Under Article L. 621-12 of the Monetary and Financial Code (in the version preceding that introduced by Ordinance No. 2017-1107 of 22 June 2017), the Plenary Assembly of the Court of Cassation held that «documents and information storage media connected with the subject matter of the investigation and located on, or accessible from, the premises designated by the judge may be seized, without any requirement that they belong to or be at the disposal of the occupier of the premises ». It nevertheless took the opportunity to reaffirm the fundamental importance of the safeguards intended to prevent any unlawful interference with the right to respect for private and family life.
- Court of Cassation, Plenary Assembly, 16 December 2022, B+R, No. 21-23.719
- Court of Cassation, Plenary Assembly, 16 December 2022, B+R, No. 21-23.685
When announcing its 2014 annual results on 12 May 2015, a company listed on Compartment B of Euronext Paris (hereinafter «the company ») reported 2014 EBITDA (earnings before interest, taxes, depreciation and amortisation) of 5,2 million euros, exceeding the target of 1,9 million euros stated in a press release of 13 February 2015. This announcement led to a rise of more than 10 % in the share price the following day.
On 27 August 2015, the Secretary General of the French Financial Markets Authority (Autorité des marchés financiers, AMF) decided to open an investigation into the financial disclosures and trading in that security. The investigation established that, on 14 March 2015, the company’s chief executive officer had emailed all the directors, indicating that the company would exceed the financial targets announced to the market on 13 February 2015. The prosecution considered that the information concerning the company’s exceeding its 2014 EBITDA target announced to the market constituted inside information at least from 14 March 2015 to 12 May 2015 (hereinafter «the inside information »).
During the AMF investigation, the liberties and detention judge (JLD) of the Créteil Tribunal de grande instance authorised, by an order of 19 February 2017, a search of the company’s registered office during its next board meeting and the seizure of any material or document capable of establishing the disclosure and/or use of inside information, on any medium. This included, in particular, the laptops and mobile telephones of the representatives of the Moroccan legal entity that was the company’s majority shareholder (hereinafter «the majority shareholder ») attending that board meeting (including, in particular, Ms Z and Mr H, together hereinafter «the directors »).
These operations were carried out on 25 April 2017, the date of a meeting of the company’s board of directors (hereinafter «the disputed operations »).
Proceedings with several twists
The directors appealed against the order and challenged the conduct of the disputed operations. The majority shareholder intervened in the proceedings brought by Ms Z.
The applicants argued, in particular, that the disputed operations contravened Article L. 621-12 of the Monetary and Financial Code, since «the scope of a search is determined by the identity of the occupier of the premises, and an analogy with criminal law allows the latter to be defined as “the person whose premises are searched” » (Paris, Division 5, Chamber 15, 4 April 2018, No. 17-09697; see, to the same effect, Paris, Division 5, Chamber 15, 4 April 2018, No. 17-10465). Among other arguments, they also maintained that the operations had caused an irreparable infringement of their right to privacy, both through the seizure itself and through the investigators’ failure to take precautions concerning the nature of the data seized.
By two orders of 4 April 2018, the First President of the Paris Court of Appeal upheld the order in all respects and declared the disputed operations lawful.
It was noted, in particular, that occupation of the searched premises, even temporarily, was sufficient to permit such a measure, since, within the meaning of Article L. 621-12 of the Monetary and Financial Code, «the occupier of the premises is neither the owner, tenant nor subtenant of the searched premises, but the person present inside those premises at the time of the search, regardless of whether that person occupies them without any right or title » (Paris, 4 April 2018, cited above). Under Article 8, § 2, of the European Convention on Human Rights, the court also concluded that no interference with privacy precluded either the operation in principle or the manner in which it was carried out, since it could assist in ascertaining the truth and the applicants had been able to exclude correspondence covered by lawyer–client confidentiality, relating to their private lives or outside the scope of the order before the final sealed packages were prepared.
On 14 October 2020, the Commercial Chamber of the Court of Cassation delivered a judgment in each of those proceedings (Commercial Chamber, 14 October 2020, No. 18-17.174 P, Rev. sociétés 2021. 524, case note by M. Lassalle; RSC 2021. 403, commentary by J.-M. Brigant; RTD com. 2020. 905, commentary by N. Rontchevsky). Relying on Articles L. 621-12 of the Monetary and Financial Code and 8 of the European Convention, it quashed both orders, specifying that «only documents and information storage media belonging to or at the disposal of the occupier of the premises may be seized, namely the person occupying, in any capacity, the premises on which the search is authorised, excluding persons merely visiting at the time of the search, even if their visit was expected ».
Accordingly, the directors’ mere visit to the company’s registered office on the day of the search did not allow them to be identified as «occupiers » within the meaning of Article L. 621-12, cited above.
The parties were therefore referred back to the First President of the Paris Court of Appeal, who, by two further orders dated 20 October 2021 (Paris, Division 5, Chamber 15, 20 Dalloz Actualité — reformatted document 3 October 2021, Nos. 20-16012 and 20-15979), maintained the position adopted in the orders of 4 October 2018.
In concluding that the applicants did indeed qualify as occupiers, the court noted, in particular, that:
- the concept of an occupier of premises in searches authorised by the JLD,
« whether under Article L. 621-12 of the Monetary and Financial Code, Article L. 540-4 of the Commercial Code or Article L. 16 B of the Tax Procedures Code », as interpreted in case law, does not require any form of legal control over the premises; - the applicants were present on the premises on the day of the search in their capacity as directors and therefore as members of a collegiate management body of the company. They were thus present in a professional capacity, and their connection with the company precluded their being regarded as «third parties » in relation to it.
No disproportionate interference with privacy capable of precluding the measure could therefore be established in this case, the measure being found consistent with Articles L. 621-12 of the Monetary and Financial Code and 8 of the European Convention. The order was accordingly upheld and the disputed operations again declared lawful.
The parties lodged further appeals on points of law. By two judgments of 24 May 2022, the Commercial Chamber referred the examination of those further appeals to the Plenary Assembly of the Court of Cassation. It was in that context that the judgments under review were delivered.
Meanwhile, in the subsequent proceedings before the AMF Enforcement Committee, the allegations included:
- that the majority shareholder and Ms Z, its chair and chief executive officer (a member of the company’s board of directors), had used the Inside Information;
- that Ms Z had recommended that a third party invest on the basis of the inside information;
- that the majority shareholder’s representative and expert, appointed as a permanent non-voting attendee of the company’s board of directors and audit committee, had disclosed the inside information to a third party or, at least, recommended that the third party invest on that basis.
Before presenting any defence on the merits, the respondents applied for a stay pending a final decision in the proceedings discussed here and requested that material resulting directly or indirectly from the disputed seizure be excluded from the proceedings.
By a decision of 28 April 2021, which was not final, the AMF Enforcement Committee excluded the material obtained through the disputed seizure (AMF, Enforcement Committee, Decision No. 6 of 28 April 2021) and sanctioned the majority shareholder, Ms Z and the permanent attendee mentioned above.
The decisions discussed here may therefore have only a limited impact on the respondents. They nevertheless offer substantial guidance.
The occupier of the premises is not the only person who may be affected by seizures during a search conducted by AMF officials
The Plenary Assembly, for its part, held (Court of Cassation, Plenary Assembly, 16 December 2022, Nos. 21-23.719 and 21-23.685), under Article L. 621-12 of the Monetary and Financial Code (in the version preceding that introduced by Ordinance No. 2017-1107 of 22 June 2017), that «documents and information storage media connected with the subject matter of the investigation and located on, or accessible from, the premises designated by the judge may be seized, without any requirement that they belong to or be at the disposal of the occupier of the premises ».
It recalled that this provision is necessary to achieve the legitimate aim pursued, namely investor protection and the regulation and transparency of financial markets, and specified that its interpretation «does not excessively interfere with any person’s right to respect for private and family life, home and correspondence, since, first, the search and seizure operations have been authorised in advance by a judge who has satisfied himself that the application is well founded; they take place under his authority and supervision, in the presence of a judicial police officer responsible for keeping him informed of their conduct and of the occupier of the premises or the occupier’s representative, who inspect the material before its seizure; they may take place only on the premises designated by that judge; the occupier of the premises and the persons named in the order are informed, through service of the order, of their right to engage a lawyer of their choice; and the operations may be challenged before the First President of the Court of Appeal by any person from whose possession property has been seized; and, second, only material necessary to investigate the aforementioned offences may be seized, while material not useful for ascertaining the truth must be returned » (emphasis added).
Asked to explain the definition of the «occupier of the premises » under Article L. 621-12 of the Monetary and Financial Code, the Plenary Assembly of the Court of Cassation thus chose a third approach.
It affirmed the relative irrelevance, under the statutory scheme, of the status of the person affected by the seizure. The Plenary Assembly took care to specify that the «documents and storage media » need not «belong to or be at the disposal of the occupier of the premises » in order to be seized.
This ruling is not entirely surprising, since the Commercial Chamber had already upheld operations in a case where the AMF was aware of the use,
«on a very occasional basis », of an apartment by a person present during search and seizure operations (Commercial Chamber, 13 June 2018, No. 16-25.415 P, Rev. sociétés 2019. 260, case note by E. Dezeuze and C. Méléard).
Thus, although occupier status appears relevant to the procedural conduct of the measure and the identification of persons entitled to challenge it, it does not appear capable of restricting the range of material that may be seized by investigators of Dalloz Actualité — reformatted document 5 the AMF.
This raises questions concerning the absence of any real restriction based on the status of the owners of material seized under this procedure, as recalled by the Advocate General in these proceedings: «where documents are relevant to the investigation, they may be seized even if the person present on the searched premises is neither suspected nor named in the authorisation order, which must nevertheless be sufficiently precise » (Opinion of M. Lecaroz, Advocate General, in Court of Cassation, Plenary Assembly, 16 December 2022, No. 21-23.685, p. 16; see, in this respect, Versailles, 10 February 2012, No. 10/09436).
The Plenary Assembly thus rejected the concept of a «person merely visiting », which the Commercial Chamber had begun to develop in its judgments of 14 October 2020 (Commercial Chamber, 14 October 2020, Nos. 18-17.174 and 18-15.840 P, Dalloz actualité, 4 December 2020, commentary by G. Sansone ; D. 2020. 2063; Rev. sociétés 2021. 524, case note by M. Lassalle; RSC 2021. 403, commentary by J.-M. Brigant; RTD com. 2020. 905, commentary by N. Rontchevsky). Its formulation must nevertheless be qualified, since, in this case, both the owners of the seized material and the material itself were expressly identified in the JLD’s authorisation order, as the court hearing the case on remittal duly noted (Paris, Division 5, Chamber 15, 20 October 2021, Nos. 20-16.012 and 20-15.979). Furthermore, the Court emphasised the fundamental importance of the safeguards intended to prevent any unlawful interference with the right to respect for private and family life.
Reaffirming the importance of procedural safeguards
The Advocate General, recommending dismissal of both appeals, had warned the Plenary Assembly that its rulings could affect the powers not only of AMF investigators but also of several other administrative authorities using comparable search and seizure procedures (Opinion of M. Lecaroz in Nos. 21-23.685, pp. 5 and 6, and 21-23.719, pp. 5 and 6).
The procedures concerned had a similar structure, namely «an application by the administrative authority to the JLD, a detailed order from the JLD, operations conducted in the presence of a judicial police officer alongside the investigators, that officer acting as an “interface” between the parties and the JLD responsible for supervising the operations, and, finally, a subsequent challenge concerning both the authorisation and the conduct of the operations brought before the same JLD » (ibid., p. 9).
The Plenary Assembly was therefore asked to rule in light of the lessons also drawn from the use of such measures by the tax administration (Tax Procedures Code, Art. L. 16 B), the Competition Authority (Commercial Code, Art. L. 450-4) and the DGCCRF (Consumer Code, Arts. L. 512-51 et seq.).
First, the Court recalled that Article L. 621-12 of the Monetary and Financial Code, «which pursues a legitimate aim, namely investor protection and the regulation and transparency of financial markets, is necessary in a democratic society to achieve that objective ». It thereby reaffirmed the principles underpinning the scheme and permitting its existence under, in particular, Article 8, § 2, of the European Convention on Human Rights. It also followed the Commercial Chamber’s case law, which had already affirmed that its existence and Dalloz Actualité — reformatted document 6 «the interference it provides for with the right to respect for private life and correspondence is not, in itself, disproportionate to the legitimate aim pursued » (Commercial Chamber, 4 November 2020, No. 19-17.911 P, D. 2020. 2238; Rev. sociétés 2021. 108, case note by E. Dezeuze and C. Méléard).
That analysis had itself drawn on the approach adopted in relation to tax searches (Commercial Chamber, 7 May 2019, No. 17-27.851).
The compatibility of these procedures with Article 8 of the Convention (Criminal Chamber, 8 November 2017, No. 16-84.525; 26 January 2022, No. 17-87.359, Dalloz actualité, 9 February 2022, commentary by H. Diaz ; AJ pénal 2022. 161, commentary by P. de Combles de Nayves), as with Article 6 (Criminal Chamber, 25 February 2005, No. 03-85.574), is ensured, in particular, by the JLD’s review of the proportionality of the measure.
It should be recalled that, in upholding operations conducted in an apartment used only very occasionally by the applicant, the First President of the Paris Court of Appeal emphasised that the applicant «had suffered no infringement of his rights, since he had been able to appeal and bring challenges against both the decision and the conduct of the operations ». The Commercial Chamber emphasised these procedural safeguards in dismissing the appeal on points of law (Commercial Chamber, 13 June 2018, No. 16-25.415 P, Rev. sociétés 2019. 260, case note by E. Dezeuze and C. Méléard).
In the present case, the Plenary Assembly went further, recalling that the procedural framework as a whole ensures that Article L. 621-12 of the Monetary and Financial Code, as interpreted, «does not excessively interfere with any person’s right to respect for private and family life ». This encompasses the JLD’s prior authorisation and effective supervision of the measure, the presence of a judicial police officer on site to act as an «interface », respect for the rights of the «occupier of the premises or the occupier’s representative», their right to engage a lawyer, the right of persons affected by seizures to challenge the operations, and the restriction of retention of seized material to material useful for ascertaining the truth in those investigations.
The connection between the searched premises and the subject matter of the investigation as the guiding principle of the search and seizure scheme under Article L. 621-12 of the Monetary and Financial Code
The Court of Cassation’s ruling also reaffirms the central role of the JLD in these procedures: through proportionality review at the authorisation stage, the judge also defines the scope of the measure.
This applies first to the geographical scope of the premises concerned. This criterion is prominent in the judgment under review, since the Court emphasises that the seized material must first «be located on the premises designated by the judge or [be] accessible from them ». Consistent with Article L. 621-12 of the Monetary and Financial Code, which provides that searches may be authorised «in any location », these decisions affirm the JLD’s discretion in this respect, subject only to the premises being identified or identifiable (see, for example, on the irrelevance of the number of premises designated, Commercial Chamber, 4 June 1991, No. 90-10.586 P, or on the absence of any requirement to identify all of a company’s premises located at the same address, Criminal Chamber, 4 April 2012, No. 10-88.192 P).
They also reaffirm a ruling of the Commercial Chamber which had already held, in relation to tax searches, that no connection between the premises concerned and the suspected person was required for the measure to be authorised (Commercial Chamber, 27 June 2018, No. 16-27.561 P, Dalloz actualité, 3 September 2018, commentary by X. Delpech ; D. 2018. 1437; Rev. sociétés 2019. 275, case note by D. Ravon).
The premises to be searched appear, in fact, to be selected by reference to paper or digital information relevant to the investigation that may be located there, even if the premises are private (Criminal Chamber, 8 September 2010, No. 09-84.467 P, Dalloz actualité, 19 November 2010, commentary by E. Chevrier ; AJ pénal 2010. 557, commentary by J. Lasserre Capdeville) or not precisely identified (Commercial Chamber, 27 November 1991, Nos. 90-10.579 P and 90-10.580 P), Entreprise Jean Lefebvre (company) v. Directorate-General for Competition, D. 1992. 122, submissions by M. Jeol, case note by R. Texidor.
The Plenary Assembly then reaffirmed the requirement for a connection between the seized material and the subject matter of the investigation, stating that «documents and information storage media connected with the subject matter of the investigation may be seized ».
This criterion, whose degree of precision raises questions, follows several earlier Court of Cassation rulings. In relation to tax searches, the Commercial Chamber had held that the JLD’s seizure authorisation is not limited to «documents belonging to or originating from persons suspected of fraud, but permits seizure of all material relating to the suspected fraudulent conduct and, accordingly, all documents of natural or legal persons having business relations with the person suspected of fraud, provided that they are useful, even only in part, in proving the fraud » (Commercial Chamber, 13 October 2021, No. 17-13.008 P, Dalloz actualité, 18 November 2021, commentary by X. Delpech ; D. 2021. 1925; see also Commercial Chamber, 4 November 2014, No. 13-20.322, D. avocats 2015. 29, commentary by D. Piau).
The issue of the divisibility of seized material follows the same approach, since «an indivisible file containing material useful to the investigation may be seized in its entirety, even if it includes material exceeding the scope of the investigation or whose seizure would infringe the principle of respect for defence rights, in order to guarantee the authenticity of that file (Criminal Chamber, 14 December 2011, No. 10-85.293; 11 July 2017, No. 16-81.038) » (Report by M. Seys, judge, assisted by N. Ploffoin, judicial auditor at the SDER, in No. 21-23.719, p. 35).
The practice of using provisional sealed packages, intended to restore adversarial safeguards and allow the sorting of material covered by lawyer–client confidentiality, relating to private life or outside the scope of the JLD’s authorisation, therefore constitutes an important guarantee of the proportionality of the measure. In this case, the First President of the Court of Appeal had found the operations lawful, in particular because such sorting had been permitted, even though the person whose mobile telephone had been seized had declined to attend the adversarial meeting at which the final sealed packages were prepared (Paris, Division 5, Chamber 15, 4 April 2018, No. 17-09697).
Furthermore, the material to be seized need not be precisely specified by the JLD (Commercial Chamber, 29 October 1991, No. 90-12.923), or even physically stored on the designated premises, provided that it is accessible from those premises (see, on this point, the Constitutional Council’s analysis in its decision on a priority preliminary question of constitutionality, No. 2022-980 QPC of 11 March 2022, concerning Article L. 16 B of the Tax Procedures Code).
The broad language used by the Court in these judgments suggests that third parties who do not occupy the premises and wish to challenge seizures affecting them should rely on the absence of a connection between the seized material and the subject matter of the investigation, rather than on their own status.
This case law could encourage the AMF, instead of opening investigations with a precise subject matter (for example, financial disclosures concerning a security over a specified period) and subsequently extending them (to trading in that security and/or a longer period), to broaden the subject matter of the investigation from the outset in order to avoid subsequent challenges to operations conducted without a connection to it.
by Ghislain de Foucher and Chloé Méléard, Members of the Paris Bar