Powered by Smartsupp

Call Us + 33 1 84 88 31 00

French law on precautionary attachment of assets

French law on precautionary attachment of assets

In France, when a creditor has difficulty in obtaining payment, he generally proceeds, before any litigation on the merits, to a protective (precautionary or interim) attachment (or seizure) (the exact term in French is “saisie-conservatoire“, which means literally “conservatory seizure”) of his debtor’s assets, as a means to exert pressure on the debtor to obtain payment.

What is a precautionary attachment of assets pursuant to French law and in what cases it can apply?

Pursuant to article L. 511-1 of the French Code of Civil Enforcement Procedures, any person whose claim appears to be well-grounded in principle may request the judge to authorize a protective seizure of his debtor’s property, without a prior order, if he can justify circumstances likely to threaten the recovery of the debt.

The precautionary seizure will make the goods of the debtor unavailable until a judgment on the merits is obtained by the creditor. If the creditor’s claim is recognized in a final judgment on the merits, the precautionary seizure will be enforced and the debtor’s goods will be sold. The proceeds will be paid to the creditor up to the amount of his claim.

Such a precautionary attachment may be applied on all assets of a debtor (money, real estate, business, intellectual property, ships and aircrafts…).

To be authorized to practice such a precautionary attachment on the assets of his debtor, the creditor must prove that his claim appears well-founded in principle, and that there are circumstances which threaten its recovery.

a) A claim which appears grounded in principle

In law, the protective measure is justified by the existence of a claim which appears to be grounded in principle, regardless of whether this claim is contested (Civ. 3ème, June 27, 1978, Bull. No. 270; Com. May 22, 1979, Bull. No. 171) or whether it is even merely possible (Dijon, December 22, 1959, JCP 1960 II 11670 note Rameau).

It is not necessary to prove that the claim is certain, or that it is of determined quantity, or that it is due. It is not necessary either to justify an urgency.

Examples: a conservatory attachment or seizure of assets may be obtained for:

– commissions and/or indemnity due to a sales agent whose contract has been terminated by the principle

– commissions of an aircraft broker

– amounts of outstanding invoices

– indemnity resulting from tortuous acts, etc.,

although their amounts may not have been precisely determined yet, and although they may be disputed by the creditor.

To authorize the precautionary attachment of assets, the judge must not look for a claim which is certain, quantified and undisputed. A claim that appears grounded in its principle, is sufficient for the judge to authorize the attachment.

b) Circumstances which threaten the collection of the claim

According to French case law, circumstances that may threaten the collection of a claim include default of payment, insolvency, a proven deficit or weakness of the debtor’s working capital in relation to the amount of the claim, or the debtor’s well-known financial difficulties.

The fact that a company has not published its annual accounts has also been considered as a circumstance justifying that a precautionary seizure be authorized.

On the other hand, the judge will refuse to authorize a precautionary attachment of assets if the debtor normally pays its dues or presents sufficient guarantees of solvency.

In principle, there is no reason to presume an intention to organize his insolvency on the part of a debtor in the absence of evidence showing such an intention.

French case law refuses to consider that the mere fact that a company has its registered office abroad can constitute a circumstance likely to threaten the collection of the debt.

The burden of proof of the circumstances threatening the collection of the debt lies with the creditor.

How is the precautionary attachment of assets obtained?

The precautionary attachment is obtained upon presentation of a request by the creditor to the judge, who decides whether to grant or not an authorization to practice a precautionary attachment.

The decision is often made on the basis of the sole request of the creditor and in the absence of the debtor, who is not even informed of the proceedings.

Indeed, the aim to surprise the debtor and avoid that he conceals his assets and organizes its insolvency knowing that a creditor is pursuing its claim.

The debtor is informed after the precautionary attachment is enforced, by a notice served upon him and the custodian of the assets by the usher (“huissier”) in charge of enforcing the attachment.

Which judge is competent to authorize a precautionary seizure?

In principle, the authorization is given by the execution judge (“juge de l’exécution”). However, it can be granted by the president of the commercial court when, requested before any legal proceedings, it aims at the preservation of a debt falling within the jurisdiction of the commercial court.

The judge who is competent is that which has jurisdiction over the domicile of the defendant. However, if the defendant has no domicile in France, the competent judge is that within the jurisdiction of which is located one of the debtor’s assets the attachment of which is required by the creditor. It is not necessary that the underlying contract or relationship having given rise to the claim is governed by French law for the French judge to have jurisdiction.

Therefore, the French judge can order a precautionary seizure on any asset located in France, regardless of the country in which the debtor or the creditor is located, and regardless of whether the underlying contract is subject to French or foreign law.

Thus, a French judge may order the attachment, for example, of an aircraft stationed in France as a guarantee for the payment of a debt by a debtor having its registered office in Africa to a creditor located in the US, such debt being due on the basis of a contract governed by Canadian law…

The authorization granted by the judge to practice a precautionary attachment will lapses if the protective measure has not been executed within a period of three months of such authorization.

The protective measure, which constitutes a hold on the debtor’s assets on the basis of a mere appearance of a claim and in the absence of a judgment on the merits, must remain temporary and it must be put an end to it as soon as possible, that is, either when the debtor proceeds to payment or when a court decision is rendered giving a final ruling on the disputed claim.

The creditor is therefore required to initiate or continue proceedings to obtain an enforceable title – if he does not have one – within one month of the execution of the measure, failing what the measure will lapse. In practice, this means that the creditor must initiate litigation on the merits before the competent judge to have its claim recognized. If such litigation is initiated, and if the debtor is unwilling to settle, the protective measure – and therefore the unavailability of the attached assets for the debtor – will remain for as long as the lawsuit lasts, that is, several years.

Re-examination of the measure by the French judge

According to article R. 511-5 of the French Code of Civil Enforcement Procedures, when authorizing the protective measure, the judge may decide to re-examine his decision or the terms of its execution following an adversarial debate.

In this case, the judge sets the date of the hearing in the order. The debtor retains the right to bring the matter before the judge at an earlier date.

Contesting the precautionary arrest of assets before the French judge

The application for release of the precautionary attachment is made by the debtor to the judge who ordered the measure.

The application may be made to the judge either for the pure and simple release of the protective attachment, if it appears that its conditions are not fulfilled, or for the replacement of the protective attachment by any other measure likely to safeguard the interests of the parties.

To overturn the measure, the debtor may allege:

– the absence of a basis for the claim

– the absence of a threat to the collection of the claim

– the lapse of the measure if the creditor has not enforced the measure or initiated proceedings on the merits within the specified time-limit

– the imperfection of the documentation relating to the enforcement of the claim issued by the enforcing usher (“Huissier”), which contain specific information and statements, failing which the attachment may be voided.

The debtor may also acknowledge the claim of the creditor but propose another guarantee than the one chosen by the creditor.

In each case, the judge will assess the situation on the basis of facts as they exist on the date he is asked to make the ruling, and not on the date on the measure was initially authorized. The judge can therefore take into account facts that occurred after the measure was taken, which would have an impact on whether the claim appears to be well-grounded and/or whether there is a threat in its collection.

In all cases, the burden of proof lies with the creditor. It is always up to the creditor to prove that the conditions for authorizing the protective measure are met. It is not for the debtor to prove that they are not.

It is therefore the enforcement judge, or the President of the Commercial Court if he has authorized the measure, who is competent to rule on an application for release. The judge in summary proceedings is not competent to rule on such application.

The judge called upon to rule on the release of the attachment is in the same position as the judge who authorized the measure. He must therefore examine the appearance of the principle of the claim, and not the certainty, the quantity or amount of the claim.

The judge must also assess the threat to the collection of the debt. Even if the judge does not have jurisdiction to judge the merits of the dispute, when the appearance of a claim depends on a contentious issue between the parties, he must assess its merits.

The judge may substitute one protective measure for another, if the debtor so requests, or on the contrary, maintain the initial measure.

The judge can also modify one of the elements of the measure: increase or decrease the amount or the list of seized goods.

If the judge considers the seizure to be unfounded, he will order its immediate release. This will be the case if it appears that the debt is not grounded in principle or if there are no circumstances that threaten its collection.

In case of release of the seizure, and if the seizing creditor has acted in bad faith, he may be ordered to pay damages.

Conversion of the precautionary attachment into an enforceable seizure of assets

When the creditor obtains a final ruling which recognizes that its claim is valid, the precautionary attachment is converted into an enforceable seizure of assets. The assets made unavailable by the attachment will be seized and sold to pay the creditor.

Register your French company in just 3 business days.

Set up your French company with us and benefit from an on-going legal advice on how to do business in France.

Shareholder dispute? We can help.

What to do and how to react when a shareholder dispute arises? Stay cool. Give us a call. We know the answers.

Contact a French Business Lawyer

Our French business lawyers are here to help.
We offer a FREE evaluation of your case.
Call us at +33 (0) 1 84 88 31 00 or send us an email.

Free Initial Assessment

We don’t like giving our customers surprises on their bills, because it’s not great customer service at all. That’s why QualitySolicitors law firms operate a Clear Price Guarantee.

The QualitySolicitors Clear Price Guarantee means that when you come to us, we tell you what the cost of our work will be before we do it rather than afterwards. So you’re always in control. And that makes budgeting for your legal services much easier.

We’re so committed to this guarantee, that if you ever see a charge for our work that we didn’t tell you about previously, you won’t have to pay it.

Free Initial Assessment

PETROFF (SELARL LEGASTRAT)
182, rue de Rivoli, 75001 Paris, France

RCS Paris n°814433470
Paris Bar Reg. N° (Toque) C2396

Useful links

You have a question in French Business Law?

Our French business lawyers are here to help.
We offer a FREE evaluation of your case.
Call +33 (0) 1 84 88 31 00 or send us an email.

All information exchanged through this website will be communicated to lawyers registered with a French Bar and will remain confidential.