Monetary claims and ADR under French Law: when must you try out-of-court settlement before issuing a claim?
CMG & Associés Avocats, Paris
Taking legal action in order to obtain monetary payment requires a certain diligence as to the amount in dispute: the amount the claimants seek to recover will determine if they are required to first resort to alternative dispute resolution (ADR).
From the general mission of the judge to conciliate the parties as set out in the overriding principles of French civil procedure, to the introduction of measures such as conciliation, mediation and participatory procedure in the French Civil Procedure Code (FCPC) in 2010, ADR has over the years become part of the DNA of French civil procedure.
In 2015, a general requirement to justify steps taken to settle a dispute out of court before issuing any monetary claim was first introduced into the FCPC. In 2016, a specific requirement [emphasis author's own] was set in regard to small claims, requiring the claimant to try predefined ADR measures before initiating legal action to avoid having his case struck out.
These two obligations coexisted until the Civil Procedure Reform of 2019. Following this reform, prior recourse to ADR has been limited to small claims. This restrictive approach laid down by the 2019 Civil Procedure Reforms signals the removal of the requirement to justify the steps taken to reach an amicable solution for all other monetary claims.
As of 1 January 2020, ADR is a prerequisite in some small claims.
Before the Tribunal Judiciaire (Judiciary Tribunal),, it is mandatory to attempt ADR when the value of the claim does not exceed €5,000. To pursue the ADR remedy, the claimant must follow two steps.
Prior to issuing proceedings, the future claimant must implement a specific mode of ADR.
The claimant must, at his or her choice, propose a conciliation, mediation or participatory procedure to the defendant. Failure to comply with this requirement may result in the case being struck out at the defendant’s request or at the judge’s initiative.
However, the applicant may bypass the ADR phase in one of these four exceptional cases:
- if at least one of the parties is seeking approval of an agreement by the court;
- if ADR is already imposed on the author of the decision;
- if there is a legitimate reason (such as an obvious emergency, circumstances making it impossible to attempt ADR or requiring a summary judgement, or the unavailability of judicial conciliators resulting in the organisation of the first conciliation meeting within a period of time which is manifestly excessive with regard to the nature of and what is at stake in the dispute); or
- if a judge or an administrative authority must, pursuant to a particular provision, make a prior attempt at conciliation.
When filling in the claim form, the claimant must indicate the steps taken to reach an out-of-court settlement when there is a duty to do so
When a legal provision states that a claim ‘must’ be preceded by a conciliation, mediation or participatory procedure, the claimant must indicate the steps taken to resolve the dispute amicably or the reasons for bypassing the ADR phase in the claim form.
Failure to indicate those ADR attempts is sanctioned by the nullity of the claim form. Essentially, its the filling-in will be struck out. Prior to this reform, judges consistently rejected applications for nullity of the claim form made under the former Article 56 of the FCPC on the ground that the sanction only applied to the substantial formalities ‘listed in sections 1 to 4 of Article 56’, which did not include ADR attempts.
In contrast, the new Article 54 of the FCPC has listed the indication of ADR attempts as a substantial formality. The sanction of nullity set out in the revised Article 54 of the FCPC should in principle apply to the failure of the claimant to mention ADR attempts when the amount claimed does not exceed €5,000.
If the claimant fails to attempt ADR, the case will be struck out and a new claim will have to be issued after having gone through a conciliation, mediation or a participatory procedure. However, if the claimant attempted ADR, failed to reach an amicable agreement and simply forgot to mention these attempts in the claim form, the court will allow the claimant to amend his filing. It is highly advisable to keep a proper record of the offer to enter ADR sent out to the defendant as proof of the claimant’s attempt to settle out of court.
Non-binding approach to ADR: from case law to statutory confirmation
The former Article 56 of the FCPC provided that, unless justified by a legitimate reason relating to the urgency or the matter in question, in particular when it relates to public order, the claim should specify the steps taken to settle out of court.
Before the 2019 reform, this provision applied to any case issued before any jurisdiction. It therefore had a general application. However, the claimant was free to use any ADR methods. Thus, one could note the classic formula consisting of indicating on the claim form that the claimant had previously and unsuccessfully given the defendant formal notice to comply with his obligations or indicating that the parties had been unable to reach an agreement after various exchanges.
According to former Article 56 of the FCPC, non-compliance with the requirement to mention ADR attempts was sanctioned by the nullity of the claim form.
Prior to the reforms, in some cases, defendants applied for a claim to be struck out when the claimant had failed to mention ADR attempts in the claim form. However, the judges rejected those submissions on the ground that the indication of ADR attempts did not constitute a substantial formality or a public policy, therefore the failure to comply with that requirement was neither a ground for nullity nor for the case to be struck out.
Thus, the requirement to justify of the steps taken to reach an out-of-court settlement lacked any real sanction before 1 January 2020.
Furthermore, it appears the revised Article 54 (5°) of the FCPC limits the reference to ADR attempts to small claims as set out in Article 750-1 of the same Code. This wording, which is more restrictive than that of the former Article 56, suggests that cases that exceed €5,000 and/or which do not fall within the jurisdiction of the Judicial Court are exempt from the requirement to attempt ADR. Thus, the statutory reforms have confirmed the court’s position of the non-binding nature of ADR attempts.
Stay of proceedings: an invitation to try ADR before legal action
Before the 2019 Civil Procedure reforms came into force, when the parties had not used ADR and the judge deemed that the case was fit for ADR, the judge usually relied on Article 127 of the FCPC to propose that the parties enter into conciliation or mediation. However, it is questionable whether the judge can still order conciliation or mediation on the basis of Article 127 of the FCPC.
Article 127 still refers to ADR attempts, as set out in Article 56 of the FCPC. However, as detailed op cit, Article 56 no longer addresses ADR attempts. Furthermore, Articles 54 and 750-1 of the FCPC exclude claims that exceed €5,000 or which are not issued before the Judiciary Tribunal from mandatory ADR. Therefore, the only avenue for the judge to order conciliation is through his general mission to conciliate the parties as set out in the overriding principle.
Binding ADR through a conciliation clause
The parties may stipulate in their contract that a conciliation should precede any legal action to force the other side to try ADR. The Cour de Cassation (the French Supreme Judiciary Court) has consistently stated that legal proceedings may neither be issued without attempting a conciliation, nor regularised by entering into a conciliation during the proceedings.
In conclusion, if the parties are no longer required to justify attempts to find an amicable solution when the amount in dispute exceeds €5,000, there is no doubt that an action brought without discussion may be suspended by the judge to organise a conciliation, if they consider that the circumstances are suitable for out-of-court negotiations. Moreover, the French courts will be overloaded in the coming months, trying to catch up with the delay dating back to 2019 (itself caused by the strikes of 2019 and early 2020) and, of course, after the quarantine due to the Covid-19 pandemic. ADR might now be the best way forward, if the defendant is willing to enter negotiations in good faith.