Where State’s assets are not specifically used or intended to be used in the exercise of diplomatic or consular missions, the State’s express waiver of immunity from execution is sufficient for the assets in question to be subject to an execution measure, regardless of their fiscal nature, and without the need for a special waiver.
No principle prevents a foreign State from enforcing a claim for taxes against a taxpayer domiciled in France at the taxpayer’s registered office in France, even if the underlying business activity was conducted in the territory of the foreign state by a local branch of the French company.
In November 2016, in execution of an arbitration award ordering the Republic of Congo to pay various sums, Commisimpex requested the attachment of receivables from EDF Africa Services, which owed taxes to the Republic of Congo related to the business activities of its Congolese branch.
The Republic of Congo requested that the measure be lifted. In a ruling handed down on 3 May 2018, the Paris Court of Appeal rejected the request on the grounds that a State’s express waiver of immunity from enforcement is sufficient to attach tax receivables.
The Republic of Congo appealed this judgment on two bases.
The first argument was based on the classic theory of immunities. The State argued that, while States may waive immunity from execution in respect of property used or intended to be used for public purposes or connected with the exercise of a public authority’s prerogatives, which is the case with tax and social security claims, such a waiver must be “express and special”.
The second argument was based on the principle of territoriality of enforcement procedures. The State criticised the Court of Appeal for rejecting its application for release on the grounds that the assets subject to seizure constituted tax receivables and that the principle of territoriality of enforcement proceedings and tax collection precludes tax receivables from being seized in the territory of any State other than the State of taxation.
In its decision dated 13 April 2023, the Court of Cassation dismissed the appeal.
On the one hand, the Court confirms that, where the assets of a State are not specifically used or intended to be used in the exercise of diplomatic or consular missions, an express waiver of immunity from execution is sufficient for the assets concerned to be subject to a measure of execution, with no special waiver required.
On the other hand, the Cour de cassation held that, where a foreign State waives its immunity from enforcement, there is no principle preventing the creditor benefiting from this waiver by enforcing tax claims held by the State against taxpayers domiciled in France under ordinary law.
Lastly, the Court of Cassation held that, by virtue of the principle whereby it is not possible to divide or segment one’s assets (“principe d’unicité du patrimoine”), tax claims held by the Republic of Congo against a French company, in relation to business activities carried out by the company’s Congolese branch, are deemed to be located at the French registered office for the purposes of seizure. Commisimpex could therefore seize the tax debt held by the Congolese government against EDF Africa Services at the registered office of EDF Africa Services.
The decision dated 13 April 2023 will please creditors wishing to enforce arbitration awards in France against foreign states holding assets in France. However, it will not please French companies owing tax or social security debts to foreign States that will obviously not be satisfied with payment made to a seizing creditor and will continue to demand the tax payment. These French companies will find themselves to be de facto joint and several guarantors of government debts. The Sapin II statute specifically aimed to protect against this risk…