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Bank secrecy challenged by the right to evidence
In a decision dated October 12, 2021, the Toulouse Court of Appeal sought to reconcile banking secrecy and the right to evidence by relying on the proportionality test, as defined by the case law of the French Court of Cassation.
Banking secrecy: an obligation on banks in the interests of customers protection
Banking secrecy, enshrined in Article L. 511-33 of the French Monetary and Financial Code, was not instituted for the benefit of banks, but for the purpose of protecting their customers. The bank is the "confidant" of its customers and has access to their income and expenses, transactions, investments, financial links with third parties, etc. Thus banks have access to all information that concerns private life in the broad sense, i.e. including family life and professional activities.
Since banking secrecy contributes to the proper functioning of the banking system, it is important to analyze it under the right to evidence.
From the legitimate impediment to the "balancing test": the interest in protecting secrecy vs. the interest in access to evidence
Bank secrecy has long been considered a "legitimate impediment" to the production of evidence, particularly when the bank was a third party to the proceedings. Indeed, article 11 of the French Code of Civil Procedure provides that the judge may order, if necessary under penalty, the production of documents held by third parties provided that "there is no legitimate impediment",[1] which was the case with bank secrecy.[2]
The "legitimate impediment" also applied when "the financial institution is a party to a lawsuit, as long as its adversary is not the beneficiary of the secrecy that the client has not himself waived".[3]
But the case law has changed. In 2017, the Court of Cassation, under Article 145 of the Code of Civil Procedure (CCP), held that bank secrecy was no longer a legitimate impediment when the banking institution "is a party to the lawsuit brought against it with a view to seeking its possible liability in the carrying out of the disputed transaction."[4]
The legitimate impediment has been replaced by the balancing test. Two landmark rulings by the Court of Cassation in 2018[5] and 2019[6] set out the terms of this test, which must be carried out in two stages. Before granting a request for the production of a document covered by banking secrecy, the judge must first verify, whether the information is "indispensable" (and not just "necessary") for the exercise of the right to evidence and then ensure that the production of the information is "proportionate to the antinomic interests at stake."
The decision of the Toulouse Court of Appeal of October 12, 2021 in the light of the “balancing test”
Like many appeal court decisions, the one of 12 October 2021 by the Toulouse Court of Appeal[7] applies this two stages method: the plaintiffs, partners in various companies, questioned the management of these companies by a third party. They had requested, under Article 145 CPC, bank and accounting data and the appointment of an expert to analyze them and verify their suspicions of money laundering and accounting failures of the companies, as well as failures by the banks to meet their obligation of vigilance.
The Court recalled, in line with the above-mentioned case law of the Court of Cassation, that in order to be "legally admissible", investigative measures, such as the production of evidence, must not "involve any infringement of a fundamental freedom or a protected secret, subject to a proportionality review to verify whether the measure ordered is essential to the exercise of the applicant's right to evidence and proportionate to the conflicting interests at stake." Firstly, the Court stresses the need to take account of banking secrecy, pointing out that "the power of the civil court to order a party or a third party to produce any document which it considers useful for establishing the truth is limited by the existence of a legitimate reason relating in particular to professional secrecy.”
Then, as part of its proportionality review, it refused to grant the complainants access to the respondents' bank and company accounts and to all their accounting documents over a ten-year period. On the other hand, it listed in great detail the documents it considered the plaintiffs were entitled to receive, in particular documents that make it possible to identify the issuers and beneficiaries of two "unexplained" transfers and documents on the articles of association and about general meetings over a limited period.
In conclusion: if banking secrecy is not absolute and must eventually give way to the right to evidence, it is subject to the condition that the plaintiffs' request meets the test of necessity and proportionality as required by the Court of Cassation.
No, banking secrecy has not disappeared, nor should it.
[1] Court of Cassation, Commercial Division, November 13, 2003, No. 00-19.57.
[2] See in particular Court of Cassation, Commercial Division, 25 January 2005, No. 03-14.693; Court of Cassation, Commercial Division, 10 February 2015, No. 13-14.779.
[3] Court of Cassation, Commercial Division, February 10, 2015, No. 13-14.779.
[4] Court of Cassation, Commercial Chamber, November 29, 2017, No. 16-22.060.
[5] Court of Cassation, Commercial Chamber, May 24, 2018, No. 17-27.969.
[6] Court of Cassation, Commercial Chamber, May 15, 2019, No. 18-10.491.
[7] Req. No. 20/03050
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