Publication of the Gauvain Report: First elements of protection of French strategic interests in response to the extraterritoriality of American justice

The report on extraterritoriality by Raphaël Gauvain, MP and lawyer, was published on 26 June 2019. It presents several recommendations aimed at modernising the protection mechanisms available to French companies confronted with extraterritorial laws, particularly those of the United States. 

The 1968 French blocking statute, which provides for a penalty of 18,000 euros and six-month imprisonment, currently offers only limited protection against US legal proceedings, as illustrated by the record fine of nearly $9 billion imposed on BNP Paribas in 2015. The blocking statute, which has seldom been applied in France – it gave rise to only one criminal conviction in France (Cass. crim. 12 déc. 2007, n° 07-83.228) – has not been recognised by the American federal courts as a legitimate obstacle to the implementation of a discovery procedure since a 1987 Aérospatiale Supreme Court decision (Société Nationale Industrielle Aérospatiale v. United States District Court for the Southern District of Iowa, 482 U.S. 522 (1987)).   

The first recommendation made by the Gauvain report aims to create a status for in-house lawyers to ensure the confidentiality of internal legal opinions, aimed at providing greater legal privilege protections under the laws of other jurisdictions, such as the US. This proposal seemed to be of interest to the Prime Minister, who said he was "ready to work on the confidentiality of certain legal opinions internal to the company". The main issue here  will be defining the scope of this protection as well as on the scope of its enforceability.

The report also suggests a modernisation of the provisions of the 1968 statute by creating a mandatory early warning mechanism, a dedicated support administration and a reinforcement of sanctions, increased to two-years imprisonment and 2 million euros for individuals, and 10 million euros for legal entities. 

Finally, the report recommends extending the effects of data privacy laws to data created by companies to make it possible to punish data controllers who have transmitted data from French companies to foreign authorities outside of the channels of administrative or judicial assistance, by an administrative fine of up to €20 million or 4% of worldwide turnover. 

In practice, the effectiveness of theses measures, if adopted, will meet certain limits. For instance, the proposed new legal privilege protections would only concern in-house legal opinions, which constitute but a small part of the documents generally transmitted to the US authorities in the course of their investigations. 

The Gauvain report also only briefly mentions employees’ or managers’ rights of defence in the context of compliance investigations – whether or not they are extraterritorial in nature. However, the current framework for these investigations remains incomplete and protections are limited: a thorough reflection on this issue therefore seems necessary. 

Please follow this link for a French language version of the Gauvain report.