3.2.1.2. Regulatory Authorities

Traditionally, the courts have taken a restrictive view of liability actions against public authorities exercising a regulatory function.³⁷⁹ So, faute lourde has been required for claims in respect of diverse regulatory activities including the supervision of public companies,³⁸⁰ social security offices,³⁸¹ and friendly societies.³⁸² In many areas of regulatory activity, the standard of faute lourde applied by the courts has been very high: seriously negligent conduct has been required.³⁸³ Regulatory bodies have rarely been found to have been negligent enough to have committed a gross fault.³⁸⁴

Despite the traditionally restrictive notion of fault in this sphere, a move away from the uniform application of faute lourde was made. This initially occurred in linked areas of administrative activity, such as public health protection.³⁸⁵ There was then evidence of change in the supervisory or regulatory sphere, with courts allowing liability on the basis of faute simple. The first such case may be explained by its subject matter, involving the government's failure to supervise adequately the blood provision service.³⁸⁶ But certain authors saw the inception of a trend,³⁸⁷ and other decisions followed suit in reducing the fault level to faute simple: the alleged negligence of the maritime supervision board in issuing seaworthiness certificates;³⁸⁸ the supervisory activities of the Office National des Fôrets.³⁸⁹

(p.109) However, a series of decisions has stopped this seemingly ineluctable progression of faute simple in its tracks. First, the Conseil d'Etat overturned two decisions of the lower courts which had ushered in the standard of faute simple in respect of the state's supervisory jurisdiction concerning the legality of the decisions of local authorities.³⁹⁰ Then, in a third and highly significant decision, the plenary chamber of the Conseil d'Etat examined the standard of fault applicable to the sphere of state banking supervision. In Kechichian, depositors brought an action against the state alleging that the Commission Bancaire had failed to supervise properly a bank, the United Banking Corporation, thereby contributing to its failure and the consequent loss of their deposits. The Cour Administrative d'Appel de Paris found in favour of the claimants,³⁹¹ reiterating the principles enunciated in an earlier decision concerning the Bank of Credit and Commerce International,³⁹² in which it had abandoned the traditional prerequisite of faute lourde and decided that the standard of faute simple applied to the supervisory role of the Commission Bancaire. An appeal was made to the Conseil d'Etat. In an extremely significant judgment, the Conseil d'Etat overturned the Cour Administrative d'Appel's decision on the standard of fault.³⁹³ The claimants needed to show that the Commission Bancaire had committed a faute lourde in its supervisory activities. Nonetheless, the Conseil d'Etat upheld the lower Cour Administrative d'Appel's finding of liability. The Commission Bancaire's failure to act decisively to ensure that the bank was re-capitalized within a short space of time,³⁹⁴ and its willingness to backtrack on initial requirements amounted to a faute lourde. However, as the ‘principal’ causal contributor of the bank's failure was the fraudulent activities of its directors,³⁹⁵ the Conseil d'Etat held the state solely liable for the part it played in the failure of the bank, which was held to represent ten per cent of the lost deposits.

It is reasonable to assume that faute lourde will continue to apply in damages actions concerning all of the various financial regulators.³⁹⁶ (p.110) However, in the general sphere of regulation, there are cases in which faute simple will still apply.³⁹⁷ The administrative courts thus seem to apply a dual regime: in some cases the proof of faute simple would seem to suffice, in others the higher level of faute lourde has been maintained.

It is also appropriate to mention the liability of tax authorities at this juncture.³⁹⁸ From a position of near-immunity, the courts have diluted the required level of breach in claims against the tax authorities to the present variegated application of faute lourde and faute simple.³⁹⁹ The present position in the tax sphere is that faute lourde will in principle apply when operations of tax assessment or recovery are subject to a claim in responsabilité administrative.⁴⁰⁰ However, faute simple will suffice if the impugned act ‘did not involve particular difficulties relating to the assessment of the financial position of the tax payer’.⁴⁰¹