In a judgment dated February 25, 2009 (Cour de cassation, civ. 3, 25 February 2009, No. P07-20.096), the Court of cassation, the highest court in the French judiciary, confirmed its previous decisions (Cour de cassation, chambre mixte, 30 November 2007, No. 06-14.006; Cour de cassation, 3e civ., 30 January 2008, No. 06-14.641) according to which certain provisions of the French Law on Subcontracting dated December 31, 1975 are mandatory, and as such are to be applied even when French law is not the governing law chosen by the parties to the contract.
For several years, there has been a debate among scholars on the classification of certain provisions of the 1975 Law as mandatory within the context of international subcontracting. This Law allows, amongst other things, a subcontractor to initiate legal proceedings directly against the employer, should the main contractor fail to pay monies due by virtue of the subcontract.
The legal basis for the mandatory application of this Law is Article 7 of the Rome Convention on the law applicable to contractual obligations which provides that
when applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
While the first civil chamber of the Court of cassation held, in its judgment dated January 23, 2007 (Cour de cassation, civ. 1, 23 January 2007, Bull. Civ. 2007, n°33) that the Law did not qualify as a mandatory rule, the joint chambers of the Court of cassation held, several months later, in its judgment dated November 30, 2007 (op. cit.), that regarding the construction of a building in France, the provisions of the 1975 Law which protect the subcontractor, are mandatory within the meaning of the Rome Convention. Because this jurisprudence has subsequently been confirmed by several judgments of the Court of cassation, it has to be considered a real trend.
This trend has at least two significant implications.
First, even if the contractual relationship between the parties is international, the provisions which protect the subcontractor under the 1975 Law will be applicable, if the construction works take place on French territory. For instance, the Court of cassation had to deal, in a judgment dated January 30, 2008 (op. cit.), with the following situation: the employer, a company registered in Belgium, entered into a contract with a German company. This contract provided for delivery of certain products and the erection of machines in France. The contract was governed by Swiss law. The contractor entered into a Subcontracting agreement with another German company, which itself entered into several Subcontracting agreements with three German companies. All the Subcontracting agreements were governed by German law. A French company intervened as the employer’s representative. Therefore, the only criteria which led to the mandatory application of the provisions regarding the direct action of the subcontractor under the 1975 Law was the location of the works in France.
Contracting parties should therefore be aware that their choice of governing law may be overridden by the mandatory laws of some jurisdictions. In France, the mandatory rules contained in the 1975 Law will be applied as soon as the works take place in France, regardless of the governing law of the contract or the nationality of the parties.
Second, the transformation of the 1975 Law into a mandatory rule could be considered as the first step of a more general trend towards the protection of one of the contracting parties in an international construction contract. It is possible that certain other provisions and principles of French construction law which are also aimed at protecting parties to a construction contract – such as the presumption of liability of the builder of the works or the guarantee by the building owner of payment of sums owed to the contractor when they exceed a certain threshold– might in the future be considered mandatory.
Your thoughts and comments on other implications of the recognition of new mandatory rules and on the existence of such a trend in other jurisdictions are welcomed.
By Joanne Clarke and Gauthier Vannieuwenhuyse