учебный год 2023 / Chalhoub, Study of The French Law of Security Interest on Movables

creation of a national registry for the fiducie.182 In one article, it is confirmed that the fiducie is opposable against third parties at the date of the agreement, in the second article, there is a national registry. This registry has not been of day yet, and the law does not explain its raison d’être.Is the registration optional or obligatory? In any event and whatever was the rationale - or lack thereof-, the inconsistency between these 2 texts makes of the fiducie as a security a secret lien.

Moreover, the ad validitatem registration of the agreement within 30 days of its date

provided for in Article. 2019 C. civ.,183 which was mainly foreseen by the French legislature to avoid tax evasions, still allows the secret lien at least during the one month period provided for registration.

At the difference of the common law trust, the fiducie gives rise to a transfer of property of specific nature. It does not confer a right in rem, but instead, it confers a “contractual property of limited nature,” since it is exclusively exerted for the finalities of the contract of fiducie and constitutes for the trustee a separated assets protected from the potential claims of his

creditors.184

182Art. 2020 C. civ.: “A national registry of fiducies is constituted according to the modalities provided for in a decree en Conseil d'Etat.”

183Art. 2019 C. civ.: “Under the sanction of nullity, the fiducie agreement and its addendums are registered within one month of their date at the tax services having jurisdiction at the trustee’s head office or at the tax services of non-residents if the trustee is not domiciled in France.”

184Adelle, supra note 171.

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d. Effects

Until the maturity date, the trustee has the most extended powers over the secured

receivable.185 But, at the maturity date, and in case of the payment of the debt, the trustee has to return the secured receivable. However, in case of non-payment, the property of the receivable will be transferred permanently to the trustee who has to claim payment of the assigned debtor on behalf of the beneficiary. Article 2372-3 paragraph 2 C. civ. states that: “when the trustee is not the creditor, the creditor can require the retrieval of the good that he can freely dispose of or, if foreseen by the fiducie agreement, sell the good or the assigned right and the restitution of the price or a part thereof.” In case of discrepancy between the amount of the transferred receivable and the amount of the secured receivable, the creditor shall return to

the settlor an amount corresponding to this difference.186

e. The rechargeable fiducie

Article 2372-5 C. civ. states that:

“The assigned property in application of Article 23 72-1 C. civ. can be subsequently allocated to the secure debts other than those mentioned in the constitutive agreement provided that it expressly provides for this.”

The settlor can therefore offer it in security, not only to the original creditor, but also to a new one, although the first one has not been paid yet. This property cannot then be allocated in security of a new debt except in the limit of its value estimated at the date of recharge.

185Art. 2023 C.civ.

186Art. 2372-4 C. civ.

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Under the sanction of nullity, the recharge agreement established in accordance with the provisions of Article 2372-2 C. civ. is registered according to the form provided for in Article 2019 C. civ. The registry date determines the rank of the creditors.

The provisions of the present article are of public order and any contrary clause is deemed not written.”

B. The assignment Dailly as a security interest

The law n° 81-1 of January 2, 1981 known as the law Dailly had an objective to facilitate

the credit to the companies and simplify the assignment of what is known as “professional” 187

receivables by providing for a modern and efficient substitute of the bill of exchange.188 The legislator did not differentiate between the regimes of the mere assignment of professional receivables and their assignment as a security interest, leaving it for the doctrine and the jurisprudence to determine it.

In 1984, a new law amended some dispositions the law Dailly and introduced a new article (now, Article L. 313-24 C.M.F.) that states: “Even when it is effected as a security and without stipulation of a price, the assignment of receivables transfers title of the assigned receivables to the assignee,” which leaves the assi gned receivables outside bankruptcy

proceedings of the assignor after the assignment.” 189 The Cour de Cassation has confirmed in a decision of November 22, 2005 that the transfer of property to the assignee is only temporary

187See below the section related to the scope of assignment Dailly.

188Jean Stoufflet, Cession et Nantissement de Créances par Remise d'unBordereau: Loi Dailly du 2 janvier 1981 [Assignment and Pledge of Receivables by Delivery of an Advice Note], JurisClasseur Banque – Crédit – Bourse. Fasc. 570: (Cote: 02,1997).

189Hubert, supra note 121 at 180.

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and implies the restitution of the assigned receivable once the secured receivable is totally

reimbursed.190

The assignment of professional receivables by virtue of an advice note bordereau was introduced in the French law with a limited sphere of application.

a. Scope of application

The law Dailly has been inserted in the Monetary and Financial Code under Articles L.313-23 et seq. Article. 313-23 C.M.F. specifies that the assignment Dailly exclusively concerns a 1)“credit” extended by a 2) “credit inst itution” to a 3) “private-law or public-law company or to a natural person for use in connection with his business activities,” by the means of an advice note submitted solely by the 4) “benef iciary of the credit,” of any 5) “debt which it may hold on a third party private-law or public-law company, or natural person if it relates to his

business activities.” 191

Therefore, the assignment as a security interest through the advice note Dailly can only be connected with receivables of professional origins when they are maintained against a natural person.192

Article L. 313-23 C. mon.fin. specifies that “cash claims which are due and payable may be assigned or pledged.” Also, “receivables resulti ng from a deed which has already been

190Cass. com., Nov. 22, 2005, n° 03-15.669. available at http://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT00 0007050889&fastReqId=142759720&fastPos=1 (In French). (last visited on May 14, 2009).

191Art. L. 313-23 C. mon.fin. “Any credit which a cre dit institution extends to a private-law or public-law company, or to a natural person for use in connection with his business activities, may give rise to the assignment or pledge by the beneficiary of the credit of any debt which it may hold on a third party privatelaw or public-law company, or natural person if it relates to his business activities, for the benefit of that institution, by simply submitting an advice note.”

192Lasbordes - De Virville, supra note 174.

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executed, or which is yet to be executed but whose amount and due date are not yet determined, may also be assigned or pledged.” This includes fut ure professional receivables.

The same advice note can serve as a vehicle for the assignment of several professional receivables, thus it offers a considerable advantage over the bill of exchange which can only

serve one receivable (or several receivables with the same due date) over the same debtor.193

Outside this scope, the assignment Dailly cannot be applicable.194

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receivable to which the query relates is included in the global amount shown on the advice note.

A document from which one of the above indications is missing does not constitute a valid deed of assignment or pledge of professional receivables within the meaning of Articles L. 313-23 to L. 313-34.”

The advice note constituting the “assignment of pro fessional receivables” is also to be signed by the assignor, “the signature is affixed e ither by hand, or by any non-manual process.”

And the date should be affixed by the assignee,195 in order for the advice note to create its effects

between the parties and against third parties.196

The omission or lack of precision of one of the above indications would lead the court to disqualify the agreement which won’t “ constitute a valid deed of assignment or pledge of

receivables within the meaning of Articles L. 313-23 to L. 313-34 C.mon.fin..” 197

The parties should clearly mention in the agreement (eventually in the advice note) that the assignment is only done as a security interest, and it is indispensable that they precisely mention the secured receivables present or future. They should also fix the conditions of re-

assignment after the extinction of the secured receivable.198

c. Perfection

It takes effect between the parties and becomes opposable against third parties at the date indicated on the advice note when it is submitted, regardless of the date of creation, maturity date

195L.313-25 C. mon. fin.

196Stoufflet, supra note 188.

197Last paragraph of art. L. 313-23 C. mon. fin.

198Stoufflet, supra note 188 at 48.

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or due date of the receivables, without any other formality or registration being necessary.199

Consequently, the assignment Dailly is a secret lien.

The notification of the debtor of the assigned receivable envisaged in Article. L. 313-28 C. mon. fin. is conceived as a protection for the credit institution that can put the debtor on notice against paying to the assignor. In case of notification, the debtor may only validly settle his debt

to the credit institution.200 It results that in case the credit institution do not opt to notify the debtor of the assigned receivable, the assignment will remain secret.

d. Priority of creditors

In case of contest of two assignees of the same receivable, the beneficiary of the senior

advice note has priority.201 Such is the case when the same receivable is included in more than

one advice note, 202 or when the receivable was subject to a professional assignment and to a

factoring… 203 Note however, that the multiple assignment of the same receivable could amount

to a criminal swindle.204

Conversely, in case of contest with a beneficiary of a clause of retention of title, the beneficiary of a junior professional assignment will not be able to obstruct the right of the senior beneficiary. The court of cassation had the chance to decide on this matter when a supplier

199Art. L. 313-27 C. mon. fin.

200Art. L. 313-28 C. mon. fin.

201Stoufflet, supra note 188 at 78.

202Cass. com., July 5, 1994, Bull. civ. IV, n° 251.

203Cass. com., Jan. 3, 1996, JCP G 1996, II, 22682.

204CA Paris, 9e ch. A, Nov 12, 1990.

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benefited from a clause of retention of title on some delivered and unpaid goods by the buyer who resold the goods and went insolvent. The court ruled that the assignment of receivable by

the buyer does not prevent the claim of the goods by the supplier.205

2.1Comparative chart between the types of assignment of receivables under the French law: Dailly and the Fiducie

205Cass. com., June 20, 1989, D. 1989, p. 431 available at http://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT00 0007022790&fastReqId=369685811&fastPos=1 (In French) (last visited on May 14, 2009).

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Chapter 3: Retention of title as a security

Before the reform of 2006, the retention of title as a security was only regulated by the

French law in the case of insolvency of the debtor (Book VI of the Code de commerce).206 The

Grimaldi group proposed to acknowledge and regulate it in the Civil Code.207 Consequently, the

Order n° 2006-346 of March 23, 2006 added a Chapter IV t o the new Book IV entitled “Of the retention or cession of title as a security” and it s Section 1 (Articles 2367 to 2372 of the Civil Code) deal with the “retention of title as a securi ty.”

As pointed out by Mr. Pierre Crocq, the new articles adopt what the case law has already

decided concerning the legal nature and the effects of the retention of title.208 Article 2367 C. civ. provides that:

“Ownership of a good may be retained as security by a clause of retention of title which suspends the transferring effect of a contract until full satisfaction of the underlying obligation.

Ownership so retained is the accessory of the debt whose payment it secures.”

Thus, the clause of retention of title can be inserted in any type of contract, it can suspend the transfer of the ownership and, contrary to the German retention of title, it cannot guarantee

obligations other than the one constituting the counterpart of the transfer of ownership.209

206Pierre Crocq, Sûretés mobilières: Clause de réserve de propriété[Movable Security interests: Clause of Retention of Tilte], JurisClasseur [J.C.P.] Civil Code Fasc.Unique. Art. 2367 à 2372 (Cote: 01,2008) at 22. (Fr.).

207Grimaldi, supra note 5 at 14-15.

208Pierre Crocq, Présentation de la Réforme Des Sûretés: La Réserved Propriété[Presentation of the Reform of the Security Interests: The Retention of Tilte] JurisClasseur Civil Code Fasc. 10.Art. 2284 à 2488, (Cote: 05,2008), at 125 et seq.

209Id. at 127.

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German clause may secure obligations and debts that have not arisen from the transaction where the obligation is secured with the retention of title.

Moreover, according to Article 2372 C. civ., “The r ight of ownership is extends to the debtor's receivable with respect to a sub purchaser or to the indemnity of an insurance policy which is subrogated to the property.”

a. Scope of application

The clause of retention of title initially started with the contracts of sale, but is now

accepted with any type of contract,210 notably in a service agreement as ruled by the cour de

cassation in 2001211 and 2003.212 In 2001, an appeal was made to the commercial section of the cour de cassation by a company (Bail equipement) against the decision of the court of appeal which directed it to return movables that it purchased from a company (Bio-alternative) to the manufacturer (Ateliers de Nissan) who benefited from a clause of retention of title on these movables. The appellant contended that the clause of retention of title is not valid as the agreement between Bio-alternative and Ateliers de Nissan is a service agreement. The cour de cassation ruled that a clause of retention of tile can be contained in a service agreement.

210Art. 2367 C.civ.: “Ownership of a good may be reta ined as security by a clause of retention of title which suspends the transferring effect of a contract until complete payment of the countervailing obligation.”

211Cass. com., May 29, 2001, Juris-Data [n° 2001-0100 18.]

212Cass. com., Nov.5, 2003, Juris-Data [n° 2003-02080 6.]

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