Professional Documents
Culture Documents
January 8, 2003
The French usury rule is set forth in L. 313-3 of the Code de la Consommation A Partnership
Including
(the French Consumer Code), which states: “[a] conventional loan [prêt Professional
conventionnel] constitutes a usurious loan when it is granted at a rate that exceeds, Corporations
at the time it is granted, by at least one-third the average effective rate applied New York
during the prior quarter of the year by credit institutions in loans of the same One New York Plaza
New York, NY 10004
nature with similar risks, as defined by the relevant administrative authority after 212.859.8000
consulting the National Credit Council.”
Washington, DC
1001 Pennsylvania Avenue, NW
The applicability of French usury law to obligations has been highly controversial Washington, DC 20004
202.639.7000
under French law. There is no case law concerning whether obligations are
“conventional loans” within the meaning of the statute. Nor is there any case law Los Angeles
350 South Grand Avenue
discussing subordinated loans of any type. Doctrinal authors have been divided on Los Angeles, CA 90071
the question. 213.473.2000
London
FFHSJ has taken the position in several publications that French usury law should 99 City Road
London EC1Y 1AX
not apply to high-yield debt instruments: International Financial Law Review United Kingdom
(IFLR, February 2002 and December 2002), Recueil Dalloz (April 2002), and 44.20.7972.9600
Revue Banque et Droit (August 2002). Paris
5, boulevard de la Tour Maubourg
75007 Paris
In October 2001, FFHSJ formally requested the Central Bank of France, the France
Commission des Opérations de Bourse (COB, the French market regulator), 33.140.62.22.00
ANSA, and the President of the Commission of Finance of the Assemblée www.friedfrank.com
Nationale (French House of Representatives), to clarify the scope of the usury
rules under French law.
This response, coming from the Minister in charge of determining the reference
usury rates, removes a serious obstacle to high-yield lending in France, although it
does not address the issues raised by loans to French corporations that are
arranged in foreign financial markets.
Paris
Eric Cafritz 33.140.62.22.00
Delphine Caramalli 33.140.62.22.00