The Foreign Investment Regulation Review: France


As a matter of principle, foreign investments are permitted in France. However, the French Ministry of Economy (MOE) is keen to review certain types of foreign investments when they pertain to French interests that are considered sensitive, including but not limited to national defence and technological matters or the protection of critical infrastructures.

Over the past few years, review activity under the French Foreign Investment Regime (FFIR) has gathered steam and constitutes a key factor to carefully assess when planning a potential transaction.

Indeed, from 2014, which marks the beginning of the political realisation that national assets and knowledge should be kept within national folds, the FFIR has continued to expand, leading to a strengthening of the intervention powers of the MOE. In December 2019, the FFIR was again significantly amended by Decree No. 2019-1590 and a Ministerial Order dated 31 December 2019. These new changes have become applicable to all notifications submitted to the MOE from 1 April 2020. The revamped FFIR notably involves strengthened enforcement powers for the MOE and a larger scope of review thanks to lower review thresholds and a larger list of covered strategical sectors. It has since taken on a whole other dimension due to the covid-19 pandemic, which revealed the dependence of many strategical sectors (in particular the health sector) on some foreign countries for the production or supply of sensitive products. It also paved the way for implementation of a regulation at a European scale with the full entry into force of the EU screening mechanisms for foreign direct investments, which notably provide for a new cooperation mechanism allowing Member States and the European Commission to exchange information and raise concerns related to specific investments.

The FFIR has become instrumental for the French government to review and prohibit all potentially harmful transactions.

Year in review

The revamped and strengthened FFIR came into force on 1 April 2020, enabling the MOE to extend the parameters of its review and tighten its expectations.

Therefore, although France remains an economically attractive country and registered 1,215 foreign investments in 2020 despite the covid-19 crisis, it has also reported a significant increase in the number of reviewed investments. Indeed, the number of decisions issued by the MOE has significantly increased over the past years, seeing a significant rise of 50 per cent in two years, from 184 reviewed decisions in 2018 to 216 in 2019 and 275 decisions in 2020.

Even though prohibition decisions remain rare, in the past few months a number of deals have been blocked by the MOE, sending a clear message that the MOE is not adverse to using its new-found discretionary powers to ensure the protection of French national interests. Citing as reasons the protection of industrial and food sovereignty, the French Minister of the Economy, Bruno Le Maire, prevented two potential transactions without even having opened a formal review, by pre-emptively expressing the MOE's disapproval in the press: the acquisition of French leading retailer, Carrefour, by convenience store chain, Couche-Tard, and the acquisition of European industrial vehicle manufacturer, Iveco, by Chinese vehicle manufacturer, FAW. In contrast, the MOE's review of the proposed acquisition of military solutions pioneer, Photonis, by US defence manufacturer, Teledyne, was much more thorough and technical. It finally led to the prohibition of the deal as the French government concluded that Photonis's military activity was too sensitive to be divested, despite the obvious economic gains that the transaction could have yielded.

The covid-19 pandemic has also underlined the need to protect and preserve economic activities essential for national interests. As a result, monitoring foreign investments appears to be one of the key issues to ensure the preservation of essential and sensitive activities on French soil.

Foreign investment regime

i Policy

When reviewing foreign investments, the aim of the MOE is to ensure that a particular transaction will not threaten the continuity of sensitive activities to sensitive clients, to ascertain that strategic activities and their associated sensitive data will not be subject to foreign legislation, and to maintain the technological standards of the production and industrial capacities of the French entity.

Owing to the covid-19 pandemic, transactions relating to sensitive sectors are being reviewed with particular scrutiny. Last spring, the pandemic highlighted the dependence of many strategical sectors (especially the health sector) on some foreign countries for the production and supply of sensitive products or the supply of products necessary for the production chain of French products. Against the background of the pandemic, biotechnologies were included in the list of critical technologies covered by the FFIR and the threshold for non-European investors taking shares in a French listed company was lowered from 25 per cent to 10 per cent until the end of 2022.

Apart from the expansion of the legislative arsenal, whose main goal, according to Bruno Le Maire, is to expand the foreign investment review to 'several thousand companies', a tightened control by the MOE over proposed transactions is to be expected, notably to ensure that companies producing and supplying sensitive products or services will remain in France, and to ensure the supply of sensitive products or services to sensitive clients.

ii Laws and regulations

France has a stand-alone foreign investment regime: the FFIR. This regime is established in the French Monetary and Financial Code (MFC). Foreign investments in sensitive sectors are subject to prior authorisation of the MOE before completion of the transaction.

The FFIR was significantly revamped by a decree enacted in December 2019. This new regime involves strengthened enforcement powers for the MOE and a larger scope of review thanks to lower review thresholds and a larger list of covered strategical sectors. The new regime now applies to all authorisation requests submitted from 1 April 2020. It was further amended throughout 2020 and 2021 as part of the French government's attempt to stem the consequences of the covid-19 pandemic; in particular, by further lowering review thresholds for non-European investors (at least until 31 December 2022) and expanding the strategic sectors list to include biotechnology activities.

Once the transaction is notified by the investor to the French Treasury (Treasury), a department within the MOE that tackles European and international matters, the latter sends the notification to the relevant administrations and agencies concerned by the investment to collect their comments on the proposed investment. On the basis of this information, as well as its own assessment, the Treasury will issue its decision.

iii Scope

A French foreign investment notification is required when two conditions are met: the transaction at stake falls within (1) a type of investment covered by the FFIR and (2) one of the strategic sectors concerned by the FFIR.

Type of investment

The FFIR applies to non-French investors and makes some distinction between European investors and non-European Investors that are neither from the European Economic Area, nor from the European Union (non-EU or EEA investors).

The FFIR applies to the following types of investments when they are made by non-French investors:

  1. the acquisition of control of an entity governed by French law; or
  2. the acquisition of all or part of a branch of activity of an entity governed by French law.

The notion of control of a company that has its registered office in France is different from the notion of control under competition law and is defined by Article L. 233-3 of the French Commercial Code, which provides the following.

A legal or natural person is deemed to control another when:

  1. it directly or indirectly holds a share of the capital that grants it the majority of the voting rights at that company's general meetings;
  2. it alone holds the majority of the voting rights in that company by virtue of an agreement entered into with other partners, members or shareholders and which is not contrary to the company's interests;
  3. it effectively determines the decisions taken at that company's general meetings through the voting rights it holds; or
  4. it is a partner, a member or a shareholder of that company and has the power to appoint or dismiss the majority of the members of that company's administrative, management or supervisory organs.

Control is presumed when an investor directly or indirectly holds above 40 per cent of the voting rights and no other partner or shareholder directly or indirectly holds a larger share.

Two or more legal or natural persons who act together are deemed to jointly control another company when they effectively determine the decisions taken at general meetings.

The following types of investment covered by the FFIR are only applicable to non-EU or EEA investors:

  1. exceeding, directly or indirectly, alone or in concert, 25 per cent of the voting rights of an entity governed by French law; and
  2. exceeding, directly or indirectly, acting alone or in concert, 10 per cent of voting rights of a listed company registered in France (temporary measure applicable until 31 December 2022).

The above-mentioned temporary 10 per cent threshold was implemented by an amendment of 22 July 2020 and only applies to investments made 10 business days after the publication of the Decree; that is, from 6 August 2020. In this respect, there is a specific and accelerated review procedure (see Section V below). While the change was originally intended to apply until 31 December 2020, it has been extended until 31 December 2022 by a decree dated 22 December 2021.

Strategic sectors

Under the FFIR, the authorisation procedure applies to investments in a French company whose activities fall within at least one of the strategic sectors covered by Article R. 151-3 of the French Monetary and Financial Code. The list of strategic sectors has been significantly expanded over the past years. These strategic sectors include the following activities:

  1. activities likely to jeopardise national defence interests in the exercise of a public authority or likely to jeopardise public order and public safety, including activities relating to national defence equipment and sensitive data;
  2. activities likely to jeopardise national defence interests in the exercise of a public authority or likely to jeopardise public order and public safety, when they concern essential infrastructure, goods or services, including to ensure the functioning of supply of energy sources, transport networks, water and food; and
  3. activities likely to jeopardise national defence interests in the exercise of a public authority or likely to jeopardise public order and public safety, when they are intended to operate in one of the activities mentioned in (a) or (b) above, including research and development activities, which now include biotechnology activities (following the 2020 amendments to the FFIR).

iv Voluntary screening

French foreign investment screening is mandatory and suspensory. A transaction falling under the FFIR must be notified to the MOE and cannot be closed until clearance has been obtained.

v Procedures

Review procedures

Under the FFIR, there are two review phases. The MOE has 30 working days from submission of the complete notification to perform the following:

  1. clear the transaction without condition;
  2. declare that the transaction falls outside the scope of the FFIR; or
  3. open an in-depth review of the transaction.

If the MOE decides to open an in-depth review, it has 45 additional working days to clear the transaction with or without conditions, or to prohibit the transaction.

This means that, under the new regime, the review process can last between one and a half and five months.

Furthermore, a specific and accelerated procedure exists in the above-mentioned case of a minor investment in a listed sensitive company exceeding 10 per cent of the voting rights.

At first, the parties must submit a preliminary and simplified notification of the investment to the Treasury, which will decide within 10 days (and not 30 days) to allow it or, alternatively, to revert the parties back to the normal procedure due to sensitivity concerns. In that case, the parties must complete a formal authorisation request under the traditional filing requirements of the normal 75-day timeframe procedure (Article R. 151-5 of the French Monetary and Financial Code).

Preliminary rescript procedure (possibility to request an opinion)

In 2018 it was possible for a French target to ask the MOE, prior to any formal Foreign Investment filing, whether its activities fell within the scope of the FFIR. However, the mandatory requirement of a specifically identified investment, as well as frequent unsuccessful outcomes (resulting in wasted time), made this rescript tool difficult to use in practice and therefore not as interesting from the perspective of the parties.

As of 1 April 2020, these hindrances have been greatly suppressed, as a French entity may ask the MOE at any time whether all or part of its activity falls within the scope of the FFIR provisions, without having to specify the identity of the potential new investor. However, the entity must still be able to justify its request with a contemplated investment project.

After such a request, the MOE is required to respond within two months.

Appeal procedures

The decisions of the MOE may be appealed before the administrative judge. From a procedural standpoint, undertakings have to demonstrate that the MOE made an obvious mistake when making its assessment, which is a difficult criterion to fulfil.

In any case, undertakings rarely make use of this ability, due to the sensitive and casuistic nature of this type of administrative decision and there is some reluctance from administrative courts to proactively go against the administration. As a result, the MOE has been successful in the rare cases challenging its decisions.

vi Prohibition and mitigation

The MOE announced in March 2021 that it had reviewed 275 of the 1,215 new foreign investments made in 2020, compared with 216 reviews in 2019 and 184 reviews in 2018. Such an upward trend may illustrate the French government's increasingly broad and flexible review powers targeted at protecting French national interest.

Foreign investment decisions are not publicly available in France, except for high profile cases that may be leaked in the press.

In practice, most of the reviewed transactions are authorised. Depending on the level of sensitivity of the activities, commitments may be imposed, in particular, to ensure the continuity and the security of sensitive activities subject to the review or to maintain the know-how of the French entity.

While prohibition cases in France have remained rare to date, the end of 2020 and early 2021 saw the MOE formally prohibit one transaction and informally express its disapproval with respect to two other transactions under its strengthened and expanded foreign investment review regime:

The MOE prohibited the acquisition of military solutions pioneer, Photonis, by US defence manufacturer, Teledyne. In December 2020, it ended a tumultuous saga after almost a year of negotiations between the French government and the US conglomerate. Initially, the French government was focussed on designing a package of commitments for Teledyne, which would protect France's strategic interests, while at the same time preserving its economic attractiveness. By the end of 2020, Teledyne had finally agreed to a set of stringent conditions, notably granting a minority shareholding interest and veto rights to the French public investment bank, Bpifrance. Yet the French government, through its Defence Minister, made a U-turn at the last minute, concluding Photonis's activities were too strategic to be managed by a non-French player, irrespective of any potential commitments. Photonis was subsequently acquired by HLD, the French investment group, for €370 million, much less than the €500 million that Teledyne was initially offering.

In January 2021, the proposed acquisition of French leading retailer, Carrefour, by Canadian convenience store chain, Couche-Tard, was nipped in the bud by the French Minister of the Economy, Bruno Le Maire. In a matter of days, he sent a 'courteous, clear and definitive no' to the Canadian group, before any formal notification on the investor's side. By considering the proposed transaction between two food retail groups as involving a strategic sector on the basis that it impacted France's food security, the French government showed its willingness to adopt a broad interpretation of its ever-growing list of strategic sectors.

Similarly, in April 2021, CNH Industrial, the parent company of Iveco, announced that it had ended discussions with China's FAW Group over the sale of a unit of Iveco S.p.A. comprising the Iveco, Iveco Bus and Heuliez Bus brands. The decision was welcomed by both France and Italy, with CNH announcing that it would instead aim to spin off its trucks, coaches and commercial vehicles businesses by early next year. The French Minister of the Economy tweeted that the announcement was good news because the proposed takeover raised important issues of industrial sovereignty, highlighting that France and Italy had worked hand in hand to maintain industrial capacity in Europe.

These cases illustrate the French government's clear commitment towards favouring the protection of its national interests over economic attractiveness, particularly in the context of the ongoing pandemic.

Sector-specific requirements

i Prohibited sectors

There are no sector-specific requirements.

ii Restricted sectors

There are no sector-specific requirements.

Typical transactional structures

Regardless of the type of transaction (asset or share) or transactional structure, foreign entities should keep in mind that a single non-French entity or a non-French acquisition vehicle in the 'control chain' of an acquirer would be sufficient for said acquirer to be regarded as a foreign investor subject to the review of the MOE. Furthermore, the acquirer would be subject to even stricter thresholds with regard to non-controlling minority investments if that entity was non-European.

Indeed, further to the French reform, all persons and entities that belong to a control chain are investors. Therefore, any (European or non-European) entity that comes into the control chain may be considered a foreign investor.

The notion of control of a company that has its registered office in France is different from the concept of control under competition law and is very broadly defined by Article L. 233-3 of the French Commercial Code, as provided in Section I.iii.

Other strategic considerations

Merger control approvals and foreign investment reviews now seem to go hand in hand when assessing whether and where a transaction should be notified. Even though the scope of the review by the authorities differs and both reviews are conducted independently from one another, a certain convergence of the two regimes could be seen, with both regimes sometimes seeming to take on a more political approach.


From a practical perspective, future foreign investors will have to face a government that has increasingly broad and flexible review powers targeted at protecting the French national interest.

The MOE is treading a thin line, however, because its protectionist intent must not discourage foreign entities from investing in France or be seen to be inhibiting economic growth. The increasing number of notifications, coupled with its participation in the European Union cooperation mechanism, may have the unintended effect of slowing down its Phase 1 review period.


1 Jérôme Philippe is a partner and Aude Guyon is counsel at Freshfields Bruckhaus Deringer LLP.

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