Foreign direct investment reviews 2021: France

Following major reforms, the French Foreign Investments Control regime is now reaching cruising speed

11 min read

“Close attention seems to be given by French authorities to transactions involving public health issues”

Since 2014, the scope of the French Foreign Investments Control regime has been substantially expanded. In May 2019, the so-called PACTE (Plan d'Action pour la Croissance et la Transformation des Entreprises) law strengthened the powers of French authorities in case of breach of the filing requirement or commitments imposed in the context of a clearance decision.

Subsequently, Decree No. 2019-1590 of December 31, 2019 and the Ministerial Order of December 31, 2019 relating to foreign investments in France, which entered into force in April 2020, amended the regime to capture new strategic sectors, refine certain concepts and provide a clearer review framework for foreign investors.

The regime has since been updated in the context of the COVID-19 health and economic crisis. No substantive reform is expected to be adopted in the next few years. The Ministry of Economy (MoE) is currently working on guidelines clarifying the rules, notably regarding sectors affected.

The Bureau Multicom 4, located within the MoE's Treasury Department, conducts the review. The process generally involves other relevant ministries and administrations depending on the areas at stake. Since January 2016, a commissioner of strategic information and economic security (attached to the MoE) also assists the Treasury when coordinating inter-ministerial consultations.

“Sanctions will be imposed if an investor did not comply with the clearance conditions imposed by the MoE”



The foreign investor files a mandatory request for prior authorization, which must include detailed information on the investor and its shareholders, the target, the pre- and post-closing structures, financial terms of the transaction and the sensitive activities at stake.



Transactions reviewed under the French Monetary and Financial Code (MFC) include:

  • Acquisition by a foreign investor of a direct or indirect controlling interest in a French entity
  • Acquisition by a foreign investor of all or part of a branch of activity of a French entity. For non-EU/EEA investors only, the acquisition of more than 25 percent of voting rights of a French entity, whether made directly or indirectly, by a sole investor or by several investors acting in concert (instead of the 33 percent threshold of the share capital or voting rights under the former regime). In light of the COVID-19 crisis, a decree of July 22, 2020 lowered the voting rights threshold from 25 percent to 10 percent for listed companies. This measure is temporary, and has been extended until December 31, 2021.

The review applies only to foreign investments made in the sensitive activities listed in the MFC. Previously, the scope of the review differed depending on the origin of the investor. The Decree of December 2019 abandoned this distinction.

For both European Union/European Economic Area (EU/ EEA) investors and non-EU/EEA investors, the list of strategic sectors notably includes:

  • Activities relating to dual-use goods and technologies, and activities of undertakings holding national defense secrets or that have concluded a contract to the benefit of the French Ministry of Defense
  • Activities relating to the interception/detection of correspondences/conversations, capture of computer data, security of information systems, space operations and electronic systems used in public security missions
  • Activities relating to infrastructure, goods or services essential to guaranteeing energy supply, water supply, transport networks, telecom networks, space operations, public security, public health and vital infrastructure
  • R&D activities in cybersecurity, artificial intelligence, robotics, additive manufacturing, semiconductors, certain dual-use goods and technologies, sensitive data storage, energy storage and quantum technologies. A ministerial order of April 27, 2020 broadened the list to include biotechnologies

Since the Decree of 2019, the screening obligations also cover print and digital press, as well as activities relating to the production, transformation or distribution of agricultural products enumerated in Annex I of the Treaty on the Functioning of the European Union (TFUE) when they contribute to food security objectives, such as ensuring access to safe, healthy, diversified food, protecting and developing agricultural lands, and promoting France's food independence.



The MoE assesses whether the transaction may jeopardize public order, public safety or national security based on the information the investor provided in its submission. Follow-up Q&A and meetings with the MoE and other involved ministries are customary. The seller and the target company may also be requested to cooperate with the review.

The Decree of December 2019 specified the standard of review. The MoE is now expressly entitled to take into consideration the ties between a foreign investor and a foreign government or foreign public entity. In addition, the MoE may refuse to grant authorization if there is a "serious presumption" that the investor is likely to commit or has been punished for the commitment of certain enumerated infringements (such as drug trafficking, procuring, money laundering, financing terrorism, corruption or influence peddling). The MoE may also take into account the investor's previous breach of prior authorization requirements or of injunctions and interim measures.

In addition, the PACTE law of 2019 modified the sanctions mechanism in the event a party infringes the prior approval obligation. As such, if a transaction has been implemented without prior authorization, the MoE may enjoin the investor to file for prior authorization (this measure is not only punitive, but may also be used by the MoE to give the foreign investor the possibility to cure the situation), unwind the transaction at his own expense or amend the transaction.

If the protection of public order, public security or national defense is compromised or likely to be compromised, the MoE also has the power to pronounce interim measures to remedy the situation quickly. Remedies include suspending the investor's voting rights in the target company; prohibiting or limiting the distribution of dividends to the foreign investor; temporarily suspending, restricting or prohibiting the free disposal of all or part of the assets related to the sensitive activities carried out by the target; and appointing a temporary representative within the company to ensure the preservation of national interests.

Sanctions will also be imposed if an investor did not comply with the clearance conditions imposed by the MoE, such as the withdrawal of the clearance, compliance with the initial commitments, or compliance with new commitments set out by the MoE, including unwinding the transaction or divesting all or part of the sensitive activities carried out by the target. Non-compliance with MoE orders is subject to a daily penalty. In addition, the MoE may impose monetary sanctions amounting to twice the value of the investment at stake, 10 percent of the annual turnover achieved by the target company, €1 million for natural persons or €5 million for legal entities.

In addition, the PACTE law introduced some transparency into the French review system. The MoE is now required to issue yearly public general statistics (on a no-name basis) related to French national security reviews, to provide a better sense of the general approach adopted by the MoE.



In 2017, following several cross-border deals involving French flagships acquired by foreign investors, the French National Assembly created a Parliamentary Enquiry Committee to investigate decisions made by the French State and explore how French national security interests are protected on such occasions. This put increased pressure on the services conducting and coordinating the review process to ensure that they have completed a thorough review of both the activities at stake and the profile and intentions of the foreign investors.

All relevant administrations are involved in the review process, and the investor and its counsel, as well as the target company, may be convened to meetings and Q&A sessions in relation to the envisaged transactions. Delineating and retaining strategic activities, jobs and resources (including IP rights and know-how) in France has also become an increasing strategic concern in the review process, especially as they relate to clearance commitments that may be required of a foreign investor.

Based on general statistics published by French authorities, it is relevant to note that 275 transactions were filed for foreign direct investment (FDI) screening in 2020. Approximately 30 percent of those transactions were related to defense/security areas and 50 percent to sectors outside defense/security. Non-EU investments represented 49.5 percent of the notified transactions with top non-EU investors originating from the US, followed by Canada and Switzerland. Main EU investors were UK-, Germany- and Luxembourg-based.

In the context of the COVID-19 crisis, close attention seems to be given by French authorities to transactions involving public health issues (notably in relation to targets active in the medical technology area and to acquisitions involving cybersecurity activities). Increased scrutiny is also expected in the area of food security.

In January 2021, French finance minister Bruno Le Maire expressed opposition to Canadian store operator Alimentation Couche-Tard Inc.'s proposed €16.2 billion takeover of French retail group Carrefour. Le Maire reportedly said Carrefour is a "key link in the chain that ensures the food security of the French people" and that its acquisition by a foreign competitor would put France's food sovereignty at risk. Couche-Tard finally decided to withdraw its offer.



Foreign investors must anticipate foreign investment control issues before planning and negotiating transactions. The responsibility for filing lies primarily on the buyer and, if the transaction falls under the MFC regulation, prior clearance by the MoE should be a condition of the deal. The parties may also seek a ruling from the MoE to confirm whether a contemplated transaction falls within the scope of the MFC. The Decree of 2019 opened a new option for the target, which may now submit a request to obtain comfort about whether its activity falls within the scope of the MoE review.

The seller's cooperation in the preparation and review of the filing is important. If the parties expect conditions or undertakings will be imposed, the buyer should anticipate discussions with the MoE and other interested ministries that may impact the timeline for clearance. In addition, the buyer should consider including a break-up fee or opt-out clause in the transaction documentation to protect its interests if the conditions imposed on the transaction are too burdensome. Preliminary informal contacts with French authorities may also be advisable.



Under the new framework, the MoE has 30 business days to indicate whether a transaction falls outside the scope of the review, is cleared unconditionally or requires a further analysis. Where further analysis is required and mitigating conditions are necessary, the MoE has an additional period of 45 business days to provide the investor with its final decision, refusal of the investment or clearance with commitments. In practice, longer periods, such as three or four months, should be anticipated if the MoE requests supplemental information and considers imposing conditions to clear the case.

Since October 2020, the MoE standard practice is to notify the European Commission and other Member States via a short form summarizing the transaction in investments involving non-EU investors under the new EU cooperation system. To date, the practical implementation of the EU notification process has not generated notable delays in the French review process.



The French review process has integrated the EU cooperation mechanism since October 2020. Under the EU system, the MoE notifies certain transactions to the European Commission and other Member States that may request from French authorities additional information. The EC and other Member States may provide non-binding comments to French authorities.


Once the review is completed, the MoE may:

  • Authorize the transaction without condition (a rather rare outcome)
  • Authorize the transaction subject to mitigating conditions/undertakings aimed at ensuring that the transaction will not adversely affect public order, public safety or national security (most of the cases when the MoE decides to review the investment)
  • Refuse to authorize the transaction if adverse effects cannot be remedied (also a very rare outcome)

Mitigating conditions/undertakings may pertain to the investor's preservation of the continuity of the target's activities and the security of its supply of products or services; for example, maintaining existing contracts with public entities, or maintaining R&D capabilities and production in France. They may also include corporate requirements such as ensuring that sensitive activities are carried out by a French legal entity, and/or imposing information-access/governance requirements involving French authorities.

The MoE review is a mandatory process. Contractual agreements in breach of the mandatory process are deemed null and void. The PACTE law amended the sanctions mechanism in case of breach of the notification requirement and granted the MoE additional powers in that regard.


  • Clearance with remedies is customary in most of the transactions that the MoE decides to review. It is key to anticipate those remedies that are generally standard, and to prepare for potential discussions with the MoE. Possible adaptation of those remedies post-closing is also an option to be considered by the investor since the new FDI regime gives the MoE the power to revise conditions over time.
  • With the entry into force of the EU cooperation mechanism and increased international cooperation (notably between French and German authorities), the French FDI review should be considered a part of a more global and multijurisdictional assessment.



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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

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