NDAs and Confidentiality Clauses Under French Law: What Actually Protects You

NDAs and confidentiality clauses under French law: what actually protects you

French law protects confidential business information at four levels: the liability rule of Article 1112-2 for information exchanged in negotiations, the confidentiality clause or NDA you draft, the statutory trade-secret regime, and a criminal offence covering manufacturing secrets revealed by directors and employees. Foreign companies routinely rely on the first layer alone, and routinely draft it in ways French courts decline to enforce: undefined categories of "confidential information", no survival language, no liquidated sanction, and then a damages award of one symbolic euro at the end of the litigation.

This article sets out the protection of information exchanged in negotiations, how to draft a confidentiality clause that holds under French law, what happens when there is no clause at all, the three-criteria trade-secret regime of the Commercial Code with its exceptions, and the criminal offence. It is written for businesses disclosing or receiving sensitive information in French negotiations, joint projects and supply relationships, whether they are preparing the documents before disclosure or dealing with a leak that has already occurred.

Which side of the confidentiality problem are you on?

Confidential information exchanged in negotiations: Article 1112-2

Protection begins before any contract exists. Whoever uses or discloses without authorisation confidential information obtained in the course of negotiations engages its liability under the general law (C. civ. Art. 1112-2). The provision codifies what the courts had already decided (Cass. com., 3 oct. 1978, n° 77-10.915), and its conditions are three:

• The information must be confidential. Information that qualifies as a trade secret under Article L 151-1 of the Commercial Code certainly is. But the protection is not confined to trade secrets: any information can be made confidential if the parties so agree, and only a public-policy general interest could stand in the way.
• It must have been obtained during the negotiations, whether volunteered by the party holding it or delivered on request, the parties being free to fix the terms of the communication in a formal accord.
• It must have been used or disclosed without authorisation. A negotiator "uses" the information where it exploits it, either commercially or malevolently by passing it to competitors, or by implementing it for its own account. Before the judge, the facts revealed can be held proved only after an adversarial debate between the parties.

Professional usage can define the confidentiality expected: an auction organiser who observed an established professional usage imposing confidentiality on the buyer's identity committed no fault (CA Paris, 16 juin 2020, n° 18/10105). The confidentiality duty sits alongside the negotiator's duty of sincerity: the information given must be exact (Cass. 1e civ., 31 oct. 2012, n° 11-15.529), and every negotiator is deemed to know these duties without anyone having to remind it of them (Cass. 2e civ., 25 mai 2022, n° 19-22.149). Discretion also has limits that cut the other way: a negotiator is not bound to reveal that it is conducting parallel negotiations unless it undertook to abstain from them (Cass. com., 12 mai 2004, n° 00-15.618), though a company director acquiring a shareholder's shares must disclose ongoing negotiations for their resale to a third party, whatever their stage (Cass. com., 10 juill. 2018, n° 16-27.868). The liability incurred under Article 1112-2 is in principle extra-contractual; it becomes contractual where the parties bound themselves to these duties in a negotiation agreement.

Contractualising the negotiation: the negotiation agreement

Where negotiations promise to be long and complex, and French courts have dealt with negotiations lasting four years (Cass. com., 7 avr. 1998), the parties may fix their rules in a negotiation agreement (contrat de pourparlers). Such a contract presupposes that the parties commit to negotiate, and only to negotiate, each keeping the freedom not to conclude the contemplated contract; where it has an international character, its regime is determined like that of any international contract. Among the matters such a contract can settle, several concern confidentiality directly: it can determine the information communicated during the negotiations that must be kept confidential, prohibit parallel negotiations, a prohibition that must be expressly formulated, organise partial written records and the force they will carry, a party who stated it would be bound only by a "definitive and detailed" deed not being bound by the writings exchanged during the negotiation (Cass. com., 15 nov. 1994, n° 92-19.931), define the object of the negotiations, the arrangements for any technical trial and the allocation of negotiation costs, and fix in advance the indemnity due for a breach, the parties being entitled to agree the evaluation of the loss since the liability is contractual. A clause excluding liability for breaking off the negotiations, for whatever reason, has been upheld, subject to dol (fraud) and gross fault (CA Paris, 16 févr. 2011, n° 09/16782). Once concluded, the negotiation agreement is performed like any contract, in good faith, and breaches of it engage contractual liability (Cass. com., 16 sept. 2014, n° 13-16.524).

Drafting a confidentiality clause that holds in France

The validity of a secrecy or confidentiality clause is recognised by statute (C. civ. Art. 1230). Enforceability is another matter, and it is decided at the drafting table. French courts refuse to sanction the breach of a confidentiality undertaking where the confidential information said to have been misused was never precisely identified (TGI Nanterre, 2 oct. 2014), and litigation over the scope of what was covered is a classic of the genre (CA Versailles, 20 mai 2010, n° 09/03261). Where a clause confined the secrecy obligation to objects and plans "signalled" as professional secrets, it protected only those actually so marked (TGI Paris, 16 mai 1990). A French NDA is only as strong as its definitions and its marking discipline.

The drafting checklist the practice has settled on covers seven points:

• Define the information covered, and how disagreements about coverage will be resolved.
• State the permitted use, specifying that communication transfers no exploitation right, intellectual property included.
• Require the recipient to warn its personnel of the information's confidential character: controlling entry to a factory does not, by itself, place those admitted under a secrecy obligation (TGI Paris, 16 mai 1990).
• Identify who is bound and to whom the information must not be communicated.
• Provide the exceptions business life demands, disclosure to obtain a loan, on a sale of activities or where a competitor takes control of a party, on your terms rather than a judge's.
• Fix the duration: an obligation unlimited in time and space is not treated as perpetual, and remains lawful, where it covers only a determined process and leaves the recipient free to practise its trade in other fields (Cass. com., 2 avr. 1979). Where the obligation is to outlast the contract, state that it survives whatever the cause of termination.
• Stipulate the sanction, examined below.

Survival after termination and the penalty clause

Article 1230 makes confidentiality clauses survive résolution, termination for breach, as a matter of law. It says nothing about the contract's other exits: expiry of the term, mutual termination, caducité. The prudent drafter therefore states that the obligation survives the end of the contract whatever the cause. As for sanction, the courts' record commands a penalty clause: without one, breach yields damages only on proof of loss, and French judges assess that loss with parsimony, a leaked-information claim that had won 10,000 euros at first instance being reduced on appeal to one euro of moral prejudice (CA Paris, 3 juin 2014, n° 12/21265). Practice adds reinforcements: a cash collateral (gage-espèces) securing the penalty and allowing set-off at the creditor's initiative, acceleration of any term the recipient enjoys, use restrictions on the transmitted information, an undertaking not to recruit the secret holder's personnel, and, in reciprocal exchanges, the victim's right to disclose what it received. One limit should be kept in mind when setting the figure: the judge may moderate or increase a penalty that is manifestly excessive or derisory (C. civ. Art. 1231-5), so a realistic, justified amount holds better than a deterrent one.

No NDA? What French law still gives you

Silence in the contract does not leave the discloser without protection. An obligation of secrecy can be recognised as implicit in the very object of the contract, the communication of know-how (savoir-faire) being the standard example, since the purpose of such a communication assumes that the recipient will not pass the knowledge on. And the courts have long accepted that violating a secret, or by analogy a confidentiality undertaking, can constitute a fault engaging extra-contractual liability under the general fault provisions, formerly Articles 1382 and 1383, now Articles 1240 and 1241 of the Civil Code (Cass. com., 22 mars 1971, n° 69-12.975).

The victim of a disclosure whose rights no clause has fixed can claim compensation for its loss (Cass. soc., 26 avr. 1963), or terminate the contract (CA Paris, 10 oct. 1997), including by the unilateral termination for serious breach the courts accept (Cass. com., 12 juill. 2011, n° 10-22.753). The beneficiary of the leak is not out of reach either: the recipient who made itself the discloser's accomplice can be condemned alongside it. But the quantum problem is the same as under a sanction-free clause: proof of loss is on you, and awards are modest. The statutory trade-secret regime, which follows, was built precisely to firm up this ground.

Trade-secret protection under Articles L 151-1 and following of the Commercial Code

Since the trade-secret statute entered the Commercial Code, information qualifies for protection where it meets three criteria (C. com. Art. L 151-1): it is secret, in that it is not generally known or readily accessible to persons familiar with this type of information in the sector; it has commercial value, actual or potential, because of its secrecy; and it is subject to reasonable protection measures designed to preserve that secrecy. Only the information's legitimate holder may use it, disseminate it or waive the protection. The category is broad, spanning processes, economic and financial information and commercial or industrial strategies.

Obtaining, using or disclosing a protected secret is unlawful whenever it is done without the holder's consent and results from one of three situations (C. com. Arts. L 151-4 and L 151-5):

• unauthorised access to a document, or to its copy;
• conduct that is disloyal and contrary to commercial usage;
• use by a person violating an obligation not to disclose the secret or to limit its use.

In each of these situations the violator's civil liability is engaged (C. com. Art. L 151-3). The third criterion is where businesses fail: a company that cannot show reasonable protection measures, access restrictions, marking, contractual undertakings, has no trade secret to defend. Your NDA is not only a contract; it is the evidence that the statutory regime applies to what you shared.

The statutory exceptions that prevail over the secret

The protection has statutory limits. The secret is not opposable where the underlying information was obtained, used or disclosed to exercise freedom of expression and information, including press freedom; to reveal, in good faith and to protect the general interest, illegal activity, fault or reprehensible conduct, including through the right of alert instituted by the Sapin 2 law of 9 December 2016; or to protect a legitimate interest recognised by EU or national law (C. com. Art. L 151-8). Nor is it opposable where disclosure is required or authorised by EU law, treaties or national law, notably to the investigative, supervisory, authorisation and sanction powers of courts and administrative authorities (C. com. Art. L 151-7). An NDA cannot be drafted around these carve-outs, and clauses that pretend otherwise mislead their own beneficiary.

Would your information qualify as a trade secret?

The criminal layer: manufacturing secrets

For industrial know-how, French law adds a criminal offence: a director or employee of an enterprise who reveals or attempts to reveal its manufacturing secrets faces two years' imprisonment and a 30,000 euro fine, with a possible five-year deprivation of civic rights (CPI Art. L 621-1). The protected object is a process of practical or commercial interest, implemented by an industrial operator and kept hidden from competitors who did not know it before it was communicated to them (Cass. crim., 10 déc. 1957); the process need not be patentable, nor absolutely unknown to every competitor (Cass. crim., 19 sept. 2006), but it must present a genuinely novel character.

The offence's contours matter to both sides of an employment or partnership dispute. The disclosure must come from an employee or director of the enterprise holding the process, and remains punishable after the employee's departure from the company (Cass. crim., 19 sept. 2006). Communication to any third party counts, a spouse or the employee's own newly created company included. But the former employee who simply sets up on his own account and uses the secrets learnt in the previous job commits no offence; the employer's remedy is then civil, in unfair competition. The offence requires fraudulent intent (Cass. crim., 12 juin 1974, n° 73-90.724): negligence, or a staff never instructed in secrecy, does not convict (Cass. crim., 14 avr. 1970). Merely receiving a secret is not complicity absent provocation, incitement or assistance, though knowingly harbouring and exploiting fraudulently communicated secrets constitutes recel (Cass. crim., 7 nov. 1974). Sharing the process with contractually bound exchange partners does not destroy its secrecy, and the partner who passes it to a competitor commits the offence (Cass. crim., 20 juin 1973, n° 72-92.270). Nor does the free movement of goods within the European Union justify the violation of a manufacturing secret (Cass. crim., 24 juin 1985).

The four levels of protection compared

Frequently Asked Questions

This article is for general information only and reflects French law as published at the date shown above. It does not constitute legal advice. Always seek qualified advice before acting.