A recent report by French MP Raphael Gauvain recommends reinforcing the protection of the economic interests of French companies by reforming the blocking statute and introducing a tax against GAFA companies transmitting data belonging to French companies to American regulators.

The question of protecting France's economic interests has been revived with the announcement of the publication of the so-called "Gauvain" report, which reminds that all foreign companies convicted of corruption in the United States in recent years are European and in particular French. No Chinese or Russian companies have been convicted. Faced with this situation, the report concludes that "French companies do not currently have the effective legal tools to defend themselves against legal actions brought against them, whether by competitors or foreign authorities," and contains several proposals to expand the French legal arsenal, including a reinforcement of the "blocking statute" and the taxation of tech giants (or more commonly known as GAFA) transmitting French data to US authorities.[1]

Towards a Reform of the ‘Blocking Statute?’

The "blocking statute" of 26 July 1968 (amended on 17 July 1980) prohibits any person, including French companies, subject to international treaties or agreements (in particular the Hague Convention of 18 March 1970) "from requesting, seeking or communicating, in writing, orally or in any other form, documents or information of an economic, commercial, industrial, financial or technical nature with a view to gathering evidence in or in connection with foreign judicial or administrative proceedings."

The prohibition, subject to a criminal penalty of six months’ imprisonment and a fine of €18,000, or approximately $20,200 (increased to €90,000, or approximately $100,900 for a legal entity), is designed to protect French companies against Anglo-Saxon discovery mechanism, which allows the litigant (who is sometimes an American competitor) or the US administration to request from the French company the disclosure of documents, including those that may have an economic value for the said company.

This legal provision has been seldom used in France (only one sanction imposed in 2007 on a French lawyer - Criminal Chamber, 12 December 2007, No. 07-83.228) and dismissed by the US Supreme Court in 1987, precisely on the grounds that it was not widely applied (Société nationale industrielle aérospatiale v. United States District Court for the Southern District of Iowa, 15 June 1987).

Noting the ineffectiveness of the current legal provisions, as French companies prefer to cooperate with the US public authorities rather than take the risk of losing access to the American market, the Gauvain report notably suggests reinforcing the blocking statute by increasing the above-mentioned penalty to two years’ imprisonment and €2 million, or approximately $2.24 million (€10 million, or approximately $11.2 million for a legal entity).

In addition, the report recommends that companies targeted by a foreign investigation be required to notify the Commissioner for Strategic Information and Economic Security (Sisse) so that the latter can determine whether the company can—or cannot—provide the requested information.

Towards a New Tax Against the GAFA?

The Gauvain report also recommends "the adoption of a law protecting French companies against the transmission by webhosts of their non-personal digital data to foreign judicial authorities." This proposal aims at countering the provisions of the American CLOUD Act,[2] which requires the GAFA to transmit to US judicial authorities, when they so request, all data stored abroad, including those belonging to French or European companies.

Faced with such a threat, the French government plans to impose a tax on the GAFA, which would be an extension of the administrative fine imposed under the GDPR[3], of 4% of their annual turnover, in the event of transmission of data from a French company to an American public authority, in cases other than those provided for by international conventions.

In addition, the tax would also be imposed on any intermediary who has access, stored, or hosted and transmitted sensitive data to US public authorities.

Of course, we will be closely following any legislative efforts to introduce the proposed reforms discussed above into law.

In any case, we would recommend being extremely cautious when addressing issues relating to the transfer of documents from France.