Focus on Regulatory Law – February 2014

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REGULATORY AUTHORITIES

Conseil Supérieur de l’Audiovisuel – Warnings are Not Sanctions
The Conseil d’Etat raised a priority matter of constitutionality before the Constitutional Council, regarding Article 42 of law n° 86-1067 of 30 September 1986 related to freedom of communication.

Article 42 is related to the warnings that the Conseil Supérieur de L’Audiovisuel (CSA), the Audiovisual Council, can give publishers and distributors of audiovisual communication services and satellite network operators, reminding them of their legal and statutory obligations. It states that these warnings are made public by the CSA and that they can be made either in response to issues raised by certain bodies and associations, or on the CSA’s initiative.

The question at hand was whether or not these warnings are similar to a sanction and, if they are, whether or not the application of Article 42 might lead to a breach of the constitutional principles of independence and impartiality as well as the rights of defence.

The Constitutional Council answered no on both points: The warning cannot be regarded […] as opening up the sanction procedure mentioned in Article 42-1, but is instead a preamble to it […] The warning by the CSA does not, therefore constitute a sanction that is akin to a punishment […] Subsequently, the grievances arising from lack of knowledge of the requirements of Article 16 of the Declaration of 1789 are void […] The contested provisions, which are not contrary to any right or freedom guaranteed by the Constitution, must be declared compliant with the Constitution.

Source: Decision n° 2013-359 QPC of 13 December 2013; CE 4 October 2013, Company ‘Les laboratoires Servier’, n° 356700

CSA – Evaluation of Candidate’s Loss of Earnings When Forced Out of a Tender Procedure
The background to this case is that the CSA rejected a tender presented by Vortex to broadcast the Skyrock radio service in 35 regions. After an appeal by Vortex, the State was instructed by the Administrative Court of Appeal of Paris to pay Vortex compensation of €320 million. This covered the costs incurred by Vortex in presenting its tender and its loss of earnings resulting from the illegal rejection of its tender in several regions where it had a serious chance of being selected.

The Conseil d’Etat ruled that Vortex should have been allowed to tender in order to satisfy the requirement that operators should be diverse and therefore avoid abuse of a dominant position. It also ruled that the Court of Appeal acted lawfully in deciding that Vortex had the right to compensation for loss of earnings because it was deprived of a real chance of being selected.

The Conseil d’Etat considered that the loss of earnings must be determined with regard to the net profit that Vortex would have made from the Skyrock frequencies. The Conseil justified its decision on the basis that it calculated the net profit…”from the turnover per inhabitant and per day, multiplied for each region by the local population and the number of days when it
had no available frequencies […] subtracted from the turnover the operating costs, particularly resulting from the costs of broadcasting and copyright taxes paid […] taking took into account the fact that, in the six regions in question, the percentage of the urban and young population, which formed the “target” public of the Skyrock programming, was less than that of the regions where the Skyrock programme is generally located and the turnover per inhabitant would therefore have been necessarily less for these six regions […] taking into account the fact that, at the time of the attribution of a new frequency in any one region, a programme requires communication costs for its promotion among the local population and cannot achieve right away an audience rating that is identical to the one it enjoys at national level”.

Source: CE 24 January 2014, CSA, n° 351274

CSA – Modification of the Sanctioning Procedure
Decree n° 2013-1196 of 19 December 2013, published in the Official Journal of 21 December, modifies the sanctioning procedure put into effect by the CSA when applying Article 42-7 of the law of 30 September 1986. This bill outlines the relationship between the CSA’s independent judge advocate (Rapporteur), who is in charge of the prosecution and examination, and the council, which hands down sanctions after the Rapporteur’s decision.

Source: Decree n° 2013-1196 of 19 December 2013 related to the sanctioning procedure put into effect by the CSA

ENERGY

Orders Not Yet Ratified – Departmental mining guidelines (SDOM) may prohibit opencast mining in a region, even where authorised by the regional planning authorities
The Conseil d’Etat has confirmed that an order that has not been ratified yet is not prevented from having effect. The order had introduced into the mining code Article L. 621-5, which French Guyana argued was contrary to Article L. 4433-7 of the General Code of Territorial Communities.

The Conseil d’Etat ruled: The provisions of Article L. 621-5 state that regional planning takes the SDOM into account […] These provisions imply that the SDOM may prohibit opencast mining in a region where the regional planning in force permitted opencast mining activity […] These provisions are legally valid, like those of Article L. 4433-7 of the General Code of Territorial Communities which, contrary to what the applicant maintains, are therefore not imposed upon them.

Source: CE 6 December 2013, French Guyana Region
n° 357249

Buy-Back of Wind Energy and State Aid – The French compensation mechanism for extra costs imposed upon companies in relation to the compulsory purchase of wind energy at an above-market price can constitute State Aid
The decision relates to a mechanism introduced by the law of 10 February 2000 that compensates suppliers for the extra costs incurred in relation to the obligation imposed on them to buy back wind energy at a tariff in excess of its market value. The Court of Justice of the European Union (CJEU) considered that the mechanism qualified as possible State aid because the compensation mechanism in question results from the law and that the advantage is granted directly or indirectly by means of taxpayer-funded resources.

The CJEU concluded that the compensation mechanism introduced by the law of 10 February 2000 does, therefore, constitute an intervention by means of State resources.

Source: CJEU of 19 December 2013, Association vent de colère ! and others, matter C-262/12

Indonesia – Indonesian Government Imposes Export Ban on Nickel and Bauxite
The Indonesian government recently imposed an export ban of the unprocessed ores, nickel and bauxite, which went into effect January 12, 2014. The ban is part of an initiative by the Indonesian government to force domestic miners to expand into higher value processing businesses instead of simply shipping raw materials to foreign buyers. Failure to comply with the ban could result in producer companies losing their licenses to mine. Affected parties, in addition to reviewing the wording of their supply contracts and any relevant charter party, should also consider the use of trade and investment treaty dispute resolution mechanisms.

Investment Treaty Arbitration

While the WTO dispute resolution mechanism can only be activated by a state, investment treaties allow an affected company to bring a claim before a neutral, international tribunal. In order to benefit from the protections offered by such treaties, the company must have an investment in the country that has implemented the ban. The substantive protections provided by investment treaties are (for the most part) similar, but any relevant investment treaty with Indonesia must be reviewed carefully as to whether it provides protection in the specific situation.

Where there is a breach of any of the substantive protection standards, a private investor may be able to initiate arbitration directly against the government:
See: Indonesian Government Imposes Export Ban on Nickel and Bauxite 30 January 2014, Carolyn B. Gleason, Dr. Sabine Konrad, Thomas Sauermilch

Iran Sanctions – Implementation of P5+1/Iran Nuclear Non-Proliferation Agreement
On November 24, 2013, the P5+1 (China, France, Germany, Russia, the United Kingdom and the United States) concluded a landmark six-month Joint Plan of Action (JPA) with Iran. The P5+1 have agreed to extend limited, reversible relief from current sanctions imposed on Iran. Implementation of the measures began on 20 January, 2014.

The United States has agreed to the following: Suspend efforts to further reduce Iran’s crude oil sales and suspend sanctions on associated insurance and transportation services; Not pursue new nuclear-related sanctions against Iran; Suspend sanctions on Iran’s petrochemical exports and associated services; Suspend sanctions imposed on Iran relating to gold and precious metals, as well as sanctions on associated services; Suspend sanctions on Iran’s auto industry and associated services; License the supply and installation in Iran of spare parts relating to flight safety for Iranian civil aviation and associated services, as well as safety-related inspections and repairs in Iran and associated services; and Facilitate humanitarian trade—i.e., sales of food and agricultural products, medicine, medical devices and medical services—via a new “financial channel.”

The recently promulgated U.S. government guidance and FAQs (January 20, 2014) make clear that, with the exception of civil aviation activities and the humanitarian financing channel, the relaxation of the specified sanctions by the United States applies only to conduct and transactions fully completed during the initial agreement period (January 20 – June 20, 2014) and only to sanctions on non-U.S. persons.

Under the JPA, as noted above, the P5+1 are establishing a financial channel to further facilitate the purchase of and payment for exports to Iran of food, agricultural commodities, medicine and medical devices, as well as medical expenses incurred abroad by Iranians.

The European Union has also agreed to the following specific forms of relief: Not to pursue new nuclear-related sanctions against Iran; To suspend certain nuclear-related sanctions targeting petrochemicals, gold and precious metals from Iran. In particular, the European Union has agreed to suspend the prohibition on the import, purchase or transport of Iranian petrochemical products.

The suspension also covers the provision of all related services, such as financing, insurance and reinsurance.

The European Union has, in addition, agreed to suspend the prohibition on trade in gold and precious metals with the government of Iran, its public bodies and the Central Bank of Iran or persons and entities acting on their behalf; To facilitate financial transfers for nonsanctioned trade with Iran, including humanitarian purposes, such as food and medicines via a new financial channel. The European Union has also agreed to allow more financial transfers (below an increased threshold) to be processed without authorization; and To suspend the prohibition on the provision of transportation and insurance services to third states importing Iranian oil.

See: Iran Sanctions-Implementation of P5+1/Iran Nuclear Non Proliferation Agreement, 23 January 2014, David J. Levine, Raymond Paretzky, Andrea L. Hamilton, and David Henry

CONTRACTS

Partnership Contract – Example of an Absence of Complexity
The Administrative Court of Appeal of Lyon has ruled that, under the terms of Section II. Article L. 1414-2 of the French General Local Authorities Code, “a partnership contract to fulfil a project can only be valid in particular circumstances defined by the law”. Such circumstances include the complexity of the project.

The Court has therefore ruled that the constraints invoked by a local authority in relation to the partnership contract at issue…“Are insufficient to characterise complexity, in such a way as the local authority was objectively not in a position to define the technical facilities that fulfilled its needs; neither has a case been made that the community was not in a position to establish the financial or legal framework of the project”.

In relation to the case at hand, the Court therefore ruled the contract be terminated.

Source: Administrative Court of Lyon, 1 January 2014, n° 12LY02827

Contract Authorising the Use of Public Land – Excluded third parties may appeal against all related and preceding acts
The Administrative Court of Appeal of Marseille has ruled that …“Other than in exceptional cases, as long as there is no legal or statutory provision or principle that requires a public body to publicise a procedure and open the contract for competition before issuing an authorisation to occupy public property or its outbuildings”, the ousted candidate is subsequently entitled to challenge all related measures that were taken prior to the signing of the contract.

Source: Administrative Court of Marseille, 26 November 2013, SARL Port Camargue Plaisance Service, n° 11MA01387

PUBLIC HEALTH

Pharmacies – Limiting Their Ability to Advertise is Not Unconstitutional
The provisions of Articles L. 5125-31 L. 5125-32 of the French Public Health Code leave to the regulatory authority the task of establishing the conditions under which pharmacies can advertise.

Having been notified of a priority matter of constitutionality by the Court of Cassation, the Constitutional Council judged that…“The legislator intended to place the profession, activity and establishment of pharmacists within a framework that encourages a balanced allocation of dispensaries over the whole territory, thus guaranteeing access by the entire population to the services they offer. This framework therefore pursues a public health objective. The task of establishing the conditions under which pharmacies and dispensaries may advertise, in order to allow the application of these rules do not prevent freedom of enterprise. The provisions do not in themselves affect any other right or freedom guaranteed by the Constitution.”

Source: Decision n° 2013-364 QPC of 31 January 2014

IN BRIEF

Public Services Right to Strike – Article L. 2512-1 of the French Employment Code applies to a company awarded a public service by a public tender
Articles L. 2512-1 and others of the Employment Code apply to all bodies that manage a public service. The Articles apply whatever the terms and conditions of or remuneration for providing the service, and regardless of the criteria under which the management was appointed by means of a public tender. Articles L. 2512-1 and others include the right to strike, provided the striking parties give five working days’ notice.

Source: CE 4 December 2013, M. B., n° 31667

Toxic Loans – Banks responsible for failure to honour duties of consultancy and information
On 28 January 2014, the County Court of Paris ruled the Royal Bank of Scotland (RBS) had failed to provide information and consultancy to the community of Metropolitan Lille (LMCU), to which the bank had granted “toxic”’ loans.

The court did not annul the rate exchange contracts RBS made with LMCU but it did honour LMCU’s requests for compensation on the basis of the bank’s failure to honour its duty to provide information, consultancy and safeguards. The judge particularly noted that these conventions were not suited to the needs of the LMCU.

As regards the compensation owed, the judge did not name a sum but instead invited the parties to cooperate, with a view to taking part in mediation. He did, however, state that “The damage resulting from [RBS’] failures to honour its duty to provide information and consultancy cannot be equal to the replacement value of the rate exchange contracts, but instead should reflect the opportunity LMCU lost to enter into more advantageous rate exchange contracts under better conditions, had it been better informed and […] advised”.

Source: County Court of Paris, 28 January 2014, Urban Community of Metropolitan Lille vs. The Royal Bank of Scotland PLC