A new decree n° 2014-479 dated May 14, 2014, published May 15, 2014 and entering into effect on May 16, 2014 (the “Decree”) considerably expands the sectors in which foreign investment transactions will require the prior authorization of the Ministry of Economy.

French law breaks foreign investments into two (2) categories: (i) forall foreign investors, irrespective of their country of incorporation, the acquisition of all or part of an activity or company with its registered office in France, or the acquisition of the control of a company with its registered office in France and (ii) for foreign investors not incorporated in the European Union, the acquisition of more than one-third of the share capital or voting rights of a company with its registered office in France.

Up until now, foreign investment transactions subject to prior authorization were notably investments in the defense sector, casinos or other gambling activities, private security services, cryptology and activities related to “double use” goods. Nonetheless, the foreign investment regulations distinguish investments by a non-EU foreign investor and an EU foreign investor, applying the regulations more strictly to investments made by non- EU foreign investors.

In addition to those activities already covered, the Decree adds any activities considered necessary to protect French strategic interests as a matter of French public policy, or activities related to matters of public security or national defense. Such strategic interests include:

  • provision of electricity, gas, hydrocarbons or other sources of energy;
  • provision of water;
  • operation of transportation networks and services;
  • operation of electronic communications networks and services;
  • operation of an establishment that is strategic to French national defense;
  • protection of public health.

All foreign investments falling into this new scope of activities, including those made by EU foreign investors, are now subject to prior authorization of the Ministry of Economy.

These activities are defined in an extremely broad and subjective manner by reference to (i) those French interests set forth above and (ii) the “necessity” of the activity which is the subject of the investment as it relates to the protection of such interests. Before the Decree, the activities covered were generally defined by the simple reference to an activity, defined in an objective manner. The introduction of the notion of French “interests” in the text of the Decree is undoubtedly motivated by the desire to fend off any potential reserves of the European Commission, who already plans to ensure that the enlarged scope of foreign investment transactions subject to prior authorization is indeed limited to those activities strictly necessary to the defense of “public interest” without infringing on the principle of the free movement of capital.