Foreign direct investment reviews 2019: A global perspective
Foreign direct investment reviews 2019: France

Foreign direct investment reviews 2019: France

In December 2018, a new decree expanded the scope of the French national security review, especially in the technology sector

The MoE review now covers activities relating to the interception/detection of correspondence and conversations, capture of computer data, information systems security, space operations and electronic systems use in public security missions.


In May 2019, the so-called “PACTE” 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. The Bureau Multicom 4, which is located within the Ministry of Economy’s (MoE) 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 interministerial consultations.



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:

  • Direct or indirect acquisition by a foreign investor of the control of an undertaking whose registered office is established in France
  • Acquisition by a foreign investor of all or part of a branch of activity of an undertaking whose registered office is established in France
  • For non-EU investors only, acquisition of more than 33.33 percent in the capital or voting rights of an undertaking whose registered office is established in France. (French law does not provide for any materiality threshold—even transactions of modest size can be captured for review)

The review only applies to foreign investments made in sensitive activities listed in the MFC. For EU-based investors, these activities include defense- and security-related activities and dual-use technologies. For non-EU investors, additional activities are captured (e.g., gambling).

In May 2014, the scope of activities concerned by national security reviews has been significantly expanded for all foreign investors (whether EU or non-EU) to protect “activities relating to equipment, products or services, including those relating to safety and the proper functioning of facilities and equipment, essential to guarantee the French national interests in terms of public policy, public security or national defense” in seven new sectors: (1) electricity, gas, oil or other source of energy; (2) water supply; (3) transportation networks and services; (4) electronic communication networks and services; (5) an installation, facility or structure of vital importance; and (6) protection of the public health.

In November 2018, the list of sensitive activities was further expanded. The MoE review now covers activities relating to the interception/detection of correspondence/conversations, capture of computer data, information systems security, space operations and electronic systems use in public security missions. The new decree also expands the scope of review to R&D activities in cybersecurity, artificial intelligence, robotics, additive manufacturing, semiconductors, certain dualuse goods and technologies, and sensitive data storage.



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.



In 2017, following several crossborder 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 how French national security interests are protected on such occasions. This put an 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 counsels, 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 in France have also become an increasing strategic concern in the review process, as well as in relation to clearance commitments that may be required on a foreign investor.



It is critical for foreign investors to anticipate foreign investment control issues ahead of 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. In this regard, the 2018 decree introduced the option for the target company to submit a written request to the MoE to get comfort about whether the projected investment is subject to prior authorization review. Previously, such requests could be submitted only by the buyer.

The seller’s cooperation in the preparation and review of the filing is important. If the parties expect that 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.



The MoE must make its decision within two months of its receipt of a complete authorization request.

Longer periods (e.g., three or four months) should be anticipated if the MoE requests supplemental information and considers imposing conditions to clear the case.



The French government amended in May 2019 the French legal framework applicable to national security reviews in the context of the PACTE Law. This law has modified the sanctions mechanism in case of infringement to the prior approval obligation. The reform aims at giving the French government a larger palette of possible sanctions it can adapt and leverage depending on the specific situations.

Following the PACTE Law, 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 (i.e., suspend the investor’s voting rights in the target company, prohibit or limit the distribution of dividends to the foreign investor, temporarily suspend, restrict or prohibit the free disposal of all or part of the assets related to the sensitive activities carried out by the target and appoint 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, 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 the 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) in relation to French national security reviews. This will serve as a relevant tool to get a better sense of the general approach adopted by the MoE. The first report is expected to be issued this year.

More regulatory activity is also expected in 2019. The MoE is currently working on the revision of the 2003 ministerial order defining what information foreign investors are required to provide when submitting prior authorization requests. The objective is to specify and to clarify the list of relevant information, taking into account the new coordination process between the European Commission and EU Member States set up by the EU Regulation 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.



Once the review is completed, the MoE may:

  • Authorize the transaction without condition (rather rare)
  • 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 (very rare)

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, 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. The contractual agreements in breach of the mandatory process are deemed null and void. As mentioned above, the PACTE Law amended the sanctions mechanism in case of breach of the notification requirement and granted the MoE additional powers in that regard.


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