Written by Hilary Barnes
France’s government on 13 June 2013 decided to demand the annulment of a controversial arbitration case between a French businessman and the state, a decision which will not go unnoticed in the international legal world where it is the accepted practice that when parties agree voluntarily to arbitration they do not then try to overturn an award by resorting to the judiciary.
The government’s decision was taken following the decision on June 12 of the fraud police in Paris to indict Mr Pierre Richard, CEO of Orange (formerly France Telecom), one of France’s biggest companies listed with the Paris Stock among the Paris Stock Exchange’s CAC40 large companies, for organised fraud in connection with the arbitration.
The decision by a previous government to send the case to arbitration was made by Christine Lagarde, then finance minister in the government of President Nicholas Sarkozy, now Chief Executive of the IMF.
At the time Pierre Richard was a senior official on the staff of Ms. Lagarde. He was detained for questioning on June 10; although under French law a suspect is not charged with an offence at this stage of the processing. He was questioned about the circumstances in which it was decided by the government of the day to send the dispute between
Bernard Tapie, a French businessman, and the state went to arbitration. The award was in Tapie’s favour and he was awarded €403m. France’s practice of detaining persons suspected of criminal conduct for up to 48 hours, but without charging them with an offence, is open to abuse and often has been abused. It is arguable that the detention of Pierre Richard, CEO of Orange (France Telecom) is a case in point.
He was admitted to hospital on June 12 on being released after two days of questioning by the fraud squad, apparently suffering from shock and exhaustion.
Pierre Richard’s indictment takes the total to four those who have been indicted on this charge so far, including one of the arbitrators, Pierre Estoup, 86, a lawyer, Bernard Tapie’s lawyer Maurice Lantourne, and the manager in charge of the Tapie estate, Jean-François Rocchi.
So far, the proceedings in this case raise at least three interesting questions for a lay observer about France’s legal particularities;
- Already mentioned, the use of detention without charge to destabilize the suspect in order to help the police to build a prima facie case, and not before they have got a prima facie case. It is not water boarding, but the principle is the same.
- The potential for using indictment to destroy the careers of the accused, which may, from the prosecution’s point of view, be just as good a guilty verdict – and much prompter.
- The damage to France’s reputation as a centre for international arbitration. One of the assumptions behind the use of arbitration is that the losing party does not turn round and use the courts to have the verdict overturned. This becomes particularly sensitive if it is the state itself that sees itself as the losing party and turns to the law to gets its way. After what has happened in the past few weeks, who is ever going to risk being an arbitrator in a case in France in which the state is a part? Who would ever wish a case to be settled by arbitration in France if the state is the other part?
The indictment means that Pierre Richard’s career at the top of French business, and perhaps in the service of the state in any capacity, is probably at an end, whether or not he and the others who are accused are eventually convicted, which could take years.
Under the French legal system an indictment can be left hanging for years without the person ever being brought to court. It is not uncommon finally for the charges to be dropped or declared void. The victim has no legal recourse.
Formally speaking, there is a presumption of innocence (introduced by legislation of 1992), but in fact, as Paris lawyer Hervé Lehman wrote in Le Figaro on June 12,
“to be indicted is to be marked with an indelible presumption of guilt. If cleared, or the case is dropped three, ten or fifteen years later, it does not wash away the seal of infamy, which is too public, too lasting to disappear entirely.”
In recent years no less than six CEO’s of CAC40 companies have been indicted for various offences. None has been convicted, two cases are ongoing, one case was declared void and three of the six were cleared.
What a record for prosecuting authorities! Hervé Lehman listed 16 cases in which 12 politicians were indicted in the past 20 years, of which 12 cases were finally declared void, there were four not guilty verdicts and there were no convictions. (The list was not exhaustive: there have been other cases in which politicians were convicted, including suspended prison sentences for former prime minister Alan Juppé and former President Jacques Chirac.)
If one is of a conspiratorial frame of mind, one can imagine, especially in cases where politics are involved and the prosecution becomes convinced that corruption in high places needs their urgent attention, that that an indictment is as good as a guilty verdict to destroy the supposed conspiracy.
Because of the political background and implications to the Tapie arbitration case, it is one in which questions about the judgement of the police and prosecuting magistrates, and the influence of political bias or pressures, are bound to arise.
Francois Bayrou, respected veteran centrist politician and perennial presidential candidate, argues that in this case the state – that is to say those who were responsible for taking the decision to send the case to arbitration – conspired to defraud the state, but he admits that he does not know for what motive.
According to the reports in Le Figaro and Le Monde, the lines of inquiry being pursued by he magistrates are:
- to trace the chain of responsibility for the decision to go to arbitration: was it taken by the Ministry of Finance, or was it taken by the Ministry of Finance on instruction by or the urging of President Nicolas Sarkozy’s office or the president himself, and if so why;
- what were the relations were between all the people involved in this decision (Pierre Richard managed the arbitration file for Christine Lagarde which means that he worked with Jean-Francois Rocchi, manager of the Tapie business estate that was the subject of arbitration); and
- the magistrates are looking at procedural irregularities and the reasons for them. Christine Lagarde, now CEO of the IMF, has argued from the beginning that the decision was taken to save the state money on pursuing the case through the courts, possibly for years to come, as well as from the possibility that the courts would finally increase the award to Tapie (the arbitrators did just this).
Ms. Lagarde was questioned about this case by investigating magistrates for two days in May, but she was not indicted.
See previous article at GEI News, 10 June 2013, Lagarde Questioned in French Scandal.