The Sapin II Law in its anti-corruption and anti-tax fraud provisions laid down the requirement for companies to make public their “practices of transferring profits and tax base to tax haven countries”. The measure was challenged on the grounds that it forced French companies to disclose information to the public and to competitors which would reveal their commercial strategies, and was excessively burdensome.
The Council struck down those provisions in Decision No 2016-741 DC of 8 December 2016.
“100. Paragraph I of Article 137 adds Article L. 225-102-4 to the Commercial Code which imposes on certain companies with a turnover exceeding threshold fixed at EUR 750 million a public reporting requirement in respect of tax on profits. The following must be disclosed in an annual report which is available free of charge to the public online for each of the Member States of the European Union in which the companies exercise their activity: the number of employees, amount of net turnover, income before tax on profits, tax on profits due, tax paid with an explanation on any discrepancies with the amount due and undistributed profits. Other reporting obligations are provided for other States in which the companies exercise their activity. Paragraph II of Article 137 ensures coordination within Article L. 223-26-1 of the same code. Paragraph III of Article 137 repeals paragraphs III to V of Article 7 of the Law of 26 July 2013 referred to above which provide for the introduction of country by country reporting for some companies, which are not in force. Paragraph IV of Article 137 lays down the procedures for the entry into force of paragraphs I to III. Paragraph V provides a progressive reduction of the turnover threshold triggering to the public reporting obligation. Paragraph VI of Article 137 is relative to the submission by the government to parliament of an assessment report.
102. By introducing Article L. 225-102-4 into the Commercial Code, the legislator intends, as a measure of transparency, to prevent the relocation of tax bases in order to combat fiscal fraud and evasion. The objective pursued is on which is enshrined in the Constitution.
103. However, the obligation requiring certain corporations to make public the fiscal and economic indicators for their activity on a country by country basis is liable to enable all operators on the markets where those activities are carried out, and in particular their competitors, to identify the essential elements of their industrial and commercial strategy. Such an obligation infringes entrepreneurial freedom in a manner which is manifestly disproportionate to the pursued objective. Consequently, without any necessity to review the other grievance, paragraph I of Article 137 of the Law referred hereto is contrary to the Constitution. This is also the case for the rest of that article, which is inseparable from it.
104. Compliance of a law which has already been enacted with the Constitution can be assessed on the occasion of the review of legislative provisions which amend, supplement or affect its scope. In this case, the provisions of paragraph III of Article 137 declared contrary to the Constitution had the effect of repealing paragraphs III to V of article 7 of the Law of 26 July 2013, which establish a mechanism similar to the one provided for in paragraph I of Article 137. For the same reasons, paragraphs III to V of Article 7 of the Law of 26 July 2013 must also be declared unconstitutional”.
A partial repeal was also effected concerning the protection mechanism for whistleblowers. In effect, in Decision No 2016-740 DC, handed down on the same day, on the organic law regarding the competence of the “Défenseur des droits” (ombudsman for the defense of citizens’ rights) for the guidance and protection of whistleblowers, the Council considered that Article 71-1 of the Constitution, which allows the Défenseur des droits to assist any person claiming to be the victim of discrimination to identify the procedures adapted to their case, does not presuppose that there is any obligation on its part to provide financial assistance, which may prove to be necessary, to persons capable of referring cases to it. It therefore concludes that “the organic legislator could not, without ignoring the limits of the competence conferred on the Défenseur des droits by the Constitution, provide that that authority could give the interested parties financial aid or relief”.
Decision No 2016-741 DC therefore declares unconstitutional Article 14 of the Sapin II Law, which provided for that possibility.
Lastly, with regard to the relationship between “representatives of interests” or lobbies and the parliamentary assemblies, Article 25 of the Law entrusts to the offices of each parliamentary assembly (National Assembly and Senate) to determine the rules applicable to the lobbies within it. However, according to some parliamentarians, it disregards the autonomy of the parliamentary assemblies because the list of lobbyists listed in the directory provided for in Articles 18-1 et seq. of the Act, adopted by the High Authority for Transparency in Public Life (new French anti-corruption body) could be imposed on the assemblies which would therefore lose the power to determine independently the scope of application of the rules governing their relations with the representatives of interests, the classification of which would depend on an external administrative authority.
According to the Council, the High Authority for Transparency in Public Life “cannot, without an infringement of the principle of the separation of powers, be invested with the authority to impose obligations on members of parliamentary assemblies, their collaborators and agents of their departments, in their relations with those representatives of interests”. Nevertheless, the Council considers that that outcome would neither be the purpose nor the effect of the contested provisions. However, it has entered a reservation with regard to interpretation; the provisions of the Sapin II Law “cannot, without infringing the principle of the separation of powers, prohibit the parliamentary assemblies from determining, within the lobbies, specific rules for certain categories of them, or from taking individual measures with regard to them”.
Law No 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernization of the economy
Decision No 2016-741 DC of 8 December 2016