France Strengthens Foreign Investment Laws with New Measures
France has announced new measures to bolster its foreign direct investment (FDI) screening regime. These measures, which came into effect on January 1, 2024, aim to protect sensitive sectors of the French economy and ensure national security. In addition to allocating more resources to the government unit responsible for FDI laws, the French government plans to introduce a new law in the spring, aiming to make investing in France less burdensome by providing more flexibility for investors regarding tax and social laws.
Under the current FDI screening regime, both EU and non-EU foreign investors are required to obtain authorization or notify the government when acquiring control, part of a business, or a specific threshold of voting rights in a French legal entity. These requirements also apply to branches of foreign entities operating in France if they engage in sensitive activities.
The new measures expand the scope of sensitive sectors covered by the FDI screening regime. The sensitive sectors now encompass defense and security sectors, infrastructure, essential goods and services, encryption services, and R&D activities related to critical or dual-use technologies such as semiconductors, AI, and biotechnology.
Furthermore, the French government has clarified that the FDI regime also applies to the acquisition of a French branch by a foreign entity. This means that branches registered in the French corporation registry fall under the scope of the FDI screening regime.
Notably, the new measures permanently lower the voting rights threshold triggering the application of the FDI screening regime for non-EU/EEA investors from 25% to 10%. This change aims to ensure closer scrutiny of investments in French-listed companies by non-EU/EEA investors. Previously, an interim rule had temporarily implemented the lowered threshold in response to the COVID-19 pandemic.
To strengthen the FDI screening process, the French government is allocating more resources to the unit responsible for FDI screenings. The team will now include case handlers specializing in specific sectors such as defense or pharmaceuticals, who will liaise with other relevant government departments as required. Expert groups from cross-government department teams will also provide assistance in decision-making processes, ensuring a comprehensive evaluation of investments.
Foreign investors interested in investing in France can find useful information, facts, annual reports, and FAQs in English and French on the French government’s website.
These new measures reflect France’s commitment to safeguard its national interests and ensure the responsible and strategic management of foreign investments. By strengthening its FDI screening regime, France aims to strike a balance between attracting foreign investment and protecting crucial sectors of its economy.
