French Supreme Court Limits Scope of Nationality Based Jurisdiction

Articles 14 and 15 of the French Civil Code establish the jurisdiction of French courts where either the plaintiff or the defendant is a French national. The provisions date back to the original Napoleonic Code.

Although Articles 14 and 15 refer to obligations, the French supreme court for private and criminal matters (Cour de cassation) has extended its material scope to virtually all private law disputes, with only two exceptions: real property and enforcement proceedings. While nationality based jurisdiction could be justified for family disputes (as France relies on nationality as a connecting factor for choice of law purposes), it is widely considered as an exorbitant rule of jurisdiction outside this field, in particular in commercial matters. This explains why it was singled out by the Brussels instruments which have long identified them as the French (and Luxembourg) exorbitant rules which are specifically excluded in civil and commercial matters where the defendant is domiciled within the EU, or in territories covered by the Lugano Convention.

Remarkably, the French supreme court had ruled that Articles 14 and 15 applied in insolvency matters. This enabled French creditors to initiate insolvency proceedings in France against debtors which had barely any connection with France. The Court has ruled otherwise in a judgment of 12 June 2024.

Background

The case was concerned with a French-Lebanese dual national who had deposited monies in a Lebanese bank. As the bank refused to pay him back the monies, the client eventually initiated insolvency proceedings in France against the bank. According to the judgment, the Lebanese bank had no presence or interest in France.

The bank challenged the jurisdiction of French courts.

Judgment

The French supreme court confirmed the decision of the lower courts which had declined jurisdiction.

The Cour de cassation started by insisting on the purpose of insolvency proceedings, which is to maintain the economic activity of the debtor. The court explained that this is so not only for reorganisation proceedings, but also for liquidation proceedings, which can result in a sale of the business.

The court then gave the main reason for its judgment. The purpose of insolvency proceedings goes beyond the private interest of the creditor who might have the power to initiate them. Insolvency  proceedings should thus be excluded from the scope of Article 14 of the Civil Code.

Assessment

The reasons given by the court are not fully convincing. While it is true that liquidation proceedings may lead to a sale of the business and thus a continuation of the activity of the debtor, they may also, and indeed in practice very often lead to a mere liquidation of the business.

Resorting to Article 14 of the Civil Code to initiate insolvency proceedings was, in practical terms, a way to favour French creditors, who are in most cases local creditors, and to ensure that they could be paid over assets situated in France. As proceedings opened on this jurisdictional ground were unlikely to be recognised abroad, they served the purpose of opening local and territorial insolvency proceedings. It is unclear why this advantage for French creditors has now disappeared.

It may be, then, that the judgment signals the willingness of the court to revisit the material scope of nationality based jurisdiction. A number of French scholars advocated (decades ago) to subject the rule to a proximity test, fearing that the European Court of Human Rights might rule so on the basis of Article 6 of the European Convention. The judgment follows another path, which is substance specific.