In a decision that represents a triumph for bondholders, and should provide comfort to market participants, the Supreme Court of France (the “Supreme Court”) has recognized the trust structure and the parallel debt mechanism as part of security packages put in place for secured international financings granted to a French company.
A codification of existing legislation, the French Code of Civil Execution Procedures entered into force on 1st June past, both as regards its legislative provisions (Order 2011-21895 of 19 December 2011), and regulatory provisions (Decree 2012-783 of 30 May 2012).
The notorious law 91-650 of 9 July 1991 reforming civil execution procedures, together with its implementing decree 92-755 of 31 July 1992, were abrogated.
Decree n°2012-1190 dated 25 October 2012 (JORF n°0251 dated 27 October 2012) issued for the implementation of Law n°2012-346 dated 12 March 2012 sets out the rules for implementing conservatory measures within safeguard, reorganisation or liquidation proceedings.
New insolvency proceedings called “accelerated financial safeguard” (sauvegarde financière accélérée) were introduced into French law two years ago1.
On February 28, 2013, the Versailles Court of Appeals adopted two new Safeguard Plans for CMBS borrower, Heart of la Défense SAS (HOLD), and its Luxembourg parent company, Dame Luxembourg SARL (Dame). By doing so, it confirmed that HOLD and Dame, even though they are holding companies or SPVs, can benefit from Safeguard Plans in order to restructure their indebtedness.
(Cass. Com, Feb. 19, 2013, no. 12-13.662)
In the instant case, a lessee had been placed into receivership on September 27, 2010, and then into court-ordered liquidation on November 8, 2010. Subsequently, on December 28, 2010, the lessor had served the liquidator with notice of termination for nonpayment of the rents accrued since the opening of insolvency proceedings.
Introduction
Inspired by the American “prepackaged restructuring plan,” the French authorities have yet again decided to reform French insolvency law, with the creation of an “accelerated financial safeguard procedure” (procédure de Sauvegarde Financière Accélérée). This procedure is available to debtors who start conciliation proceedings after 1 March 2011.
In France, when bankruptcy proceedings are instituted against a party involved in a pending arbitration it can result in conflicts between the applicable arbitration and insolvency rules. In that context, an arbitral tribunal sitting in France may be confronted with determining the extent to which they must defer to mandatory insolvency rules.
When it comes to securing enforcement, it is worth thinking outside the box, and looking at what can be done overseas: the French procedure code offers to litigants the ability to obtain the Court's authorization to perform conservatory measures which freeze your debtor's assets, by way of security, for the ultimate enforcement and performance of judgments made in substantive proceedings.
On October 11, 2010, the French Parliament adopted a significant amendment to the 2005 French Safeguard Procedure (procedure de sauvegarde), itself heavily inspired by the US Chapter 11 mechanisms. The new legislation introduces into French law summary safeguard proceedings -named "Accelerated Financial Safeguard" (sauvegarde financière accélérée). It grants legal basis to so-called "prepack" restructurings, i.e., out of court arrangements agreed to by a majority of creditors before the debtor files for a Court-driven restructuring.