Understanding French Tax Cases: The Role of the Public Reporter

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By Gary D. Sprague, Esq.

Baker & McKenzie LLP, Palo Alto, CA*


One would think that it should be a relatively simple exercise to identify the precedential authority of a published case. The reported decision of the court will state the issue, conclusion, and legal rationale of the judges; if there is a dissent, then the reader will examine that dissent carefully for any further light it may shed on the issues in the case (or perhaps for possible arguments if the advocate wishes to distinguish the case in a future matter).  In the American system, the guidance exists within the text of the decision.

Not so in France. If the reader has had occasion to read the decisions of the French Supreme Administrative Court, which is the highest court in France for tax matters, the reader will not find all of the useful, and precedential, guidance within the four corners of the opinion. In many cases, it will be essential for the reader to consult the opinion of the Public Reporter to understand the impact of the case and to appreciate the guidance being expressed for the future development of the law.

In a recent commentary titled "Applying (and Misapplying) the OECD Commentary in Commissionaire PE Cases," 40 Tax Mgmt. Int'l J. 423 (7/8/11), I discussed the development of the law regarding whether transactions entered into by a civil law commissionaire normally create a PE of its principal under the typical OECD Model Convention Article 5(5). In an important decision, the Supreme Administrative Court held that Zimmer SAS did not constitute a PE of its principal. The careful reader may have noticed, however, that the critical discussion applying Article 5(5) to the facts of the Zimmer commissionaire arrangement was not written by the judges of the court. Instead, the technical analysis came from the pen of the Public Reporter, whose opinion is not reproduced in the official case report.1 The influence of the Zimmer case on the development of the law in France on this issue could not be understood without making reference to the Public Reporter's analysis.

In the interest of encouraging a fuller appreciation of French tax jurisprudence, this commentary briefly describes the role of the Public Reporter in French tax cases.

The institution of the Public Reporter was created along with the administrative court system during the 19th century.  There is no equivalent institution in the civil judicial system.  The Public Reporter initially was a representative of the central administration, but his role has evolved towards more independence and impartiality. These functions have never been clearly established by statute, but they have been explained by the Supreme Administrative Court itself in the following terms: "The mission of the [Public Reporter] is to explain to the court the questions raised by the request and to provide its opinion on the case through its conclusions, which must be rendered in full independence and impartiality."2 

The Public Reporter embodies a curious combination of roles. The Reporter is a member of the court with the status of a judge, but he does not have a vote to determine the outcome of the case. Instead, his role is solely to provide technical input on the issues in the case, acting as an independent expert to provide a personal opinion, in order to enlighten the other members of the court.

Unlike the prosecutor in criminal courts, who indirectly reports to the government through the Ministry of Justice, the Public Reporter is fully independent and does not report to anyone outside the court.

The process by which the Public Reporter makes his contribution also is curious to American eyes. Most of the argumentation before the administrative courts is in writing. In tax disputes, the procedure begins with an inquiry into the case ("Phase d'instructiondu dossier"). During this inquiry, the parties (taxpayer and tax administration) each will file briefs with the court to explain their positions. The case then is reviewed by a judge reporter ("Rapporteur"), which is a completely separate function from the Public Reporter. The judges of the court assigned to the matter then discuss the case among themselves.  The Public Reporter generally does not participate in this discussion; rather, he listens to the explanation of the judge reporter and the subsequent discussions of the other judges. The Public Reporter then prepares his personal opinion, which is explained in the Conclusions, a document submitted to the other members of the court.  In the Zimmer case, the Conclusions of the Public Reporter included the essential analysis of Article 5(5) which eventually became the foundation of the Court's decision.

At the end of this phase, the court holds a public hearing. The judge reporter opens the proceedings by describing briefly the circumstances of the case. The taxpayer or his representative is allowed to make an oral argument to supplement the briefs, but may not present new arguments. The Public Reporter also will speak during the public hearing, by reading his Conclusions. Most often, there are no further presentations.

After the public hearing, the court convenes a private session to debate the merits and come to a decision. Prior to 2006, the Public Reporter before the Supreme Administrative Court was allowed to participate in these debates among the judges; since 2006 he has been allowed only to be present in the room but not to participate in the actual discussions (more on this point below).  He has no voting right in the outcome of the case. The court is free to come to any conclusion, regardless of the opinion of the Public Reporter.

That said, it can be observed that in many cases the opinions of the Public Reporters carry great weight in the final determination of the judges. The Public Reporters who are assigned to tax cases generally are recognized as possessing superior understanding and technical knowledge of tax law. As such, their opinions frequently become important documents in the development of French tax law.

Their analyses, however, frequently cannot be found in the reported decision itself. The case report issued by the Supreme Administrative Court will generally address only the ultimate decision on the issue presented (e.g., is there a PE or not). The court normally endeavours to limit its decision to the exact issue presented, and to avoid addressing questions which have not been specifically raised by the taxpayer or the tax administration.

In contrast, the Public Reporter is permitted (and expected) to expand in depth on the analysis and legal concepts raised by the case. The Public Reporter may elaborate a principle of law so as to suggest an analysis applicable to subsequent cases, not just the case at hand. Therefore, it is necessary to read the conclusions of the Public Reporter to understand whether a particular decision may have been intended to resolve only the specific case in front of the court, or whether the court perhaps was endorsing a broader statement of principle to be applied in future disputes.

The Public Reporters often influence the evolution of case law, even to the extent of creating new legal doctrines.  As one of many examples, the current law in France distinguishing between the allowance of an expense deduction versus requiring capitalization for license fees paid for the use of intangible rights has been based on an approach presented by a Public Reporter.3 In the controlling 1996 case, the Public Reporter articulated certain criteria focused on the nature of the rights obtained by the licensee which had not previously been expressed in the law, but which were followed in the decision of the Supreme Administrative Court in that case. The criteria set forth by the Public Reporter in that case now have been followed by the court in more recent decisions.

So where can the law student, practicing lawyer, or legal scholar find these opinions, if they are not included in the court's case report? The Public Reporters own the copyright on their works, and are free to enter into a publishing agreement with any of the various legal reviews. The reviews then publish the works of the Public Reporters, so the opinions are made available to the public through subscriptions to the legal reviews. Generally, these arrangements with legal reviews are more common in the field of tax law than in other areas, allowing a much broader diffusion of the Conclusions for tax cases than for other administrative cases.

The influence of the Public Reporter, in light of the unusual relationship the Public Reporter holds relative to the other judges in the case, has led to criticisms that the Public Reporter's role may compromise a taxpayer's right to a fair trial.  Until recently, even the title of the purportedly independent legal expert raised suspicions of partiality. Before the adoption of a 2009 decree, the title of the position was "Commissaire du gouvernement," which understandably could convey the impression that this judge was not acting completely independently of the government.4 Accordingly, the title was changed to "Rapporteur Public" in order to avoid the inference that the judge was an advocate for the government. While the change of name seems to have been a good idea for that reason, it certainly did not eliminate all grounds for confusion in French judicial nomenclature, as the title is now confusingly similar to that of the court "Rapporteur," whose role was mentioned above.

Perhaps in consonance with the thought that the power to tax is the power to destroy,5 the question of the independence of the Public Reporter was raised as a human rights issue by several French taxpayers. In several cases before the European Court of Human Rights (ECHR), taxpayers argued that the French administrative judicial system violated the fair trial principle as set forth by Article 6§1 of the European Convention on Human Rights. Taxpayers first focused on the Conclusions themselves, that is, the opinion of the Public Reporter which is first read to the court during the public hearing on the case. Taxpayers complained in particular about the procedural rules that the taxpayer does not have access to the Conclusions before the public hearing, and that the taxpayer is not allowed to speak after the Public Reporter at the public hearing.  Taxpayers further complained that the Public Reporter was allowed to participate in the deliberations among the judges after the public hearing.

In the case of Kress vs. France,6 the ECHR upheld the procedures regarding the Conclusions, on the basis that, even though the taxpayer does not have access to the Conclusions in advance of the hearing, neither does the tax administration, so that both parties remain on a level playing field. In addition, the ECHR noted that even after the public hearing, the taxpayer still has the possibility to send a note in writing to the court to supplement a specific point ("note en de´libe´re´").

With respect to the issue of the Public Reporter's presence in the courtroom during the court's deliberations, however, the ECHR decided that the Public Reporter's presence infringed the fair trial principle on the basis that, since the Public Reporter had already publicly expressed his opinion during the public hearing, his further participation in the debates among the judges created the impression that the debates would not be impartial. France took this decision into account and by decree published in August 2006, determined that the Public Reporter would, except upon express request from one of the parties to exclude the Public Reporter from the discussions altogether, be present at the court's deliberations after the public hearing but could not participate in the discussion itself. Even though now the Public Reporter is not allowed to speak during the deliberations, one may speculate that at times it requires determined and principled judges to ignore the conclusions of an eminent Public Reporter who may be watching the debate in the same room.

Having survived the challenge on human rights grounds, the institution of the Public Reporter seems to be firmly established in French administrative judicial procedure. In fact, the Public Reporter concept seems to be expanding; it has been introduced into other judicial systems, in particular as the Advocate General before the EU's European Court of Justice and before the Belgian supreme court. As a result, readers of French tax cases should continue to pay close attention to the technical discussions contained in the Conclusions of the Public Reporters, as those experts apparently will continue to perform their role as leaders in the development of the tax law.

This commentary also will appear in the September 2011 issue of the Tax Management International Journal. For more information, in the Tax Management Portfolios, see Milhac and Bailleul-Mirabaud, 961 T.M., Business Operations in France.

*The author gratefully acknowledges the assistance of Marc Benard in the preparation of this commentary.  Marc is an associate in Baker & McKenzie's Paris office, currently on assignment in the firm's New York office.

1 CE 31 March 2010 Ste´ Zimmer Ltd, n° 304715 and 380525 conclusions Julie Burguburu, BDCF n° 6/2010.

2 CE 10 July 1957 Gervaise, informal translation.

3 CE August 21, 1996 SA Sife, n° 154488, conclusions Jacques Arrighi de Casanova, BDCF n° 5/1996.

4 This title also caused great difficulties for its translation into English, as practitioners and scholars used various alternative translations which never proved totally satisfactory, such as "Advocate General", "Government Commissioner," or "Judge Reporter."

5McCulloch v. Maryland, 17 U.S. 316 (1819).

6 ECHR June 7, 2001 Kress vs. France, and April 12, 2006 Martinie vs. France.

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