REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

4. RISK FACTORS
4.4 LEGAL RISKS
There are no specific conditions attached to the general authorizations granted under licenses L.33-1 and L.34-1
other than a duty to respect the principles set out in the French Post and Electronic Communications Code
(Decree No. 2005-862 of July 26, 2005 relating to the conditions for establishing and operating networks and
supplying electronic communication services). These principles are based on the general concepts included in the
EU “Authorization” Directive, including:
• Payment of taxes and royalties
• Contributions to the Universal Service Fund
• Respecting correspondence privacy
• Carrying emergency calls
The Company does not consider that it is exposed to any specific risks in relation to the other regulatory
requirements described in Section 6.6 below.
4.5 RISKS RELATING TO CLAIMS AND LITIGATION
In the normal course of its business, the Group is involved in a certain number of legal proceedings. Provisions
have been recorded for these disputes in accordance with IFRS. The Group considers that the provisions set up to
cover such contingencies, litigation or disputes known of or in progress at December 31, 2007 are sufficient to
ensure that there would be no material impact on the consolidated financial position of the Group in the event of
unfavorable outcomes. To the best of the Company’s knowledge, no litigation, arbitration or exceptional event
has had in the recent past or is likely to have in the future a material impact on the financial position, results of
operations, business and assets and liabilities of the Company or the Group.
The claims and legal proceedings between Free and its subscribers are not significant in number in relation to
Free’s subscriber base and do not represent material amounts.
The Group’s companies are involved in inquires, claims and legal proceedings with regulatory authorities,
competitors and other parties. The Group considers that the provisions set up to cover such contingencies,
litigation or disputes known of or in progress at December 31, 2007 are sufficient to ensure that there would be
no material impact on the Group’s consolidated financial position in the event of unfavorable outcomes (see Note
28 to the consolidated financial statements).
Like other players operating in its sector, the Group is frequently served with writs as part of claims instigated by
subscribers in relation to the provision of services. In general, the financial risk posed by each of these claims is
relatively small. However, any proliferation of such claims could constitute a risk for the Group. In such cases,
the Group tries to negotiate an amicable settlement, which helps to reduce the final total cost of these
proceedings considerably.
The Group considers that the number of these claims is not significant compared to the number of its subscribers.
In February 2007, Wal Services and two former Iliad employees – Messrs. Chami and Gohon – filed a claim for
damages with the Paris Tribunal de Grande Instance against Iliad and Messrs. Poidatz, Niel, Boukobza and
Rosenfeld, for the fraud and duress they allegedly suffered in March 2002 when Iliad and Mr. Niel acquired the
plaintiffs’ shares. Under this claim – which was filed five years after the facts in question and three years after
Iliad’s stock market flotation – the plaintiffs are seeking the recovery of their shares, and if recovery proves
impossible, compensation from Iliad and its senior managers amounting to €102 million each for Messrs. Chami
and Gohon and €802 million for Wal Services. Although the outcome of this dispute is still uncertain, Iliad
considers that the claims filed by Wal Services and Messrs. Chami and Gohon are unfounded and that the
plaintiffs were subject neither to fraud nor to any form of duress. By order of the pre-trial judge dated January 22,
2008, the Paris Tribunal de Grande Instance granted the application of Iliad and its managers and declined
jurisdiction in favor of the Paris Tribunal de Commerce.
In parallel to the civil proceedings, certain other former minority shareholders filed claims of fraud and breach of
trust allegedly committed when their shares were purchased in March 2002. By order dated August 22, 2007, the
case was dismissed in part and the remaining claims were reclassified and referred to the Tribunal Correctionnel.
The claims against the managers of Iliad were fully dismissed.
Iliad – Registration Document 2007 - 11