural persons and an amount - usually five times higher - for legal persons.
As a result, the administration seems to consider that it can choose to prosecute either the legal entity or its natural person director (or his delegate), without having to demonstrate, in the latter case, either the existence of intentional fault or any personal fault on the part of the company director or his delegate.
Several administrative courts and administrative courts of appeal have already validated this approach, holding that the provisions of the Consumer Code or the Commercial Code providing for the possibility of imposing administrative penalties "leave the administrative authority the choice of imposing the penalty either on the legal person in the name and on behalf of which the person responsible for the breach acted, or on the natural person, whether this be the manager of the legal entity or even one of its employees, who actually committed the breach, provided that this natural person is a professional within the meaning of the aforementioned provisions, that he acted within the scope of his duties within the legal entity and that he did not assert, particularly during the prior adversarial procedure, any particular circumstances likely to exonerate him from liability".
In other words, when the administration decides, without having to justify its decision, to prosecute the natural person rather than the legal entity (in particular when the latter is placed in collective proceedings), the only way for the said natural person to avoid paying a fine from his own funds is to provide a delegation of authority or to be able to demonstrate that he was not carrying out his duties during the period covered by the inspection (due to sick leave, for example).
It is therefore much more difficult for a company director to escape a personal conviction in administrative matters than in criminal matters.
Yet the government's stated intention, when the first administrative sanctions appeared in the Consumer Code, was indeed to "[align] the legal regime of these sanctions with that of the corresponding sanctions in criminal law" and to do so in order to guarantee, for the companies liable to be prosecuted as well as for their directors, "the necessary respect for the principles of criminal law" (Senate opinion on the consumer bill, report no. 792, submitted to the Senate Presidency on 23 July 2013).
There is therefore a clear discrepancy between the intention of the legislature - which is keen to offer litigants the same guarantees in administrative matters as in criminal matters - and the practical application made, both by the administration and by the administrative courts, of the texts providing for the imposition of administrative fines.
This discrepancy is a source of insecurity for company directors, who may at any time find themselves personally liable to pay administrative fines sometimes amounting to several tens of thousands of euros, against a backdrop of regulatory inflation that leaves them increasingly exposed.
It would therefore be useful to return to a reading of the texts that is more in line with the legislator's intention, so that company directors can only be held liable in the event of personal fault, including when administrative fines are imposed.