From one of Europe’s most open jurisdictions to foreign investment, France has become a driving force behind new restrictions. With further domestic legislation expected by the end of the year, investors should take foreign investment regulation even more seriously.

Having introduced a foreign investment regime back in 2014, France has now revised its procedures and approach to foreign investment filings, as well as tabling new legislation and regulations that would widen the scope for scrutiny of foreign investments and give French authorities much greater power to sanction non-compliance.

Uncertainty as policies are reviewed

The Ministry of Economy has expressly stated, with regard to all filings, that precedents can no longer be relied upon and that it is in the process of entirely reshaping its policy.

Notably, in recent filings, the Ministry of Economy has systematically asked additional questions and requested information beyond that required by law from both the investor and target entity to develop a full understanding of each such investment into France.

In order to avoid delays in the preparation of the filing and throughout the process, investors should be aware of these new, stricter procedures.

Extended scope of review

The French government is expected to significantly extend the scope of activities it considers sensitive by the end of 2018. Notably, foreign investment regulation would additionally apply to drones, aerospace, research & development in relation to cybersecurity, artificial intelligence, robotics, additive manufacturing and semiconductors.

Broadened sanctions

The French Government has also announced a stricter sanctions procedure. In September 2018, the Ministry of Economy announced before Parliament that new sanctions will be progressive and may reach very large amounts as a result of a proposed multiplier coefficient applied to the target entity’s turnover. The objective is for the new sanctions to have a detrimental effect and act as an incentive for foreign investors to comply with the foreign investment rules, as also demonstrated through the introduction of criminal sanctions and the ability for authorities to declare transactions void.

What potential investors need to know

Potential investors need to be aware that proposed investments into France may be closely examined for their potential impact in a wider range of sectors. Across all the relevant sectors, there is a greater likelihood of conditions or remedies being imposed, and the whole process is likely to take far longer.

The good news is that almost all deals get through, though sometimes only after conditions are imposed. Investors should have no reason to worry as long as this process is taken seriously. However, note that the Ministry of Economy, in the current context of international trade tensions, may be very strict and will not hesitate to block or to postpone a deal.