(European) Mercy for Jérôme Kerviel? (updated)


Jérôme Kerviel was a young trader with a promising future. Today, a French criminal court ordered him to pay his employer Société Générale € 4.9 BILLION in damages.  The court has also sentenced him to serve 3 years in prison. Unsurprisingly, Mr Kerviel has already announced that he will appeal. 

€ 5 billion is a high sum that Mr Kerviel will likely have difficulties paying. The court has forbidden him to be a trader again. That will not help. Given his current salary (he is in computers now), journalists have calculated that he may need to work 177,000 years to pay his debt. After all, as journalists have also reported, € 5 billion is the GDP of Benin.

It seems that some innovative legal argument would be welcome here. On the top of my hat, two come to mind.

First, Mr Kerviel may want to pay nothing at all. What about trying insolvency? Unfortunately, it is not available for him in France, as he is a mere employee. But it might be elsewhere in Europe. If he settles in such country, could he after a while take advantage of local insolvency law, and obtain recognition of the judgment in France under the insolvency regulation? 

Readers have pointed out to me that it might be enough for Mr Kerviel to move inside France. Alsace and Moselle have kept a special insolvency regime (French Commercial Code, Art. L 670-1), that German debtors particularly fancy, and which is open to everybody, including employees. The geographic requirement is to be domiciled in one of these two regions. Mr Kerviel could thus move to Metz or Strasbourg and, if he could show that he would have genuinely settled there, benefit from local insolvency law. However, the rule of French law which does not allow debts resulting from criminal offences to be cancelled in such cases, also applies in Alsace and Moselle. But maybe other jurisdictions would allow the cancellation for even such debts.

Secondly, Mr Kerviel may want to pay his debt, and think that he would thus need to be back in business again. Would the ban of the French criminal court be recognised outside of Europe? Could he practice in other major financial centers of the world?

UPDATE: Société Général people have told the French press that they would not insist that Mr Kerviel pay the entire sum. When asked whether that meant that they did not intend to ask for any payment, they said that it only meant that they would be happy to explore whether they could reach an agreement with Mr Kerviel. Well, even if Mr Kerviel was fortunate enough to settle for 1% of the entire sum, he would still need 1,770 years to meet his new obligation.  In any case, he announced this morning on a French radio that he was not asking anything to SocGen.

4 replies
  1. Jon Eli says:

    Dear Gilles,
    No insolvency regime that I know of erases judgments awarded as part of a criminal process. It would have been very different had this been a civil case–and in essence, this award to SG is a civil matter; it is a compensation for loss awarded to a private party, not a fine (punishment) properly defined. This blurring of the lines between fines and damages, initially instituted on grounds of institutional judicial efficiency (not to replicate in a civil trial what a criminal one has already established) is a matter for serious concern and criticism.
    Freedom of occupation is generally considered a civil right and just as licensing is generally not extra-territorial, so would be any limitation on it. I do not know what the ramifications of the French court’s sanction would be inside the EU, but elsewhere (and possibly there too) this ban should have no legal effect. Whether he would find eager customers or employers lining up is another matter.
    My advice to him is to write a book, make it into a movie; seven figure advances are in store. Why should he do this if SG would collect? He might be able to negotiate a settlement; currently SG stands to collect nothing. Or is this too pragmatic?

  2. Václav Žalud says:

    I believe that the damages awarded to SG are civil in nature. Although the judgment was given in criminal proceedings, it does not change the fact that the damages were assessed on the basis of civil law provisions (e.g., the Code Civile). In the Czech republic, we also have the opportunity to join criminal proceedings and claim damages for the harm sustained by a crime, but the claim itself remains civil in nature (correct me if this is different in France). Therefore I think he could benefit from insolvency. However, shouldn’t he have more than one creditor in order to be insolvent?

  3. Jonathan says:

    But how would insolvency help him? The debt is not erased; it merely gets rearranged and allows procedural relief (at least in common law); once he comes into money, the creditor will have access to a substantial proportion of it.
    I would suggest appealing (either within French or EU framework) on the grounds that a civil award or even a fine (as the first commentator remarked), which is not even potentially erasable during the debtor’s life-time, is tantamount to an order of servitude and against human dignity. No sanction should be such that it precludes any hope or any possibility of the debtor reinventing himself and resurrecting his life. There ARE distinctions between natural and artificial persons (corporations).

  4. Gilles Cuniberti says:


    in many civil law jurisdictions, insolvency does erase debts. It would therefore greatly help him. The only question is to find a place where 1) all natural persons may benefit from insolvency and 2) even debts connected to criminal offences may be erased. French law allows for none of these (but it does erase all other debts). But as the debt is undoubtedly civil in character, I think it is plausible that some other jurisdiction would not make the difference.

    Now, I take your human rights point: there is indeed a case to say that being subject to such a debt is a violation of his fundamental rights.

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