France – Proposal for a bill transposing the EU Sanctions Directive and amending the French Customs Code

1 – A bill strengthening the enforcement framework

As the Bill¹ illustrates, amendments to the French legal framework are necessary to ensure the full transposition of the Sanctions Directive into French law. Article 459 of the French Customs Code already provides that violating EU restrictive measures is a criminal offence and sets out certain penalties, but the current wording of this provision does not adequately cover the range of conduct targeted by the Sanctions Directive.

The Bill maintains the prohibition under Article 459, but now provides more detailed wording that broadly reflects the requirements of the Sanctions Directive:

• In line with the Sanctions Directive, the Bill introduces notably broad definitions of concepts associated with EU restrictive measures, such as “asset freezes”;
• The types of conduct constituting breaches of EU restrictive measures are set out in a very detailed list. This list includes amongst others: (i) intentionally violating restrictive measures by making funds available to, or by failing to freeze the funds of, a designated person; and (ii) engaging in prohibited commercial transactions or providing financial services in connection with such transactions.
• It should be noted that the Bill does not include a EUR 10,000 de-minimis threshold, although this option was allowed under the Sanctions Directive.
• Circumvention of restrictive measures is specifically addressed, confirming that such conduct constitutes a criminal offence. However, circumvention appears to be limited to certain cases listed under the new Article 459‑2‑I of the Customs Code (e.g., concealing funds that should be frozen or failing to report frozen funds to the competent authorities).
• Violation of the conditions of an exemption granted by the French Treasury Department is treated as a violation of restrictive measures.

The Bill also provides for amendments to the Code on the Entry and Residence of Foreigners and the Right of Asylum to penalise the facilitation of the irregular entry, transit or residence of a foreign national in France in breach of an EU restrictive measure.

2 – Introduction of exemptions and reductions of penalties

The Bill provides for exemptions from, or reductions of, penalties in the event of self-reporting to the authorities.

However, the conditions for their application remain to be clarified as, unlike the provisions of the Sanctions Directive, they would apply only to the extent that such self-reporting has enabled “the prevention of the commission of the offence”.

3 – Enhancement of penalties

The penalties provided under the Bill would be as follows:

• For individuals: imprisonment for a term of five years and a fine ranging from the value of the goods concerned to twice that amount (increasing to ten years imprisonment and a fine of up to three times the value of the goods where the offence involves dual-use goods), together with the confiscation of the goods concerned or of goods constituting the direct or indirect proceeds of the offence.
• For legal persons: the penalties provided under Article 131‑39 of the French Criminal  Code (including prohibitions on carrying out certain activities and exclusions from public contracts or financial markets), together with a fine amounting to 5% of the legal entity's total worldwide turnover, or 10% where an offence is committed by an organised group. Where it is not possible to determine the fine based on the entity's turnover, an ultimate fine may reach EUR 40 million and EUR 80 million, respectively.

These penalties represent a significant change from the current French offence, which does not provide for fines based on a legal entity's turnover (the fine is currently set in proportion to the amounts involved in the violation).

It should be noted that these penalties would apply regardless of the type of conduct involved, whereas the Sanctions Directive does provide for the possibility of graduating penalties depending on the nature of the conduct.

4 – Creation of a non-intentional offence

The second major contribution of the Bill is that it would create a non-intentional offence by criminalising actions such as “trading, importing, exporting (…) goods, providing brokering services, technical assistance or other services relating to those goods, even where committed with serious negligence”, where such conduct constitutes a violation of an EU restrictive measure. In such cases of “serious negligence”, the penalties referred to above would be equally applicable. On this point, the Bill is stricter than the Sanctions Directive, which only required criminalisation on the basis of “serious negligence” where the transactions set out above are connected to “items included in the Common Military List of the European Union or to dual-use items”.

The Bill also provides for less severe penalties in cases of “simple” negligence, or in other words “in the absence of intent or serious negligence”². This provision reflects the Sanctions Directive, which required Member States to provide for the liability of legal persons in case of “lack of supervision or control”, although this notion is not included in the Bill.

Given the customs-related nature of the offence currently defined in Article 459 of the Customs Code, it was already impossible (at least in theory) for anyone to avoid criminal liability on the basis of the absence of intent unless they were able to demonstrate “good faith” based on the performance of reasonable due diligence. Under French law, the threshold to demonstrate good faith is highest for a professional (individual or an entity). Nevertheless, the explicit criminalisation of conduct resulting from “simple negligence” would provide a stronger legal basis for criminal proceedings.

This reinforces the need for French companies to implement an effective compliance programme in respect of EU restrictive measures. This concept of “serious negligence”, if maintained within the final version of the new French provisions, will have to be interpreted by both companies and criminal courts, navigating between the customs-related notion of “good faith” and the definition of a non-intentional offence under Article 121‑3 of the French Criminal Code.

In conclusion, the Bill represents a generally consistent transposition of the Sanctions Directive. However, it does not adopt the graduating approach to penalties depending on the nature of the criminal conduct, as suggested by the Sanctions Directive. Instead, the focus is placed on the deterrent effect of the sanctions, notably for legal persons, and on the criminalisation of cases of negligence, whether serious or simple.

5 – Timeline and next steps

The Bill is still subject to potential amendments by Senators and Representatives before its adoption (if adopted).

An adoption of the Bill is not expected for several months. Importantly, the examination of this Bill by the French Parliament has not yet been scheduled, and the related discussions may themselves require several months.

Closely monitoring the parliamentary proceedings will be necessary in order to anticipate the impact of this new law on the activities of French operators.

Authored by Jean-Pierre Picca,  Aline Doussin, Helene Luciani, Pierre Estrabaud, and Gabrielle Imbert.