The crisis of the French economy. ConceptIt is not always easy to prioritize between the various goals pursued in every insolvency legislation, namely; the continuation of the company, preservation of the jobs, the general economic/public interest and the payment of dividends to creditors.

There is no clear hierarchy in French law amongst these major targets and French case law appears fairly pragmatic. However compared to Insolvency regulations in other countries, French legislation and French case law appear very protective of the interests of the employees.

This seems obvious when one considers, for example,

(1) the amount of regulation aimed at trying to save companies (and incidentally jobs) facing difficult (not to say desperate) economic situations, and
(2) the very favourable ranking of French employees’ claims, compared to other creditors, especially unsecured creditors

but France may be the only jurisdiction which gives employees a right of recovery against third parties for causing the insolvency of their employer.

In an important judgment in the case of Bank of Scotland on 2 June 2015, the French Civil Supreme court (Cour de cassation) ruled that employees seeking to sue a third party for damages alleging their actions caused the “cessation of payments”  (insolvency) of the company/employer are not precluded from doing so by what would otherwise be the exclusive cause of action of the court-appointed insolvency practitioner. This ruling has been confirmed in subsequent decisions of the court.

For the French Cour de cassation, if the damage alleged by the dismissed employees is separate from the damage suffered by the general body of creditors, compensation may be claimed by the employees as victims, e.g. following the behaviour of a bank which granted bad credit to the company, causing the company to suffer a loss. One can also think of a claim by the employees of a subsidiary against the parent company in a group. Practically, the problem is to draw a line and avoid spurious actions by employees filed as leverage in negotiations to try to obtain higher dismissal compensation.

By its judgments, the Cour de cassation has taken up a concept which it had enunciated in its previous judgment in the case of  CGT des Métaux; namely, that a creditor has the right to compensation from a third party for harm or damage, subject to the requirement that the harm or damage is personal, direct and distinct from the collective harm suffered by all creditors.

However, the action will be inadmissible if the harm suffered merely constitutes a share of the economic harm suffered by the creditors viewed as a whole.

Therefore, one could argue that there is no hierarchy of collective and individual interests. It would be more accurate to say that each set of interests has its own sphere. The “collective interest” is a group interest which stems from the guarantee given by the debtor to all creditors. By contrast, the “individual interest” is a moral or material interest, distinct from the guarantee.

In these straightened economic times, French employees (who may be advised by Works’ Councils or Union representatives) who loose their jobs due to the insolvency of their employer may be on the look out for the “deep pockets” of someone else to blame for their plight.