Validity and expiry of licenses
The rule governing the expiry of a license is a matter of public policy, and cannot be derogated from except as expressly provided by law.
Expiry of the unexploited license
Measures against non-use of licensesIn order to prevent certain liquor licenses from remaining unexploited for too long by their holders, the legislator has introduced an expiry measure.
Initially set at one year (former article L. 44 of the Code des débits de boissons), this was later extended to three years (art. L. 3333-1 of the Code de la Santé Publique).
Article L. 3333-1 of the French Public Health Code has since been amended to extend the three-year period to five years.
A third- or fourth-category outlet that has ceased to exist for more than five years is deemed to have been closed and can no longer be transferred.
This provision applies to on-premises drinking establishments and came into force on January 1, 2016.
Terms and conditions
Factual situationThe lapse of a license is not pronounced by a decision of an administrative or judicial authority, but results from a finding of fact, i.e. that it has not been used for more than five years.
The competent authority therefore confines itself to establishing this situation and proceeds by way of deduction.
It was following an investigation by the Gendarmerie Nationale that the interested party, a hotelier, was notified of the expiry of her license, and it was ruled that the notification made was not tainted by any assessment but merely noted the cessation of operations and the consequent withdrawal of the said license; the Public Prosecutor, who therefore notified the said hotelier of the disappearance of her license, merely noted a factual situation; he did not pronounce a decision. Under these conditions, article 6 of the European Convention on Human Rights is inapplicable to the "finding" made by the Public Prosecutor, which is limited to reporting, after investigation by the Gendarmerie, that the license has ceased to operate.
Starting point of the five-year periodThe question arises as to when the five-year period for expiry of a liquor license begins to run.
For example, in the event of a judgment terminating the commercial lease of premises on which a license is operated, it is legitimate to ask whether the starting point of the non-operation period should be considered to be the date of the judgment terminating the lease, or the date on which the license could not physically be operated on the premises.
It has been specified that cessation of existence is a "notion of fact which must, subject to the appreciation of the courts, be interpreted in relation to the material and effective cessation of operation and not with regard to the legal regularity of the operation of the business".
Conditions for maintaining license validityWhile any outlet that has ceased to exist within the period set by law is deemed to have ceased trading, this is not the case if the outlet has been open and operating, even temporarily, for a certain period: this is the case for an outlet that has been closed for less than a year, but has not ceased to exist since sales have been made following a declaration by its owner, even if the outlet was only open for several hours a day for a week, and sales were made.
However, it was subsequently ruled that this operation could not be symbolic: thus, a court of appeal decided that the opening of a public house for one day, recorded by a bailiff, could not be assimilated "to an effective operation and constitute a valid interruption of the expiration period". Indeed, this opening "was clearly a symbolic and fictitious opening intended to avoid the expiration".
In the same vein, it has been held that the opening of a fourth-category public house for an evening constitutes a "symbolic, if not fictitious" opening, which cannot be assimilated "to actual operation in the absence of essential installations, such as electricity or safety devices".
According to a ministerial reply, in order to avoid the expiry of a liquor license, the establishment must be open for business, which may be for a short period, but must nevertheless be open for more than one day. In fact, the operation must be effective, and for this to be the case, there must be a supply of drinks - unless a non-expired stock has been kept - and these must be sold to customers. A more recent ministerial reply specified that, to avoid a license expiring, it was necessary for there to be "an opening, which may be short-lived but must be effective". In particular, this opening must "result in the entry and exit of products sold to customers and the carrying out of a real commercial activity". Such a situation requires "a certain length of time - which, however, is not specified by either legislation or case law".
In addition, it would also appear - subject to the sovereign judgment of the courts - that the owner of a liquor license who has been out of business for nearly three years, and who has just found a buyer, may open his establishment for one or more weeks and operate his license in order to be able to sell it later.
License cancellationParagraph 4 of article L. 3333-1 of the French Public Health Code specifies that when a court decision has ordered the definitive closure of a public house, the establishment's license is cancelled.
Interrupting the deadline
Force majeureThe provisions of paragraph 1 of article L. 3333-1 of the French Public Health Code do not apply when the absence of operations is beyond the control of the manager.
It has long been held that if the non-operation of a license is beyond the control of the manager, and results, for example, from the cessation of operations due to work inherent in the operation (refurbishment, modernization work, transformations, major repairs, etc.), the provisions of article L. 3333-1 of the French Public Health Code do not apply.
It was ruled that these same provisions did not apply if the cessation of operations was due to the Administration's delay in issuing an authorization to carry out work, such a circumstance being assimilated to a case of force majeure.
In the same vein, lower courts have ruled that the death of the owner of a liquor license constitutes a cause for the cessation of its operation, and that consequently there was no reason to declare the license lapsed.
Court-ordered liquidationUnder the terms of paragraph 2 of article L. 3333-1 of the French Public Health Code, in the event of compulsory liquidation, the five-year period is extended, where applicable, until the close of operations.
Judicial liquidation therefore authorizes the extension of the five-year period until the close of operations:
- If the transaction takes place before the five-year period has elapsed, the transaction is neutral;
- If this takes place after the five-year period, it is extended to the closing date, with no time limit.
From the closing date, therefore, the license lapses (unless it has been sold as part of the liquidation).
Under the terms of paragraph 3 of article L. 3333-1 of the French Public Health Code, the five-year time limit is suspended for the duration of a provisional closure ordered by the judicial or administrative authorities.
