The Double-Prosecution System Abandoned for French Market Abuse Related Offenses

May 19, 2015

On May 6 and 18, 2015[1], in what will certainly become landmark decisions, the criminal court of Paris ruled that a same person may no longer be prosecuted and condemned twice with respect to market abuse offences for the same facts by both the Autorité des marchés financiers’ (French financial markets authority) Commission des sanctions (Enforcement Committee) and a French criminal court. These decisions will likely put an end to long-lasting discussions in France, regarding the application of the double jeopardy rule.

The double jeopardy rule (ne bis in idem principle) has the purpose of preventing a person from being tried or sanctioned twice in criminal matters for the same offence. A debate relating to the interpretation and scope of this rule has been ongoing in Europe in the context of administrative and criminal prosecutions involving identical facts (or double-prosecution system). Until recently, France counted among the market abuse double-prosecution system enforcing countries.

In a first step, on March 18, 2015, the Conseil Constitutionnel (the French Constitutional Council), following the European Court of Human Rights’ (the "ECHR") Grande Stevens decision[2], ruled that the same person could no longer be prosecuted and condemned twice for the same facts by both the Autorité des marchés financiers’ (French financial markets authority) Commission des sanctions (Enforcement Committee) and a French criminal court (Cons. const., n° 2014-453/454 and n° 2015-462).

In its decision, the Conseil Constitutionnel declared as contrary to the French Constitution the legal provisions setting forth criminal prosecution for insider trading offences and those providing for administrative prosecution for insider trading breaches, on the grounds that the criminal and the administrative definitions of insider trading are similar, aim at punishing the same facts and protect the same public interest.

This decision was remarkable because the Conseil Constitutionnel put an end to a well-established jurisprudence, consistently applied by the Conseil Constitutionnel and the Cour de Cassation (France’s highest Court in commercial matters), pursuant to which cumulating administrative and criminal sanctions was deemed consistent with both the French Constitution and the Charter of Fundamental Rights of the European Union, provided however that the total penalties did not exceed the maximum possible amount under either offense. Such position had been lastly confirmed by the Conseil Constitutionnel on October 24, 2014, after the Grande Stevens case (Cons. const., n° 2014-423).

The March 18, 2015 Conseil Constitutionnel decision was designed to have an immediate effect notably on those having already been sentenced or prosecuted by the Autorité des marchés financiers or a French criminal court. However, questions remained as to how and when criminal courts would align their case law accordingly.

The May 6 and 18, 2015 judgments confirm that the Paris criminal court will apply this new principle to cumulative prosecutions under market abuses provided that the Autorité des marchés financiers had already prosecuted the case, even if defendants had not been ultimately sanctioned by the Autorité des marchés financiers’ Commission des sanctions (this was notably the case in the EADS case). This second step is important as the Paris criminal court is the only first-degree jurisdiction competent to judge market abuses in France. It is even more so important that the French Financial Public Prosecutor has expressed her will to follow this new principle.

These decisions concern insider trading cases, but should cover also market manipulation and false information spreading offenses. It is likely, however, that it will not impact other double-prosecution and double sanctions regimes.

Pursuant to the March 18, 2015 Conseil Constitutionnel decision, the French legislator has been given an interim period expiring on September 1, 2016 to draft and adopt new rules which will likely profoundly reform the French market abuse regime and sanctions.

   [1]   "Oberthur" and "A Novo" cases dated May 6, 2015 and "EADS" case dated May 18, 2015.

   [2]   On March 4, 2014 (Grande Stevens & Others v. Italy), the ECHR had already taken on the possibility of imposing double sanctions for the offence of market manipulation (subject to both criminal and administrative sanctions).

        Italy was condemned in light of its market abuse legislation by the ECHR for having inflicted two sanctions against the same investor – the first by the CONSOB (Italian financial markets authority), and the second by a criminal court. Pursuant to this decision, any time an administrative penalty is of criminal nature (as defined by European law), any subsequent criminal prosecution could constitute a violation of the ne bis in idem principle.

        Through this decision, the ECHR had condemned any system allowing successive administrative and criminal proceedings to be brought for stock market offences. It was foreseeable that this decision would not be ignored by all concerned jurisdictions and that its impact could be quite significant.