Status of foreign direct investment control law in France

France ranks 7th globally and 3rd in Europe in the FDI Index. Since 2005, France has organised its legal framework for controlling FDI in its Monetary and Financial Code (“Code Monétaire et Financier”). The Code has been amended and the rules have been strengthened over the years.

FDI that is subject to a prior authorisation by the Minister of the Economy and Finance is described as an exception to the general principle of freedom of investment and it is motivated by a concern for public security interests.

On 1 December 2018, the French Government published a new decree extending the sector list for which there exists an FDI control and a Ministerial approval. As from 1 January 2019, FDI in French companies active in the aerospace sector or carrying out research and development activities in cybersecurity, artificial intelligence, robotics, additive manufacturing and semiconductors is subject to a prior Ministerial approval. The same applies to IT hosts for

certain sensitive data, particularly in the field of health. France has anticipated the new European regulation on FDI that it is supporting.

The Ministerial authorisation may be subject to conditions intended to ensure the preservation of national interests while allowing FDI. Conditions relate to a concern to preserve the sustainability of the activities, the research and development capacities and the continuity of an establishment’s operations.

In the event of irregular FDI in one of the sectors concerned, the Minister may impose fines of up to twice the amount of the investment breaching the rules. However, the sanction must remain proportional to the seriousness of the facts and the fine may be subject to an appeal.

Hot topics: intended changes / discussions

The French parliament is currently discussing additional rules to ensure that foreign investors will comply with the French regulations. The text is known as the Action Plan for the Growth and Transformation of Enterprises (“the PACTE Act”). The adoption of the PACTE Act requires two votes, one from the National Assembly and the other from the Senate. After the Conseil Constutionnel has rejected certain objections on 16 May 2019, the PACTE has been published on 23 May 2019. Relevant provisions will enter into force until 2023.

This article is excerpted from “Accessing Europe and the Middle East: Foreign Direct Investment Control Considerations”.