When a creditor initiates debt collection proceedings, the debtor's bank is thrust into a role that goes beyond that of a mere depositary of funds: that of garnishee. This is not a neutral position, and its liability is heavily involved, as is the case for administrative seizure by third parties (SATD) initiated by a public accountant. Far from being a mere automaton, banks are bound by complex obligations, failure to comply with which can result in severe financial penalties. The acceleration of financial flows, the complexity of account structures and the international context add constant challenges to this delicate mission. Before analysing the banker's specific duties in detail, it is essential to understand how attachment worksThis is an enforcement procedure that immediately transfers ownership of a claim to the distraining creditor by the simple effect of the deed served by the court commissioner.
The fundamental obligations of the garnishee banker: declaration and deadlines
As soon as the writ of attachment is served by a judicial officer, the bank assumes imperative responsibilities. Its reaction must be immediate and precise, because the law, through the implementing decree relating to the seizure-attribution procedure, does not allow it any time to reflect on its position vis-à-vis the judicial commissioner. One of the banker's first obligations is to declare the extent of the debtor's assets, which implies detailed knowledge of the rules governing precise calculation of the balance subject to seizure following the regularisation of ongoing operations, a key stage in the implementation process.
The scope of the 'on the spot' declaration and its imperative nature
Art. R. 211-4 of the Code of Civil Enforcement Procedures requires the garnishee to provide the court commissioner "forthwith" with information on the extent of its obligations towards the debtor. Case law interprets this concept very strictly. It is not a matter of a deadline of a few days, but of an obligation of instantaneous execution. The commissioner must obtain an immediate response when the document is served. The imperative nature of the 'on the spot' declaration is explained by the very nature of the procedure, which authorises a court commissioner to seizing a bank account without prior warning to guarantee its effectiveness.
The dematerialisation of financial flows is putting this requirement to the test. In the case of a SEPA or SWIFT transfer, where the order is irrevocable as soon as it is received by the payer's payment service provider, it may take some time (D+1 or more) for the transaction to be completed. The bank must then declare the exact status of the accounts at the precise time of the seizure, taking into account transactions that have been initiated but not yet credited or debited. According to case law, the debt arising from a transfer arises as soon as the order is issued, even if the funds have not yet been formally entered in the beneficiary's account. The bank must therefore be extremely diligent in photographing the status of the assets at any given time, or risk being held liable in administrative and legal proceedings.
The requirement to disclose supporting documents and the limits of banking secrecy
In addition to simply declaring balances, the banker must provide supporting documents. This obligation, set out in art. R. 211-4 of the Code of Civil Enforcement Procedures, often comes up against the issue of banking secrecy, which is protected by art. L. 511-33 of the Monetary and Financial Code. However, the law is clear: the obligation to cooperate with an enforcement measure constitutes a legal derogation from banking secrecy. The banker cannot therefore rely on this to refuse to provide the judicial representative with the relevant information.
This communication must be targeted and proportionate. It concerns all deposit accounts opened in the name of the debtor and must enable the court commissioner to verify the accuracy of the declaration. In particular, the bank must indicate, by means of a written reply to the court commissioner, any previous assignments of claims, delegations or seizures that would affect the availability of funds. This transparency is all the more necessary as banks are also subject to obligations of vigilance in the fight against money laundering and the financing of terrorism (TRACFIN), which may lead them to identify suspicious transactions on the debtor's accounts.
Liability of the garnishee banker and assessment of legitimate reason
Failure to comply with reporting and communication obligations exposes the banker to direct and severe penalties. The banker may be held liable if he fails in his duties, but he must also be able to identify situations where the measure itself is potentially irregular, particularly in the case of a seizure of assets deemed abusive. However, the legislator has provided a safety valve in this area: the legitimate reason, which may, in certain circumstances, justify a delay or failure to make a declaration. Its assessment by the courts is at the heart of many disputes.
Penalties for failure to comply with the obligation to declare
Art. R. 211-5 of the Code of Civil Enforcement Procedures provides for two types of sanctions, often implemented at the initiative of the court officer reporting a breach. The first, and most formidable, is an order to pay the costs of the seizure. If the bank fails to make a declaration or provides it late without justification, it may be personally liable to pay the debtor's debt in his place. In a way, it becomes the guarantor of its customer's insolvency. This penalty, which can have serious consequences for the banking business, is designed to discourage any collusion between the garnishee and the debtor.
The second penalty is the payment of damages. This applies in the event of an inaccurate or misleading statement. If the creditor proves that the bank's erroneous declaration has caused him harm, for example by preventing him from recovering his debt, he can obtain compensation. Liability claims against the garnishee are time-barred in accordance with the rules of ordinary law, and begin on the day of the decision by the court-appointed receiver to enforce the attachment.
The concept of legitimate reason and its exonerating role
To avoid these penalties, the bank may invoke a legitimate reason. This concept, which is left to the discretion of the court, covers situations where objective and serious difficulties prevent an immediate and complete declaration. Case law has gradually defined what is acceptable. A legitimate reason may be recognised where transactions are exceptionally complex (for example, the need to consolidate the balances of multiple accounts governed by a unit-of-account agreement) or where it is difficult to identify the authorised contact person within a large structure at the time of service by the commissaire de justice.
On the other hand, ignorance of the law or internal disorganisation are systematically rejected. The banker's duty of vigilance may also constitute a legitimate reason. If the banker has serious doubts about the legality of a transaction or suspects fraud (as in the case of "presidential fraud" or phishing), he may be justified in deferring his declaration until he has carried out the necessary checks, which constitutes a prudent practice. By doing so, they protect not only their own interests but also those of the parties to the seizure, thus avoiding making a payment that could later be contested.
Managing complex accounts: unit agreements, mergers and foreign branches
The full complexity of seizure-attribution is revealed when it concerns unusual account structures. Unit account agreements, joint accounts and accounts held in foreign branches raise tricky legal questions about the actual scope of the seizure and the bank's reporting obligations.
Enforceability of account unification and amalgamation agreements against seizure by way of execution
Many companies have several bank accounts. To simplify their cash management, they can sign an agreement with their bank to combine or merge their accounts. This agreement stipulates that all the accounts are considered to be a single account, with only the overall consolidated balance being legally relevant. The question then arises as to whether this agreement is enforceable against the distraining creditor.
The Court of Cassation has ruled in principle that such an agreement is enforceable, provided that it was entered into prior to the seizure and is not fraudulent. The banker is then obliged to declare only the single balance resulting from the merger of the accounts, a frequent subject of dispute. The enforceability of these agreements is often debated, especially when they compete with other securities such as a pledge of accountThis solution has a considerable impact on the basis for seizure. This solution has a considerable impact on the basis for seizure: an individual credit account may be absorbed into an overall debit balance, depriving the creditor of any security.
Seizure of foreign bank branches and cross-border issues
The principle of the territoriality of enforcement procedures means that an attachment carried out in France cannot affect assets located abroad. However, case law has adopted a pragmatic approach to banks. As a branch has no legal personality separate from the parent company, and each legal entity is a single entity, the Court of Cassation considers that an attachment served at the head office of a French bank has effect on all the debtor's accounts, including those held by its foreign branches (Civ. 2e, 10 Dec. 2020, no. 18-17.937). This decision, which has a significant impact within the European Union, requires rigorous coordination.
The garnishee banker must therefore include in his declaration the balances of accounts held in his foreign branches. This solution enhances the effectiveness of seizures in a globalised economic context, but requires banks to coordinate rigorously internally in order to comply with the obligation to respond 'on the spot' to the court commissioner, particularly in view of the communication times inherent in international networks such as SWIFT or SEPA settlement procedures, a major issue for any company with an international status.
Special features of joint and undivided accounts in attachment proceedings
Seizure of an account with more than one holder is governed by different rules depending on the nature of the account. In the case of a joint account, active solidarity means that each joint holder is considered to be a creditor of the entire balance. Consequently, the creditor of only one of the joint account holders can have all the available funds seized. However, this seizure does not result in final allocation. The non-debtor co-holder may obtain partial release by proving that part of the funds belongs to him or her.
The system for joint accounts is different. In the absence of joint and several liability, each co-owner is deemed to own only his or her share. A seizure on behalf of only one of the account holders can therefore only relate to his or her presumed share in the joint ownership, often half in the absence of any specification in the deed or agreement relating to the account. The impact of the matrimonial property regime of the joint account holders is also decisive, particularly in distinguishing between own funds and joint funds and their respective seizability.
Attachment of assets and insolvency proceedings: nullity and protection of the bank
The relationship between an individual enforcement measure such as seizure of assets and collective proceedings (safeguard, reorganisation or judicial liquidation) is a source of dispute. If the attachment takes place before the judgment opening the proceedings, in principle it confers an exclusive right on the creditor. However, this right may be lost if the seizure was carried out during the "suspect period". The opening of insolvency proceedings raises complex questions about the continuation of payments, particularly with regard to seizure of successive claimssuch as rents or royalties.
The attributive effect of the opening of collective proceedings
Art. L. 211-2 of the Code of Civil Enforcement Procedures is clear: the act of seizure immediately attributes the seized debt to the creditor. The major consequence of this is that the debt is transferred from the seized debtor's assets to those of the distrainor. As a result, a judgment opening collective proceedings after the seizure does not call into question this attribution effect. The distraining creditor is not subject to collective discipline and does not have to declare his claim as a liability for the part covered by the attachment. He retains his right to direct payment by the garnishee.
Risks of invalidity of seizures during the suspect period: conditions and proof
There is one major exception to this principle: the nullity of acts performed during the suspect period. The suspect period is the period between the date on which the debtor ceases to make payments and the judgment opening the collective proceedings. According to art. L. 632-2 of the French Commercial Code, a distraint order made during this period may be set aside by the court. This is an optional nullity.
For the seizure to be declared null and void, an essential condition must be met: the seizing creditor had to have knowledge of the debtor's state of cessation of payments at the time of the seizure. Recent administrative and judicial case law has clarified the contours of this knowledge, which must be personal and not that of the mandated judicial commissioner (cf. Com. 2 Dec. 2014). The burden of proving this knowledge lies with the bodies involved in the insolvency proceedings (trustee or liquidator). For the garnishee bank, the risk is therefore that a garnishment, for which it has made a declaration and immobilised funds, will be retroactively annulled, obliging it to return the sums to the liquidator.
The complexity of the garnishee banker's obligations when faced with an attachment order, particularly in the case of complex accounts or in an international context, makes the assistance of a lawyer with expertise in enforcement proceedings essential in order to secure transactions, anticipate procedural costs and limit the risk of liability. Our firm is at your disposal to analyse your situation and propose an appropriate support plan.
Sources
- Code of Civil Enforcement Procedures (CPCE): in particular art. L. 211-1 to L. 211-5 (general provisions), art. R. 211-1 to R. 211-23 (implementing decree relating to the procedure), art. L. 162-1 and R. 162-2 (provisions specific to unseizable bank balances)
- Commercial Code: in particular art. L. 632-1 and L. 632-2 on the nullity of the suspect period, an essential condition in insolvency proceedings
- Monetary and Financial Code (CMF): in particular art. L. 511-33 on banking secrecy
- Law no. 2019-222 of 23 March 2019 on programming 2018-2022 and reform for the justice system (known as the 'Justice Law') and its implementing decree, relating to the dematerialisation of electronic exchanges with the judicial commissioner.
- Case law of the Cour de cassation (Civil Chamber and Commercial Chamber) relating to the obligations of the garnishee.
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