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Recent updates to the French foreign direct investment regime

  • France
  • Competition, EU and Trade - Foreign investment regimes
  • Corporate

22-11-2021

Financial relations between France and foreign countries are, in principle, free. As an exception, foreign investments in France are subject to a prior authorization procedure in certain sectors that may concern national defense, public order or activities that are deemed to be essential to safeguarding the country's vital interests (energy, water, transportation, space operations, electronic communications, public health, etc.).

New changes have been made by the order dated 10 September 2021 (the “Order”) to the French foreign direct investment (FDI) control regime.

Thus, in order to adapt this regime to current developments and challenges in the renewable energy sector, the Decree of December 31, 2019 on foreign investment in France will now include technologies involved in the production of renewable energy in the list of critical technologies.

Consequently, R&D activities involving these new technologies will now fall within the scope of FDI control. This change is aimed at strengthening the protection of activities that are essential to ensure the greening of the French energy mix.

In order to adapt the French FDI control regime to the contemporary challenges that certain foreign investments may represent, the list of sectors concerned by government control had already been extended by the above-mentioned Decree of December 31, 2019.

Additional sectors were included within the scope of FDI control, in accordance with European Union standards : the written and digital press, the food supply chain, and the research and development concerning (i) a list of critical technologies (e.g. artificial intelligence, energy storage, quantum technologies, etc.) used in activities considered sensitive or essential or (ii) dual-use goods and technologies according to the European nomenclature.

Moreover, on 11 October 2020, following an 18 month implementation period, the EU regulation establishing a European screening mechanism for FDI (the “Regulation”) became fully applicable in each EU Member State and the cooperation mechanism envisaged by the Regulation is now operational. This means that (i) a Member State must notify the European Commission and the other Member States of any FDI transaction in their territory that is undergoing screening; and (ii) the Commission and Member States can intervene in relation to transactions which affect Member States’ security or public order.

In order to improve the articulation of the French FDI regime with the European screening, the Order also provides for changes to the content of authorization or prior review application filings, and in particular completes the already long list of documents to be provided when filing an authorization application.

Thus, in order to adapt the French FDI regime to the information requested under the Regulation, any applicant will now have to provide the French Ministry of the Economy with additional documents/information, and in particular :

  • a specific notification form when any entity in the investor's chain of control is registered in a non-EU country ;
  • the detailed description of the activities carried out by the French target entity in any EU country ;
  • the procedures of the French target entity for accessing and managing data relating to French customers ;
  • the list of the customers of the French target entity located in any EU country and the activities carried out for their benefit, including a description of the services or products it provides ;
  • the list of French competitors or those operating in any European Union country. The list specifies the market share held in France by each competitor.
  • the list of intellectual property (patents, trademarks, licenses) held or used by the French target entity. This list will specify their nature and duration ;
  • the overall strategy of the investor in France and in the European Union (in particular, nature and examples of operations carried out, duration of the investments) ;
  • the strategy of the investor in the sector(s) of activity concerned by the operation, in France and in the European Union (in particular, nature and examples of operations carried out, duration of the investments) ;

These provisions will come into force on January 1, 2022 in order to give the various economic operators and their advisors a minimum period of time to adapt to these new measures.

It is thus more important than ever for companies to consider FDI regimes in M&A deals at an early stage in the process, in order to manage and mitigate the impact of FDI screening on the substance and timing of a transaction.

In particular, it may be recalled that, in France, in the event of a request for authorization by a foreign investor, the French Ministry of the Economy is to take a position within 30 business days on the application of the FDI regime to the transaction in question. If the Ministry of the Economy wishes to consider the possibility of authorizing the transaction subject to certain conditions, an additional 45 business day period may then apply.

Nevertheless, it is worth keeping in mind that this initial 30 business day period begins to run only when the filing is deemed complete by the French Ministry of the Economy. Given the extensive list of documents and information to be provided, the foreign investor is to take into account the time necessary for the constitution of its filing well before the date of its notification to the French Ministry of the Economy.

Finally, it may also be recalled that any foreign investor which is not governed by the law of a European Union Member State must, as soon as it applies for authorization to invest in France, disclose its links with a foreign State or governmental agency. These links may participate in any refusal to grant an investment authorization.