Strengthening of foreign investment controls in France

Implemented under the Law of 28 December 1966, the foreign investment regime in France is a tool that serves to protect the country’s economic sovereignty. The scope of its application has been significantly expanded over the last 15 years and recently controls around foreign investment have been further reinforced in the context of the coronavirus crisis.

Any foreign investment made in France in sectors considered to be “sensitive” is subject to the prior authorisation of the Minister of the Economy.

The current legal framework for the control of such investments is the result of the Law of 22 May 2019 (Loi PACTE), which is supplemented by a decree and a ministerial order (arrêté ministériel) made on 31 December 2019, and which carried out a widespread reform of the scope of the controls, the applicable procedures and the associated sanctions. The recent legislation has already been subject to adjustments that are undoubtedly related to the coronavirus crisis, being: (i) the addition of biotechnologies in the list of critical technologies covered by research and development activities which fall within the scope of its control (under the ministerial order of 27 April 2020); and (ii) temporarily lowering the threshold of what constitutes control to 10% of voting rights for certain investments in French listed companies (under the decree and ministerial order of 22 July 2020 and decree of 28 December 2020).

This legislation illustrates the continuing trend to increase controls around foreign investments in France. Two recent measures have further strengthened the regime:

First, due to the persistence of the coronavirus crisis, the action taken in 2020 in response to the onset of the pandemic, which involved the reduction of the threshold of control from 25% to 10% of voting rights for non-European investments in listed companies, was extended by a decree dated 22 December 2021. It now applies until 31 December 2022.

The purpose of this measure is to control opportunistic minority investments by non-European investors in companies that may have been weakened by the coronavirus crisis.

Secondly, a ministerial order dated 10 September 2021, which came into force on 1 January 2022, provides a full list of information to be provided in support of an application for authorisation of a foreign investment in France.

The application must now include: requested information on the intellectual property owned or used by the French target; its customers in the EU; how French customer data is processed; its competitors in the EU; and even the market share held by its competitors in France. In addition, the foreign investor will now have to indicate its overall strategy in France and Europe, as well as in the relevant sectors the subject of the investment.

In practice, this information was often requested anyway (in whole or in part) by the Ministry services after the authorisation request had been submitted, giving the administration more time to provide its response. The purpose is therefore to avoid these types of requests for additional information and the corresponding extension delays.

The ministerial order of 10 September 2021 also includes two other new features:

• technologies involved in renewable energy production have been added to the list of critical technologies covered by the control; and
•  it is now the investor, as long as such investor is registered in a non-EU country, who will have to prepare (and attach to its application for authorisation) the notification form to be submitted to the European Commission provided for in the European regulation of 19 March 2019, which established a framework for screening foreign direct investments in the EU (a form that is made available to Member States).

In this respect, it is worth remembering that this regulation established a framework for screening foreign direct investment in the EU. The European Commission can therefore issue an opinion for the attention of the relevant Member State in the event of a foreign investment that may be prone to adversely affect any projects or programmes of interest to the EU. While there were initially 8 types of projects listed in the 2019 EU regulation, a new regulation of 29 September 2021 has expanded this list to now cover 18 projects, notably in the areas of transport, energy, telecommunications, defence and healthcare.

Lastly, and importantly, the department of the Ministry of the Economy in charge of controlling foreign direct investment has announced in the first quarter of 2022 the publication of guidelines on the application of this regulation, which seeks to clarify the terms of the procedures for implementing control and as such responds to the needs of practitioners in this field.