Foreign Investment In France: Strengthening Control And Extending Strategic Sectors Under PACTE Law And New Decree

Author:Mr Nicolas Brice, Saliha Bardasi and Pierre Barthélemy
Profession:Jones Day

In Short

The Situation: In the context of strengthening the control of foreign investments, particularly at the European level, the French Parliament intends to deepen control procedures and broaden the scope of authorization of foreign investments in France ("Control of Foreign Investments in France" or "CFIFs").

The Facts: This reinforcement must occur during the vote on the PACTE law planned for the beginning of 2019 and under a decree dated November 29, 2018, entering into force on January 1, 2019.

Looking Ahead: The PACTE law will increase the administration's powers to control and to sanction foreign investments in France. Parliament will carry out its own monitoring of the French government's activity in this area.

Current Regulation of CFIFs

France's financial monetary code (Article L. 151-3 et seq.) identifies 12 business sectors for which foreign investments are subject to prior authorization from the French State. These sectors are all related to public order, public authority, public security (broadly defined, including by references to the energy, water, telecommunications, transportation, and health sectors) or the interests of national defense.

If a buyer acquires control of a French company (Article L. 233-3 of the French Commercial Code) or all or part of a French business, or crosses the threshold of holding 33.33 percent of the share capital or voting rights in a French company, such acquisition qualifies as an "investment" for the application of the regulation of CFIFs.

Under the regulation of CFIFs, the French Minister for the Economy can either authorize the operation—with or without conditions/commitments—or refuse it. In all cases, the decision must be made prior to the completion of the investment. The Treasury Department (a specific department within the Ministry for the Economy), in conjunction with other relevant sector-specific French administrations, manages the granting of authorizations and the monitoring of commitments.

Upcoming Extension of Controlled Sectors

Beginning on January 1, 2019, the Decree dated November 29, 2018, expands the sectors covered by the authorization procedure to include new sectors: spatial operations, electronic and computer-specific systems required for public security purposes, data-hosting activities, as well as research and development activities in the following sectors: cybersecurity, artificial intelligence, robotics, additive manufacturing, semiconductors, dual-use goods, and...

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