Bankruptcy remote collateral underpinned by recent French court decisions

French law recognises a preferential regime in the case of collective proceedings both for financial collateral under the financial collateral directive regime and for fiducie security.

Two recent noteworthy court decisions have upheld those distinctive regimes.

  • The first decision ruled as constitutional the bankruptcy remote regime of financial collateral.
  • The second decision interpreted restrictively the notion of retention of use and enjoyment of the security assets by the grantor where the bankruptcy remote regime of fiducie security does not apply.

Financial collateral regime ruled constitutional

The Cour de cassation (the highest French civil court) considered the admissibility of a petition before the Constitutional Court (Conseil Constitutionnel) which challenged the constitutionality of the financial collateral directive as a preliminary defence to an application to a case (question prioritaire de constitutionnalité).

The petition contested the bankruptcy remoteness of...