A number of urgent reforms to economic and financial legislation in France were adopted on December 11 2001, when the Loi Murcef (loi portant mesures urgentes de réformes à caractère économique et financier), was passed after having been the subject of a double petition before the Conseil Constitutionnel (Constitutional Council). This Act sets out a variety of changes and is divided into five parts. Part I sets out the modifications to be made to the rules governing procurement contracts; Part II relates to the relations between banks and their clients; Part III contains measures in relation to the introduction of the Euro; Part IV addresses the management of certain specific public companies and Part V contains a number of measures dealing with a broad range of other issues.
There are three areas of particular interest from a financial point of view. These will be considered separately, starting with the most significant – the amendments to the rules with regards to the issue and circulation of financial instruments, as contained in Part V (article 27).
The issue and circulation of financial instruments
There are a number of provisions contained in Article 27, which for the most part were considered necessary to harmonize the European financial markets following the introduction of Euronext in September 2000, which merged the Paris, Amsterdam and Brussels stock exchanges.
Following the adoption of the Act, it is now possible for foreign issuers of debt and equity securities to be listed in France, in the circumstances set out in the regulations passed by the commission for the operation of the French stock exchange (the Commission des operations de bourse or COB), to publish prospectuses in France in a language (other than French) commonly used for financial matters (eg English, German), provided that the document is supported by a summary in French. The nature of the summary will be governed by COB regulations and it will therefore fall to the COB to ensure that the new measures do not operate in a manner that infringes the principle of equality before the law.
This provision was the basis of one of the petitions before the Constitutional Council, where it was held that the measure did not contravene article 2 of the Constitution (which states that the language of the Republic is French) but a reservation to its interpretation was issued: the summary must include essential facts about the transaction and the company in question such as the content and the terms of the transaction, its structure, the financial condition and the activities of the company.
This change is a significant development, especially given that the previous COB regulations in this area had been overruled by decision of the Council of the State (Conseil d'Etat) therefore forcing all foreign issuers to translate their prospectuses in full, which incurred extra costs and caused delays and drove some issuers to list in Luxembourg instead.
Measures to facilitate the introduction of the Euro
The Act introduces a relaxation of the money-laundering rules. As drafted, the offence of money-laundering includes helping in the investment, concealment or conversion of the direct or indirect product of a crime. There could therefore be a risk that banks would become liable for such an offence in carrying out their responsibilities in relation to the exchange transactions that will need to take place during the introduction of the Euro. For this reason, a legislative exception to the prosecution of the offence has been introduced for offences committed between December 1 2001 and June 30 2002 by a limited list of financial institutions up to a limit of Euro10,000. The exchange transactions carried out by these financial institutions will not be considered as aiding a criminal offence provided that the amount of money exchanged does not exceed Euro10,000. Nonetheless the institutions will still be subject to their obligation of vigilance with regards to the prevention of money laundering.
Rules governing the relationship between banks and their customers
New measures have been inserted into the monetary and financial Code with the aim of improving the relationship between banks and their customers.
Following amendments to the Code, deposit accounts must be subject to a written agreement between the two parties and, under an order of the Ministry of Economy and Finance, the agreement must detail the general conditions as well as the fees payable in relation to the opening, running and closing of the account. Any plans to change the products and services covered by the agreement must be communicated in writing to the customer three months before the proposed change. The customer then has two months to raise objections to such changes and a failure to do so will be deemed as acceptance of the changes. No charge can be imposed on the customer wishing to close the account subsequently where the changes proposed are substantial. What will constitute substantial changes is left undefined. In addition, all credit and debit transactions affecting the account must be brought to the attention of the customer on a regular basis (at least once a month).
Another amendment to the Code prohibits the tied sale or tied offer of products or services unless such products or services are available individually or are inseparable. Similarly the sale or offer of products or services to a customer, which grants free of charge, either immediately or over time, a financial bonus or a bonus by way of products, goods or services whose value exceeds a fixed threshold (depending on the type of service or product in question) is also prohibited. The amendments provide for the Banque de France to supervise compliance with these new additions to the Code.
Finally, another set of amendments to note in connection with the relationship between banks and their customers concerns the procedure to be followed with regards to bad cheques. Before refusing to honour such cheques, banks must inform the issuer of the consequences of defaulting on cheques. Penalties can only be charged in respect of the part of the cheque that is not covered by the customer's available funds and are fixed at €22 ($20) per €150 (or fraction thereof) and at €5 if the portion of the cheque over which penalties can be charged is less than €50.