1. Overview of French
Business Law
James Crowson

2. The Purpose of this Presentation
• To advise the Board about legal aspects of
conducting business in France.
– Legal risk avoidance
• Definition: legal risk arising from failure to comply with
statutory or regulatory obligations.
• We are liable and must anticipate new and
other laws when exploring the possibility of
expanding internationally.

3. Government and Political System
• France is a semi-presidential representative
democratic republic. Constitution of 5th
Republic, 1958.
• Executive power is exercised by President
Sarkozy and P.M. Fillon, May 2007
• It is a multi-party system (more than 20).
• Legislative power is vested in a bi-cameral
legislature, 346 senators and 577 deputies.
Source: Germain

4. The Origins of the French Legal System
• The basis of the French legal is the 1804 Code
Napoléon
• Rights and obligations of citizens, and the laws of property,
contract, inheritance, etc.
• Adapted from Roman and customary law.
• The Code Civil remains the cornerstone of French law
to this day, though it has been updated and extended
many times to take account of changing society.
Source: Fischer

5. The Nature of the French Legal System
• France has a system of "Civil law” not "Common Law.“ Civil
law systems are largely based on a Code of Law.
• Worldwide, common law forms the basis of the law in most
English-speaking countries, whereas Civil law systems prevail
in most of the rest of the world.
• Oral proceedings are far less important in France than in
common-law jurisdictions.
• Written submissions prior to the trial per se are much more
important.
• Cross-examination of witnesses does not exist and
furthermore there are no juries in Civil matters.
Source: Germain

6. Common Courts in France
• The principal courts which non-French plaintiffs
or defendants are likely to encounter:
– Tribunal d’Instance or Lower District Courts, court of
first instance.
– Tribunal de Grande Instance or Higher District Courts,
requires litigants to be represented by a French
Attorney.
– Tribunal de Commerce or Commercial Courts, only
deals with trade and commerce disputes.
– Cour d’Appel or Court of Appeals, appellate courts
– Cour de Cassation or Supreme Judicial Court
Source: Triplet & Associés

7. Operation of the Courts
• France’s legal system is known as inquisitorial, as
opposed to the adversarial system used in Common
Law legal systems.
• In court, the judge or judges arbitrate between the
prosecution and the defense, both of which are
generally represented by their lawyers, or avocats.
• The French judicial system does not have recourse to
juries except in criminal courts.
• If the case goes to appeal, the arguments of the
prosecution and the defense are taken over by appeals
specialists known as Avoués.
Source: Triplet & Associés

8. Litigation in France
• Procedure in French courts is carried out by
parties filing written submissions.
• Oral advocacy plays a relatively minor role in civil
litigation AND oral cross-examination of
witnesses does not exist.
• There are no juries whatsoever before the civil
courts and large scale damages are virtually
unheard of.
• French Lawyers have a monopoly on appearing
before the latter and claimants may not usually
appear in person before the TGI.
Source: French Law Publications Ltd.

9. Attorney Fees
• The losing party rarely has to pay a substantial amount to the other side in
regard to costs.
• Any early suggestion of settlement by non-French attorneys or those from
outside of France tend to be perceived that opposing counsel has a weak
case.
• Contingency fee arrangements are strictly forbidden by Statute.
– Disbarment in the event that solely on contingency fee agreement with a
client.
– A written fee agreement with the client set out in advance is permitted,
however.
• Few law practices bill according to time spent and the identity of the fee
earner. Litigators tend to bill according to the worth of the matter at suit,
the reputation of the Attorney dealing with the matter, the result
obtained, etc.
• The national hourly rate is between 220 Euros (255 $US) and 450 Euros
(521 $US).
Source: Triplet & Associés

10. Paralegal or Non-lawyer Functions
• Interfaces between staff based in France and the Legal
Department based in the United States for all contracts
and/or agreements.
• Responsible for overall contract management.
• Receives, consolidates and writes in both French and
English contracts or contract extensions, including
confidentiality agreements, consultant contracts, material
transfer agreement, equipment lease, and contract
development.
• Facilitates the negotiation process between customers,
suppliers and the legal department of the company.
• Negotiates contracts with suppliers.
• Trains new firm employees to contracts process in English.
Source: EXPECTRA France

11. Alternative Dispute Resolution
• French law has a strong policy favoring
international arbitration. This is reflected in a
number of ways:
– If despite an arbitration agreement a party brings an
action before a French court in relation to a dispute
arising out of the underlying contract, the court will
dismiss the action and invite the parties to refer their
dispute to arbitration.
– French courts will not interfere with the conduct of arbitral
proceedings. For instance, they will not issue injunctions
against the arbitrators or the parties.
Source: Bertrand and Ryde

12. ADR (Con’t)
– French courts have developed over the years an abundant
body of arbitration-friendly case law which is regarded to
be at the cutting edge of legal thinking.
– If we have contracts with French parties or with parties
having assets in France, providing for disputes with such
parties to be referred to arbitration is a valid choice.
– If we enter into an arbitration agreement, provided that
France is the seat of the arbitration is a safe course of
action.
Source: Bertrand and Ryde

13. French Corporate Law
• French business deals are traditionally influenced by
accounting and tax concerns, rather than legal issues.
• French legal authorities argue that their law relies on
principles and that a French contract will almost always
be much simpler than its equivalent common law
jurisdiction.
• In France, obtaining warranties from a seller of a
company or a business is an uphill struggle.
• Warranties are perceived to be Anglo-Saxon imports,
another onslaught of cultural hegemony from across
the water.
Source: Triplet & Associés

14. Opening a Branch Office in France
• A foreign company can do business in France
directly under its own name.
• The branch does not have its own legal
status.
• The branch must be registered with the Clerk
of the Commercial Court.
• It must file its accounts with the Clerk of the
Commercial Court on an annual basis.
• Taxation of profits generated in France are at
the corporate income tax rate.
Source: (PriceWaterhouseCoopers)

15. Creating a French Company or Entity
• The formation of companies in France is
generally considerably more complicated and
time consuming than in many Common Law
jurisdictions (Triplet).
• There is no such thing (currently) as an off the
shelf (or “shell corp.”) company in French Law,
or “Business-in-a-Box.”
• All types of companies require a minimum fixed
amount of share capital to be deposited and
temporarily frozen prior to formation.
Source: (PriceWaterhouseCoopers)

16. French Legal Entities
• Société Anonyme (SA)
• Société à responsabilité limitée (SARL)
• Société par actions simplifiée (SAS)
• Société en nom collectif (SNC)
• Société Civile (SC)
• Other entities
– “Société en commandite simple” (limited partnership)
– “Société en participation” (undisclosed partnership)
Source: (PriceWaterhouseCoopers)

17. French Tax System
• Types of French tax issues discussed
– Corporate income tax
– Tax exemptions
Source: (PriceWaterhouseCoopers)

18. French Tax System (con’t)
• Corporate income tax
– Corporate income tax
• Payable by joint stock companies (SA, SAS, SARL, etc)
and partnerships.
– Corporate income tax rate
• Standard rate: 33.3% of the taxable income.
• Reduced rate of 15% for small and medium-sized
companies.
• Plus a 3.3% social security contribution assessed on the
amount of corporate income tax.
Source: (PriceWaterhouseCoopers)

19. French Tax System (con’t)
• Tax Exemptions
– Young innovative firms get full exemption from
corporate income tax for 3 years and then a 50%
reduction for 2 years AND exemption from business
tax for 7 years for firms already existing as of or
created on January 1, 2004 through December 31,
2013.
– New firms get full, then partial exemption from
corporate income tax for 5 years for companies set up
in certain development areas AND exemption from
business tax for a period of 2 to 5 years.
Source: (PriceWaterhouseCoopers)

20. Employment Law
• General Information
– French Cultural Differences
• Ignorance of cultural codes can cause blunders which can
rapidly be regarded as rudeness
• They arrive at work between 9 am and 9.30 am
• They leave work as late as 7 pm
• Major disadvantage: France’s Rigid Labor Laws
• Hiring employees
– The legal duration of the work week is 35 hours.
– It is necessary in France to provide a written contract
of employment to all staff of whatever grade or level.
Source: République Française

21. Employment Law (con’t)
• Hiring employees (con’t)
– Contracts of employment are virtually always for an indefinite
term and specific agreements for short limited term
employment are tightly regulated.
– Limited term agreements may not be renewed more than once
otherwise they will be held to become Indefinite term
agreements.
• Dismissing employees
– In France it is not possible to hire employees "at will.“ Once you
have hired an employee, you may only dismiss them for a
specific reason.
• Employee Benefits
– At least 2.08 days per month, i.e. 25 week days per year
– Up to 2.5 days per month, or 30 working days per year
Source: French Law Publications Ltd.

22. References
• Bertrand, E., & Ryde, R. (2008, November 15). Dispute resolution in France: An overview for foreign lawyers. Retrieved
December 10, 2010, from Campbell, Philippart, Laigo & Associés:
http://www.parislaw.tm.fr/uploads/docs/Dispute%20resolution%20in%20France%20an%20overview%20for%20foreign%20l
awyers.pdf.
• Central Intelligence Agency (CIA). (2010, December 7). Europe: France. Retrieved December 10, 2010, from CIA World
Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/fr.html.
• EXPECTRA France: Group "w" Ranstad. (2010, December 10). PARAJURISTE (H/F) publié par EXPECTRA France Lieu :
Grenoble. Retrieved December 10, 2010, from Admincompta.fr ASA: http://www.admincompta.fr/emploi--PARAJURISTE-H-
F-Grenoble-EXPECTRA-France--218723-inline.html?cid=MSearchE_trovit.
• Fischer, S. (2006). Comparative Law: History of French law. Columbus School of Law. Washington, DC: The Catholic University
of America.
• French Law Publications Ltd. (2002). Litigation in France. Retrieved December 10, 2010, from French Law: The French Law
Resource: http://www.frenchlaw.com/french_litigation.htm.
• French Ministry of Foreign and European Affairs. (2008). The French Political System. Retrieved December 10, 2010, from
France Diplomatie: http://www.diplomatie.gouv.fr/en/france_159/institutions-and-politics_6814/the-french-political-
system_6827/index.html
• Germain, C. M. (2004). Cornell Legal Research Encyclopedia: French Law Guide. Retrieved 12 09, 2010, from Cornell Law
Library: http://library2.lawschool.cornell.edu/encyclopedia/countries/france.
• PriceWaterhouseCoopers. (2006, June 30). How to set up a subsidiary in France. Retrieved December 10, 2010, from
http://www.bordeaux-region.com/fr/: http://www.bordeaux-region.com/en/IMG/pdf/doing_business_in_france.pdf.
• République Française, Ministère du Travail, des Relations Sociale, de la Famille, de la Solidarité, et de la Ville. (2008, August
20). Mode d'emploi: Le temps de travail. Retrieved December 10, 2010, from Ministère du Travail, de l'Emploi et de la Santé:
http://www.travail-solidarite.gouv.fr/espaces,770/travail,771/dossiers,156/temps-de-travail,414/le-temps-de-travail-mode-
d-emploi,9179.html.
• Triplet & Associés. (n.d.). Retrieved December 10, 2010, from Triplet & Associés: French Attorneys and Counselors at Law:
http://www.triplet.com.