Opinion of the Advocate General — ECLI:EU:C:2024:128
Date: 2024-02-08
Language of the case: French
Subject matter: Right of establishment;Provisions governing the Institutions;Acts of the institutions
Procedure: Reference for a preliminary ruling
Origin: France

Summary C-174/23– 1 
Case C-174/23 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
21 March 2023 
Referring court:  
Cour de cassation (France) 
Date of the decision to refer:  
15 March 2023 
Appellants in cassation:  
HJ 
IK 
LM 
Respondents in cassation:  
Twenty First Capital S.A.S. 
      
Succinct presentation of the facts and procedure in the main proceedings 
1 In March 2014, R Participation, a company established by HJ with LM and IK as 
partners, sold three collective investment schemes dedicated to investments in 
emerging markets (the ‘R funds’) to the T company by way of a transfer of 
business. HJ became an employee of the T company. 
2 On 5 June 2014, in order to organise the takeover of that business by Twenty First 
Capital (the ‘TFC company’), HJ entered into an agreement with it, under the 
terms of which the TFC company promised to hire him by 1 November 2014 at 
the latest.  
3 On 27 June 2014, the same parties entered into a partnership agreement providing 
for various remunerations in favour of IK, HJ and LM. On 24 October 2014, the T 
company sold part of its business comprising the R funds to the TFC company; on 
EN 
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11 December 2014, HJ joined the TFC company as a board member, managing 
director and second most senior manager of that company. 
4 HJ and IK sued the TFC company to enforce the partnership agreement and for 
damages. LM voluntarily joined the proceedings. The TFC company counter-
claimed the nullity of the partnership agreement. 
5 In a judgment of 10 January 2019, the Tribunal de grande instance de Paris 
(Regional Court of Paris, France) found that the remuneration provided for in the 
partnership agreement was intended to remunerate the cooperation to be exercised 
in the context of the salaried functions of HJ and LM, as well as in the context of 
HJ’s corporate mandates. Noting that the TFC company was an asset management 
company managing at least one alternative investment fund (‘AIF’), it ruled that 
the remuneration had to comply with the rules set out in Article L. 533-22-2 of the 
code monétaire et financier [French Monetary and Financial Code] and 
Article 319-10 of the General Regulation of the AMF [Autorité des marchés 
financiers (Financial Markets Authority, France)], which fall within the scope of 
public policy rules designed to order society [(ordre public de direction)]. Finding 
that the remuneration did not comply with those rules, it annulled the partnership 
agreement and rejected the claims. 
6 By a decision on 8 February 2021, the Cour d’appel de Paris (Court of Appeal of 
Paris, France) confirmed that judgment. IK, HJ and LM appealed in cassation 
against that decision. 
Relevant provisions of European Union law 
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 
2011 on Alternative Investment Fund Managers and amending Directives 
2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) 
No 1095/2010 (OJ 2011 L 174, p. 1) (‘the AIFM directive’ or ‘the AIFMD’). 
Article 13 
‘1. Member States shall require AIFMs to have remuneration policies and 
practices for those categories of staff, including senior management, risk takers, 
control functions, and any employees receiving total remuneration that takes them 
into the same remuneration bracket as senior management and risk takers, whose 
professional activities have a material impact on the risk profiles of the AIFMs or 
of the AIFs they manage, that are consistent with and promote sound and effective 
risk management and do not encourage risk-taking which is inconsistent with the 
risk profiles, rules or instruments of incorporation of the AIFs they manage. 
The AIFMs shall determine the remuneration policies and practices in accordance 
with Annex II. 
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2. ESMA shall ensure the existence of guidelines on sound remuneration policies 
which comply with Annex II. The guidelines shall take into account the principles 
on sound remuneration policies set out in Recommendation 2009/384/EC, the size 
of the AIFMs and the size of AIFs they manage, their internal organisation and the 
nature, the scope and the complexity of their activities. ESMA shall cooperate 
closely with the European Supervisory Authority (European Banking Authority) 
(EBA).’ 
Article 61(1) 
‘AIFMs performing activities under this Directive before 22 July 2013 shall take 
all necessary measures to comply with national law stemming from this Directive 
and shall submit an application for authorisation within 1 year of that date.’ 
Entry into force and transposition period 
In accordance with Article 70 thereof, the AIFM Directive came into force on 
21 July 2011. Under Article 66 thereof, Member States had until 22 July 2013 to 
transpose the main provisions of the Directive, including Article 13 thereof. 
National provisions relied on 
Article L.533-22-2 of the French Monetary and Financial Code, introduced by 
ordonnance no 2013-676 du 25 juillet 2013 modifiant le cadre juridique de la 
gestion d'actifs [Order No 2013-676 of 25 July 2013 and amending the legal 
framework for asset management] (which came into force on 28 July 2013) 
transposes Article 13 of the AIFM Directive. It sets out the following: 
‘I.- The AIF asset management companies mentioned in points 1 and 2 of 
paragraph II of this article shall determine the remuneration policies and practices 
of the following persons, when their professional activities have an impact on the 
risk profiles of the asset management companies or of the AIFs they manage: 
1. managers; 
2. members of the board of directors or the management board; 
3. directors of simplified joint stock companies and persons exercising a 
management function […]; 
4. risk takers; 
5. persons exercising a control function; 
6. persons under the authority of the asset management company receiving total 
remuneration that takes them into the same remuneration bracket as management 
[…] and risk takers. 
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Remuneration policies and practices shall be consistent with and promote sound 
and effective risk management and shall not encourage risk-taking that is 
inconsistent with the risk profiles of AIFs and their rules or articles of association. 
II – This article applies to asset management companies managing AIFs: 
1. […] 
2. […]. 
The règlement général de l’Autorité des marchés financiers [AMF General 
Regulation] shall set the terms for the remuneration policies and practices of these 
asset management companies.’ 
Article 33, I of the Order of 25 July 2013 provides for a transitional provision 
under which ‘management companies performing, on the date of publication of 
this Order, activities corresponding to the provisions contained herein shall apply 
for authorisation as asset management companies […] before 22 July 2014.’ 
The explanatory note to décret no 2013-687 du 25 juillet 2013 pris pour 
l'application de l'ordonnance n° 2013-676 [Decree No 2013-687 of 25 July 2013 
for the implementation of Order No 2013-676] includes the following statement: 
‘Entry into force: Management companies carrying out activities corresponding to 
the provisions mentioned in the present decree on the date of its publication shall 
take all necessary measures to comply with its provisions and shall submit a 
suitable application for authorisation by 22 July 2014 at the latest […]’. 
Main arguments of the parties in the main proceedings 
7 In their appeal, the appellants argue, in particular, that the requirements set out in 
Article 13 of the AIFM Directive, and transposed into French law by Article L. 
533-22-2 of the Monetary and Financial Code, only apply from the time the AIF 
manager obtains its authorisation. As the TFC company only obtained its 
authorisation on 18 August 2014, they conclude that the rules on remuneration 
were not applicable to that company on the date the partnership agreement was 
signed, namely, on 27 June 2014. In the alternative, they argue that these rules 
were not binding on 27 June 2014. They argue that the Court of Appeal, in 
considering these rules applicable as of 22 July 2013, infringed Article 1 of the 
French Civil Code and Article 33 of the Order of 25 July 2013, interpreted in light 
of Article 61(1) of the AIFM Directive. 
8 In support of their analysis, the applicants produce an English-language document 
translated into French and entitled ‘AIFMD Q&A from the European 
Commission’: 
‘[question] Article 61(1) provides that AIFMs performing activities under this 
Directive before 22 July 2013 shall take all necessary measures to comply with 
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national law stemming from this Directive and shall submit an application for 
authorisation within 1 year of that date. Does this mean that existing AIFMs have 
one year to comply in full with national law and to submit an application for 
authorisation? 
[answer] During the one-year transitional period, AIFMs are expected to comply, 
on a best efforts basis, with the requirements of the national law transposing the 
AIFMD. The AIFM’s obligation to seek an authorisation […] is legally binding, 
but only needs to be complied with within a year of the entry into force of the 
Directive. In respect of other requirements contained in the AIFMD (such as […] 
remuneration […]), an AIFM that exists at the date of entry into force of the 
AIFMD, shall – already during the transitional period – take all necessary 
measures (i.e., expend its best efforts) to comply with the AIFMD in respect of all 
relevant activities undertaken subsequent to the entry into force of the AIFMD 
(22 July 2013). After the transitional period, all of the obligations arising under 
the AIFMD are legally binding.’ 
9 They also rely on the Questions and Answers on the AIFM Directive, published 
by ESMA, which state: 
‘Question 1 [last update 17 February 2014]: To which accounting period should 
AIFMs performing activities under the AIFMD before 22 July 2013 and 
submitting an application for authorisation under the AIFMD between 22 July 
2013 and 22 July 2014 apply the AIFMD remuneration rules for the first time? 
Answer 1: Paragraph 4 of the Guidelines on sound remuneration policies under 
the AIFMD (ESMA/2013/232) […] states that “These Guidelines apply from 
22 July 2013, subject to the transitional provisions of the AIFMD”.  
The Commission Q&A on the AIFMD provided specific guidance on the 
interpretation of the transitional provisions under Article 61(1) of the AIFMD. 
[…] Once a firm becomes authorised under the AIFMD, it becomes subject to the 
AIFMD remuneration rules and the Remuneration Guidelines. Therefore, the 
relevant rules should start applying as of the date of authorisation. 
However, as for the rules on variable remuneration (i.e. the ones for which 
guidance is provided under Sections XI. (Guidelines on the general requirements 
on risk alignment) and XII. (Guidelines on the specific requirements on risk 
alignment) of the Remuneration Guidelines), AIFMs should apply them for the 
calculation of payments relating to new awards of variable remuneration to their 
identified staff (as defined in the Remuneration Guidelines) for performance 
periods following that in which they become authorised. So the AIFMD regime on 
variable remuneration should apply only to full performance periods and should 
first apply to the first full performance period after the AIFM becomes authorised.  
For example: […] for an existing AIFM whose accounting period ends on 
31 December which submits an application for authorisation by 22 July 2014 and 
obtains an authorisation after that date (including when the authorisation is 
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obtained after 31 December 2014), the AIFMD rules on variable remuneration 
should apply to the calculation of payments relating to the 2015 accounting 
period.’ 
10 Finally, they rely on the Guide AIFM – Rémunération des gestions de FIA [AIFM 
Guide – AIF Management Remuneration], published by the AMF, which states 
(p. 3):  
‘Pursuant to Article 61(1) of the AIFM Directive, management companies in 
existence on 22 July 2013 will have one year until 22 July 2014 to comply with 
the obligations under the AIFM Directive and to apply for authorisation from their 
competent authority.  
Thus, there are three possible cases: 
– management companies obtaining their AIFM authorisation between 22 July 
2013 and 31 December 2013: the measures provided for by the position [on 
AIFM remunerations concerning remuneration] will apply to the 2014 
accounting year (for the variable remuneration paid in 2015); 
– management companies obtaining their AIFM authorisation between 1 January 
2014 and 22 July 2014: the measures provided for by the position [on AIFM 
remunerations concerning remuneration] will apply to the 2015 accounting year 
for variable remuneration paid in 2016; 
– thereafter, new management companies obtaining their AIFM authorisation in 
year N, after 22 July 2014, will have the same logic applied: the first 
accounting year to be taken into account for the application of the measures 
provided for by the position [on AIFM remunerations] will be year N+1 for the 
variable remuneration paid in N+2.’ 
11 The respondent TFC company states in reply that the provisions of Article L. 533-
22-2 of the French Monetary and Financial Code were applicable on 27 June 
2014, the day the partnership agreement was signed, to the extent that, while the 
Order of 25 July 2013 provides for a deferred entry into force of certain 
transposition provisions, this is not the case for those provisions requiring 
operators to establish for directors of AIFMs remuneration policies and practices 
that are ‘consistent with sound and effective risk management’. 
12 It further argues that, even if AIFMs are given a period of time to comply with the 
new provisions transposing the AIFM Directive, they cannot, during that period, 
enter into any agreement providing for remuneration contrary to Article 13 of that 
Directive, as Article 61(1) of the Directive requires them to ‘take all necessary 
measures to comply with national law stemming from this Directive’. 
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Summary of the grounds for the reference and questions referred for a 
preliminary ruling 
13 The solution to the dispute depends on whether Article L. 533-22-2 of the French 
Monetary and Financial Code, which entered into force on 28 July 2013, was 
applicable when the partnership agreement was signed on 27 June 2014. The 
answer to this question requires the interpretation of the AIFM Directive, in 
particular Articles 13 and 61 thereof. 
14 The Court of Cassation notes that the Commission’s document appears to 
acknowledge that there is a one-year transition period ending on 21 July 2014, that 
before that date, AIFMs are only expected to make their best efforts to comply 
with the requirements of the national law transposing the AIFM Directive, and 
that it is only after that date that all the obligations under the AIFM Directive 
become legally binding. In this analysis, neither the date of application for 
authorisation nor the date it is obtained would be relevant. 
15 On the other hand, it seems to the Court of Cassation that the ESMA and AMF 
analyses show that an AIFM would only be subject to the rules on remuneration of 
the AIFM Directive and the remuneration guidelines from the date on which it has 
obtained authorisation, whereas prior to such authorisation it would not be subject 
to these rules. According to the same analyses, these rules would only apply from 
the beginning of the financial year following the authorisation. 
16 The Court of Cassation deems that none of the proposed interpretations of 
Article 61(1) of the AIFM Directive is self-evident. In particular, the link between 
obtaining the authorisation and being subject to the rules of the Directive cannot 
be clearly inferred from that article. 
17 Another interpretation seems possible, in which a distinction would be made 
depending on whether the remuneration was agreed before or after the 
transposition of the AIFM Directive into national law: in the former case, it could 
be accepted that it is difficult to ask the AIFM to immediately call into question a 
remuneration that did not infringe any rules when it was agreed, and that it could 
at most be required, during a transitional period, to make its best efforts to comply 
with the new remuneration requirements; in the latter case, it is conceivable that 
the entry into force of the national text transposing the AIFM Directive would 
immediately prohibit the manager from agreeing, for the future, to remuneration 
contrary to the rules laid down by this Directive after it has already entered into 
force. 
18 Since the exact interpretation of the relevant provisions of the AIFM Directive is 
not self-evident and the Court of Justice has not had the opportunity to interpret 
Article 61(1) of that Directive, the Court of Cassation considers that the following 
questions should be referred to the Court for a preliminary ruling. 
1. a) Are Articles 13 and 61(1) of Directive No 2011/61/EU of the European 
Parliament and of the Council of 8 June 2011 on Alternative Investment 
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Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and 
Regulations (EC) No 1060/2009 and (EU) 1095/2010 to be interpreted as 
meaning that managers performing activities under the Directive before 
22 July 2013 are required to comply with the obligations relating to 
remuneration policies and practices: 
i) at the expiry of the period for transposition of that directive, 
ii) at the date of entry into force of the provisions transposing the 
Directive into national law, 
iii) from the expiry of the period of one year, expiring on 21 July 2014, 
referred to in Article 61(1); or 
iv) from the time of obtaining authorisation as manager under the 
Directive? 
b) Does the answer to this question depend on whether the remuneration paid 
by the AIFM to an employee or a director was agreed before or after: 
i) the expiry of the period for transposition of that directive; 
ii) the date of entry into force of the provisions transposing the Directive 
into national law; 
iii) the expiry on 21 July 2014 of the period laid down in Article 61(1) of 
the Directive; 
iv) the date on which the AIFM obtained its authorisation? 
2) If it follows from the answer to Question (1) that, following the transposition 
of the Directive into national law, an AIFM is, for a certain period of time, 
only obliged to make its best efforts to comply with the national legislation 
resulting from this Directive, does it fulfil that obligation if, during that 
period, it hires an employee or appoints a director on terms of remuneration 
which do not comply with the requirements of the national provision 
transposing Article 13 of the Directive?