Interview with the French Ministry for the Economy: Insights on the French FI regime

In the latest episode of our Global Foreign Investment Podcast Series, Pierre Guillot, Linklaters Public Law / Energy Infrastructure Partner based in Paris, discussed France’s foreign investment regime with Marie-Anne Lavergne, Head of the Office in charge of Foreign Investment control at the French Treasury Department of the Ministry in charge of the Economy and Clémence Largé, Deputy to the Head of Office.

In this post, we summarise the key points that emerged from our interview with the Ministry.

A few statistics….

In 2021, 328 cases were filed with the Ministry, representing 31% more notifications than in 2020. Out of these cases, 124 foreign investments in France were authorised, including 64 filings which were subject to mitigation measures in order to protect national interests. The remaining 204 cases were either still being reviewed, or withdrawn, declared out of scope, or rejected. However, we have no knowledge of cases being rejected in 2021. 

….and timing issues 

Most cases are closed in Phase 1. In limited cases - where additional information is required, or in sensitive cases – the Ministry may open a Phase 2 investigation, lasting a further 45 calendar days.

The Ministry only has 75 working days to screen a filing – as opposed to other EU countries that have more than 3 months – which equates to almost one new case every working day. Decisions are often reached much faster. But in any event, the Ministry never goes beyond the 75 working day limit, because if no decision is issued by that deadline, the investment is prohibited. 

What happens when there is an unreported transaction?

Investors should be aware that if a transaction goes ahead without prior authorisation by the Minister of the Economy, the investment is deemed null and void. Investors may face severe sanctions and could be required to unwind the transaction entirely.

How frequently does this happen? Well, the Ministry would not specify, but it did highlight that the French foreign investment mechanism is well known to stakeholders, thanks to the high-quality communication channels which it has set up with investors. Also important is the ability for investors to seek an opinion from the Minister of the Economy in order to confirm whether a French entity’s activities fall within the scope of the screening mechanism and whether an investment requires prior authorisation. 

These procedures provide a significant degree of certainty and predictability for foreign investors. Together with the risk of harsh sanctions, they play an important role in avoiding unreported transactions. 

Interaction with the EU regime

The Ministry has witnessed a growing convergence in the characteristics of the French and EU regimes ever since the EU’s screening Regulation came into force in 2019. In a nutshell, the Ministry views the cooperation mechanism as working really well, giving it an overview of FDI transactions within the EU and helping it identify, at a very early stage, further transactions that will be subject to an FDI screening in France.

The dialogue between the Member States and the Commission was a key point made possible by the EU Regulation, and the Ministry emphasised the importance of all Member States taking part in this exchange of good practices. 

How does this play out in practice?

In spite of increased convergence and cooperation, there are still discrepancies between regimes. To note a few: 

• In France, when an investor acquires control over an entity, the threshold that triggers control is set at 25% of voting rights being acquired by a non-EU investor only, regardless of the sector they are investing in.

• The Ministry does not screen greenfield investments due to one of the eligibility criteria being the existence of a sensitive activity.

• The French regime has adopted a broader definition of what constitutes a foreign investor, compared to other countries, such as Italy. In particular, the Ministry will also screen investments from French nationals who are settled abroad or from French companies which have intermediary entities outside of France.

Looking ahead

The Ministry does not foresee any major changes to the rules. It is very conscious of the importance of legal certainty in helping France remain attractive to foreign investors. France has worked hard to make the process as transparent and clear as possible - and plans to publish guidelines by the summer to clarify technical and legal issues for stakeholders, including in relation to the screening of investments made by investment funds.

Listen to the episode for more insights.