Corporate law

Paris Court of Economic Affairs (Tribunal des affaires économiques de Paris): entry into force of a new protocol for disputes on the merits

On 19 December 2024, the Bar, the Clerk's Office (greffe) and the Paris Commercial Court signed a new protocol relating to the introduction and scheduling of disputes on the merits, with the aim of reducing the average time taken to process these cases.

The protocol concerns the settlement of disputes on the merits (and not summary proceedings, claims and injunctions to pay) and will apply to new cases filed after its implementation, which is scheduled to take place in stages from 1 January 2025. Firstly, it aims to improve the organisation of the filing of cases by introducing a procedure for the scheduling of dates. As soon as this function is operational on the ‘digital court’, the date will be scheduled on the commercial court platform.

The case will then be placed at the clerk's office by electronic transmission (Word or PDF text format) or, if this is not possible, by filing the copy of the summons with the reservation number at the clerk's office.

The protocol also changes the way in which cases are instructed, where representation by a lawyer is mandatory, based on the provisions of articles 446-1 to 446-4 of the French Code of Civil Procedure. As soon as the case is introduced, the parties will be proposed an amicable way of resolving the dispute. In the absence of conciliation, the court will exempt the parties from attending subsequent pre-trial hearings and, after obtaining the opinion of the parties, it will set a calendar for exchanges depending on the complexity of the case. Subject to certain exceptions, the exchanges will have to take place electronically.

Corporate law

New provisions on amicable liquidation proceedings and transfer of company assets (TUP)

Amicable liquidation and universal transfer of assets (TUP) procedures are sometimes misused by fraudulent companies facing tax and social security reassessments, which they seek to elude.

To prevent such misuse, the decree of 7^th July 2024 makes it compulsory to publish the dissolution giving rise to a TUP procedure in the “Bulletin officiel des annonces civiles et commerciales” (BODACC) and to produce certificates of social security and tax compliance when closing the amicable liquidation procedure.

As a result, article 8 of decree no. 78-704 is amended to make it compulsory to publish the dissolution giving rise to a TUP procedure only in the BODACC and no longer in a legal gazette, in order to enhance the publicity given to the procedure and the information provided to creditors.

The text also amends article 10 of the same decree and article R. 237-7 of the French Commercial Code (for commercial companies) to make it compulsory to produce a certificate of social regularity and a tax certificate attesting that the accounts are fully updated when the amicable liquidation is closed, as part of this procedure, which takes place without the intervention of a judge. Although the company must not have any debts and must have enough assets to pay all its liabilities, there is no obligation to certify that, a situation that the decree seeks to correct with this new obligation.

These provisions will come into force on 1^st October 2024.

Corporate law

Conditions under which former members of a civil company (société civile) are held liable for the company's debts.

In a recent decision, the French Supreme Court (Cour de cassation) ruled that shareholders in a civil partnership who have transferred their shares may be held liable for the company's debts that became due and payable before the date of the transfer, without any need to justify unsuccessful legal proceedings against the company prior to that date.

Corporate law

General Meeting of a Société Anonyme: the failure to establish a quorum is not equivalent to a lack of quorum

The Extraordinary General Meeting of a Société Anonyme is deemed valid only if the shareholders present or represented hold at least one-quarter of the shares with voting rights on first call and one-fifth on second call (French Commercial Code, art. L. 225-96, para. 2). Resolutions adopted in breach of this rule are null and void (French Commercial Code, art. L. 225-96, para. 1).

The shareholders of a Société Anonyme requested the nullity of an Extraordinary General Meeting, arguing that the meeting officers had failed to ensure that a quorum was met.

Their claim has been rejected: only the adoption of resolutions by the Extraordinary General Meeting without respecting the quorum can lead to nullity; however, the plaintiffs did not argue that the quorum had not been met, but only that the officers of the meeting had failed to ascertain its presence.  

Corporate law

Alternative arbitration clause and attribution of jurisdiction: the court may be seized

In a recent decision, the Paris Court of Appeal stated that, in the event of an alternative clause providing for recourse to arbitration to settle disputes arising from the contract, while reserving the parties the option of submitting their dispute to the national court in the event of disagreement, the court may be seized to establish the existence of such disagreement.

Corporate law

Commercial agents unable to continue working for health reasons are entitled to indemnification

The In a recent decision, the French Supreme Court (Cour de cassation) ruled that in the event that a commercial agent terminates his contract for health reasons, he retains his entitlement to the contract termination indemnity, even if he is not completely unable to carry out any activity, as long as he can no longer reasonably pursue his activity as an agent.

Tax

Research tax credit (“crédit d'impôt recherche - CIR”): sub-contracted expenses can only be taken into account if they have been paid during the financial year

According to the Toulouse Administrative Court of Appeal, sub-contracted expenses can only be taken into account in calculating the research tax credit (“crédit d'impôt recherche – CIR”) in respect of a given financial year if they are actually paid in that same year.

Tax

Denial of tax exemption to non-residents is subject to the contradictory procedure

When non-resident contributors claim an exemption on the basis of a bilateral tax treaty in a letter attached to their wealth tax (“Impôt de Solidarité sur la Fortune – ISF”) declaration, the contradictory rectification procedure must be implemented (French Supreme Court 18-9-2024 no. 23-10.515 F-D).

Employment law

The duration of fixed-term contracts, even if discontinuous, is deducted from the trial period provided for in any permanent contract subsequently entered into.

In a recent decision, the French Supreme Court (Cour de cassation) has reiterated the conditions for the implementation of the trial period in the event of a succession of previous contracts, confirming its case law in this matter.

In particular, on expiry of one or more fixed-term employment contracts (CDD), the employee may be hired, without any delay, on a permanent contract (CDI) by the company in which he or she was working. In this case, the duration of the fixed-term contract(s) has to be deducted from any trial period provided for in the new employment contract (French Labor Code, art. L 1243-11, para. 3), even if the various contracts are separated by short periods of interruption. The deduction of the duration of previous fixed-term contracts from the trial period of the new contract is even more applicable in the event of new recruitment on a fixed-term contract following immediately successive fixed-term contracts. However, except in cases of fraud, the employer does not have to reduce the trial period if the new contract is for a different position requiring the employee to have different qualifications and skills.

Employment law

A recording made without the employer's awareness can be used to prove a work-related accident

The plenary session of the French Supreme Court (Cour de cassation) recently ruled that, in civil proceedings, the unlawfulness of obtaining or producing evidence does not necessarily mean that it should be excluded from the proceedings. The court must, when requested to do so, assess whether such evidence undermines the fairness of the proceedings as a whole, by balancing the right to evidence against the conflicting rights involved. The right to evidence may justify the production of evidence that undermines other rights, provided that such production is essential to the exercise of that right and that the violation is strictly proportionate to the aim pursued.

In a judgment of 6 June 2024, the Second Civil Chamber of the French Supreme Court applied this solution for the first time to disputes concerning work-related accidents. It approved the Court of Appeal's (Cour d’appel) ruling that an employee could produce an audio recording made without the knowledge of the director of the company with whom he had had an altercation, in order to obtain recognition both of the work-related nature of the accident resulting from this altercation and of the employer's inexcusable fault, after observing that the court had carefully balanced the director's right to respect for his private life and the victim's right to evidence.

Employment law

Repeated sexist comments by an employee are culpable and justify dismissal

An employee who repeatedly insults colleagues using mildly sexist language is guilty of misconduct justifying dismissal, regardless of the employer's past tolerance.

Employment law

No compensation for notice for an employee who refuses a change in working conditions

An employee who refuses a simple change in working conditions may be dismissed for misconduct. In this case, the employer may require that the notice period, if any, be performed under the new working conditions. An employee who refuses loses all entitlement to compensation for notice (French Supreme Court, Labour Division, 23-10-2024 no. 22-22.917 F-D, Association Essor c/ E).

Real estate law

Consequences of an ancient promise to sell: revocation and invalidity of the price

It is impossible for the promisor to withdraw from the unilateral undertaking to sell unless otherwise stipulated in the contract. Whether the price is too low is determined at the date of the unilateral undertaking to sell and not, as in matters of lesion, at the date of exercise of the option.

Real estate law

The seller's right to occupancy compensation is not conditional on absence of fault on his part

While the seller's bad faith does not deprive him of his right to restitution in respect of the occupation of the property sold after the invalidation of the sale, a purchaser acting in good faith only has to pay this value from the date of the claim (French Supreme Court 3^rd Civil Division 5-12-2024 no. 23-16.270 FS-B).

Real estate law

Legal standing for a non-professional creditor in a compulsory sale of the principal residence of a debtor in compulsory liquidation

A creditor with a charge over real property, to whom the declaration of unseizability of a property belonging to a debtor in compulsory liquidation cannot be set up against, may proceed with its sale on seizure. The non-professional creditor's right to bring an action is recognised because it is not an action to order the debtor to pay a sum of money prohibited by article L. 622-21 of the French Commercial Code (French Supreme Court, Commercial Division, 20 November 2024, F-B, no. 23-19.924).

The Grimaldi Alliance (GA) has achieved gender equality certification: an important milestone for GA, which demonstrates the firm's focus on gender parity in the professional services sector.

The certification was achieved in accordance with UNI 125:2022 practice, which defines the guidelines for a gender equality management system, and represents a significant recognition of the firm's proactive approach and relentless work to promote a work environment that is fair and respectful of gender diversity: culture and strategy; governance; human resources processes; opportunities for growth and inclusion of women in the company; gender pay equity; parental protection and work-life balance. The certification was obtained with the support of a team coordinated by Daniela Fioretti, partner and member of the Strategic Advisory Board.

Francesco Sciaudone, managing partner of Ga commented: "This certification reflects the work and commitment of our team in creating an inclusive and respectful environment, where gender differences are valued and celebrated. Grimaldi Alliance,' Sciaudone pointed out, 'has not only put inclusion at the heart of its growth strategy, it has also interpreted diversity as eliminating any difference in treatment, as wanting to make a difference, and as being different, in a professional services market that is too preoccupied with technology and too little with the human factor, which remains central for us. Ga is determined to maintain this commitment by continuing to develop initiatives aimed at Diversity and Sustainability, not only within the firm but also in the active support of its clients. In fact, Ga has set up a multidisciplinary team - with partners Maddalena Boffoli, Vincenzo Maurizio Dispinzeri, and Francesco Conti - in order to assist companies in their certification processes and, more generally, in adapting their governance to the principles of sustainability and management of ESG factors'.

• Legalcommunity.it 
• LaPresse.it 
• Corrieredellumbria.it 
• Romagnauno.it 
• Lacostagroup.it 
• Ntplusdiritto.ilsole24ore.com 
• Associatedmedias.com 

I would like to point out the recent judgment no. 3976 filed on 10/03/2023 (rg no. 13405/2020) whereby the Ordinary Court of Rome - X civil section rejected in its entirety the request by a company against which a bankruptcy order (hereinafter referred to as "Bankruptcy") had been made for the payment of substantial sums to a company controlled by the Ministry of Economy and Finance, which I assisted, as Principal, by way of consideration for the services under the relevant tender contract, plus default interest pursuant to Legislative Decree no. 231/2002.

First of all, the objection raised ex adverso, contested by our defence, concerning the alleged impossibility for my client, as Principal, to oppose to the Receivership the non-performance of the remuneration obligations of the company in bonis, with specific regard to the contract in question, was rejected.

In this regard, in upholding our defence, it was held that "bankruptcy does not entail a subjective change of the bankrupt, let alone its extinction, but rather represents a mode of administration entrusted to bodies responsible for managing the crisis and realising the aims that the bankruptcy law proposes. Among these, the main ones are the increase of the assets aimed at satisfying the creditors' claims and the safeguarding of existing assets. It follows that, albeit with some exceptions, pending bankruptcy proceedings, the bankrupt, in the person of the trustee, remains subject to the unexhausted relationships that arose prior to the filing. With respect to public contracts, the rule of continuity of legal relationships must be balanced against the nature of the activity. Firstly, Art 81(2) of the bankruptcy law specifies that, in the event of the bankruptcy of the contractor, if its subjective quality was a determining reason for the contract, the contract is dissolved, unless the principal nevertheless consents to the continuation of the relationship without prejudice to the rules on public works contracts. In this sense, there is no doubt that, in the context of a public tender, where the other party is an RTI, its qualities are decisive for the award. However, the Public Contracts Code itself, as amended in 2019 and applicable to the case at hand, is concerned with the continuity of the service, providing in Article 104 that the judge, in the judgment declaring bankruptcy, may authorise the receiver to temporarily exercise the undertaking if serious harm may result from the interruption. Moreover, the aforementioned provision states that, during the provisional exercise, pending contracts shall continue unless the liquidator intends to suspend or dissolve them."

That being said, in the present case, it was found that "the taking over of the bankruptcy for a limited period of time does not exclude liability for the obligations arising from the pending relationships of the company in bonis both because of the aforementioned principle of continuity and because the continuation of the company's activity appears to have been the subject of the specific will of the receiver and judicial authorisation and the same acted to be excluded only following the taking over of the new agent. This circumstance, which testifies to an effective continuation of the contractual services, makes it possible to further emphasise that, with reference to the employment relationships existing at the date of the declaration of bankruptcy, the regulatory system, in the absence of a specific provision, is oriented towards considering that the employment relationships continue with the company as such. Article 2119, paragraph 2, of the Civil Code, which provides that the bankruptcy of the entrepreneur does not constitute just cause for termination of the employment contract precisely by virtue of the survival of the entity at the declaration of bankruptcy, an institution appointed to manage it for liquidation purposes. Moreover, as pointed out by case law (see Cass. Civ. Sez. I, no. 18779/2019), even if the trustee does not opt for the provisional exercise of the company pursuant to Article 104 of the Bankruptcy Law, the legal asset of the company, understood as the set of material and legal elements organised for the purpose of running a business, remains because the mere cessation of the activity, for a more or less long period, does not in itself imply the disappearance of the company organisation".

On the basis of these premises, therefore, the Court held that the Trustee in Bankruptcy was identifiable as the debtor of the salary, contribution and social security obligations towards the former employees, as sustained by the defence of the Defendant assisted by me.

In view of the legal framework referred to in Article 1676 of the Civil Code and Article 29 of Legislative Decree 276/2003, considered applicable to the case at hand, the Court also found that the defendant's self-defence and good faith behaviour as a precautionary measure was legitimate, by suspending the flow of payments to the bankruptcy in the face of the bankruptcy's failure to fulfil its obligations in respect of the former employees' wages, contributions and social security contributions.

In this perspective, it was considered that the aforesaid breach by the performing contractor first and by the bankruptcy afterwards constituted, according to the will expressed by the parties, a hypothesis of serious breach. Moreover, although the client was entitled to proceed with payment by deducting the amounts paid from the amounts due to the other party, this right was not exercisable in practice since, as the Court correctly ascertained, it was apparent from the documents produced that there had been numerous unsuccessful requests for clarification as to the real extent of the unpaid salary and social security credits to the employees, nor had the plaintiff in its defence made this fact known or justified its failure to reply. The suspension of payments by the Principal was therefore not only lawful, but was also deemed necessary by the Judge in view of the concrete risk of claims against the Principal and the need to use public resources in addition to the amounts determined in the contract.

International Investment

Nearshoring in Mexico: Most Attractive Destination to Do Business in Latin America

Mexico has arguably emerged as the most attractive destination to do business in Latin America, surpassing Brazil, according to the KPMG 2023 M&A in Latin America Survey. Additionally, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) reports that Mexico has now captured 17% of foreign direct investment (FDI) to the region in 2022.

One of the key drivers behind this trend is Asian investment, as companies seek to relocate their supply chains closer to the US market amid the ongoing trade war between China and the United States. The phenomenon known as nearshoring is gaining momentum, and experts predict that it will continue to deepen in 2023. In fact, data from the Mexican Association of Private Industrial Parks (AMPIP) reveals that 63% of projects aimed at bringing production closer to the US market originate from Asian economies. China is the leading investor (49%), followed by Italy, Germany, South Korea, and Taiwan. The northern border region, including cities such as Monterrey, Ciudad Juarez, Saltillo, and Tijuana, has emerged as the most attractive area for companies, particularly in the automotive sector. Other dynamic industrial markets in non-border states include the Bajío, Mexico City, and Guadalajara.

The services and manufacturing sectors have been the primary beneficiaries of FDI, with the automotive sector, including parts and components, accounting for a significant portion of new investment in 2022. For example, Tesla recently announced that it will build the largest Tesla Gigafactory in the world in Nuevo Leon, Mexico, with an investment reaching 5 billion dollars. Mexico’s favorable investment climate, skilled labor force, and geographical proximity to North America is expected continue to attract significant FDI. However, to maximize this opportunity,
certain areas need improvement, such as energy policy, water supply, and crime reduction, according to BBVA analysts.

Dispute Resolution

Introduction of the New National Code of Civil and Family Procedures

On June 7th, 2023, the new National Code of Civil and Family Procedures was published, with the objective of standardizing procedures across the country, replacing all existing civil procedure codes.
The adoption of the new National Code will take place gradually, encompassing both federal and local governments, and is expected to be fully implemented by April 1st, 2027. This comprehensive Code will have a significant impact on court procedures, due to this Code serving as supplementary law for many legislations, including the Amparo and administrative procedures.

It aims to reduce judicial overload, expand the protection of human rights and vulnerable individuals, ensure fair and efficient access to justice, promote oral proceedings, and combat corruption.
Key changes introduced by the new code include:

a. Introduction of Summary Oral Proceedings: This fast-track approach allows for the completion of the entire legal process within a month. Hearings are recorded instead of maintaining physical files, enabling easy access to information. Only the final judgment can be appealed in these proceedings.

b. Special trials: Special oral trials are established to expedite matters such as insolvency, mortgages, real estate leases, and judicial registration of real estate.

c. Prioritization of alternative justice: The use of alternative dispute resolution methods, such as mediation and conciliation, is strongly encouraged.

d. Recognition of social changes: For example, uncontested divorce is now permitted nationwide, enabling couples to dissolve their marriage without justification in court.

e. Increased participation of Notary Publics: Notary Publics are expected to play a more active role in numerous procedures, particularly those related to voluntary jurisdiction, divorce proceedings, and inheritance trials.

To implement these changes effectively, the new code places great emphasis on the use of information technology in judicial proceedings. While some states had already begun adopting new technologies, the new Code now enables the recording of hearings, issuance of summons via email, collection of testimonial evidence, use of technology as evidence, video recording of procedures, and obtaining testimonies from minors.

Natural Resources

Mining Reform

On May 8th, 2023, a comprehensive mining reform, modifying various laws such as the Mining Law, National Water Law, General Law of Ecological Balance and Environmental Protection, and General Law for the Prevention and Comprehensive Management of Waste was published.

Its primary objective is to address the unsustainable exploitation of resources and labor in the mining sector, while reestablishing state control and safeguarding human rights, the environment, and indigenous territories.
Key changes introduced by the reform include:

a. Elimination of Preferential Treatment: The reform abolishes preferential treatment for mining activities, ensuring a level playing field for all participants in the sector.

b. Prohibition of Underwater Mining and Mining in Protected Areas: Under the new legislation, underwater mining and mining activities in protected areas are strictly prohibited to preserve the integrity of these vital ecosystems.

c. Removal of the Concept of “Free Land”: The concept of “free land” has been eliminated. Mining concessions, now limited to 30 years, will now be granted through public tenders. Additionally, a 25-year extension may be possible under certain circumstances.

d. Alignment of Water Concessions: Water concessions are now aligned with mining concessions. Moreover, there is an obligation to prioritize water supply for human consumption, ensuring the protection of this invaluable resource.

e. Recycling Obligations: Concessionaires are now required to recycle a minimum of 60% of the water granted for their mining activities. This measure aims to promote responsible water management and conservation efforts.

f. Social Impact Assessments and Indigenous Consultations: The reform introduces social impact assessments and indigenous consultations as mandatory prerequisites before commencing mining operations. These assessments will help mitigate the potential negative consequences of mining activities and ensure the involvement and protection of local communities and indigenous territories.

g. Criminal Offenses: The reform establishes criminal offenses for mining companies, providing a robust legal framework to hold them accountable for any violations.

h. Mine Closure Mechanisms: Mechanisms for orderly mine closure are introduced to ensure proper rehabilitation of mining sites once operations conclude.

Labor and Employment

Labor Reform: Senior Citizen Affirmative Action

On March 14th, 2023, the Senate (upper house) passed a bill that, pending approval by the House of Deputies, would modify the Federal Labor Law. The proposed change would require companies with over 20 employees to take affirmative action by hiring at least 5 percent of adults over the age of 60.
The proposed reform specifically addresses the discrimination and challenges faced by older adults in the labor market. Historically, they encounter difficulties in finding decent work opportunities and pensions, which often leads many to accept informal and precarious jobs, exacerbating the vulnerability of this group.

From approximately 15 million senior citizens in Mexico, 40% are economically active, and 70% of which work in the informal sector or are self-employed, hindering their access to social protection systems. In addition, close to 85 thousand are believed to be in active search of employment. The proposed changes align with the Mexican Constitution’s recognition of dignified work and protection of the rights of this vulnerable group, as it aims to create better job opportunities for older adults.

At the earliest, the bill would be discussed by the lower chamber in September. However, it’s important to note that the proposed reform does not include a transitional period for implementing the changes, and as it stands, would depend on the interpretation of the Department of Labor.