France continues to be an important destination for foreign direct investments (“FDI”) with 1,194 inbound investments projects last year. For the fifth consecutive year, France has been recognised as the most attractive country in Europe for FDI, ahead of the United Kingdom and Germany. Despite a decline in the number of FDI projects announced in Europe in 2023 (5,694 projects, a 4% decrease compared to 2022) and a volume of FDI remaining significantly below pre-COVID levels (6,653 projects in 2017), France continues to be an appealing destination for foreign investors.
Recent amendments to the French FDI Screening Regime
Foreign investments in certain strategic sectors are subject to mandatory preclosing review.
The review process is handled by the Bureau CIEF (Bureau of Foreign Investment Control in France) of the French Treasury under the supervision of the Ministry of Economy. The most important changes to the screening mechanism were introduced in 2019/2020 through the “PACTE” Law1 and the Decree “Le Maire”.2 Few amendments to the existing regime were introduced last year. For non-EU investments in French listed companies, the temporary measure introducing a lower threshold of 10% voting rights has been made permanent. The scope of the review has been expanded to include investments in French branches of foreign entities engaged in “sensitive activities”. Initially applicable only to French subsidiaries, the FDI screening regime now covers all establishments registered in the French trade and companies register (le registre du commerce et des sociétés).
The scope of sensitive activities has also been slightly expanded to include the following:
- the extraction, processing, and recycling of critical raw materials;
- the security-related activities of penitentiary establishments; and
- R&D activities relating to low-carbon energy production technologies and to photonics.
Finally, as of 1 October 2023, the file submission process has been simplified and standardised and a new electronic platform has been established providing real-time, centralised tracking of the on-going progress.
2024 Annual Report
Since 2022, the French Treasury has been publishing an annual report providing key statistics about the main FDI screening trends. All information is anonymised due to the high sensitivity around French strategic assets.
On 4 June 2024, the French Treasury released its annual 2024 report providing key figures for 2023. Overall, the report shows a continuity in the trends of the French FDI review process.
The number of applications submitted to the MoE has remained stable with a slight decrease from 325 in 2022 to 309 in 2023 in the context of reduced M&A activities. The applications included 255 requests for prior authorization and 27 requests for preliminary rulings to determine whether the target is covered by French FDI rules. Approximately half of the requests for authorization were considered as out of scope of review which is in line with 2022 statistics confirming that a large number of transactions is filed out of precaution.
Whilst this proportion has decreased from 53% in 2022, 44% of the transactions in 2023 reviewed were subject to conditional clearance which remains a French specificity in the EU. It is worth noting that the percentage of conditional clearances could vary from one sector to another, for instance, it is higher in the electronic technology sector (56%) which is not surprising given the increasing sensitivity of certain activity like semi-conductors or AI. The report does not mention any vetoes though it had publicly disclosed that the French authorities objected in 2023 to the projected sale of Segault and Velan SAS, which specialise in manufacturing industrial valves for the defence and nuclear sectors, to the US company Flowserve.
Similarly to 2022, 70% of the applications were submitted on behalf of non-EU investors from the United States, the United Kingdom, and Canada. The French regime also screens European investors that amounted to 30% of the applications, mostly from Germany, Luxembourg, and the Netherlands.
The primary group of filing investors are Banks, sovereign wealth funds, and private equity funds representing around 40% of the applications.
In terms of sectors subject to review, the report confirms that the majority of investments reviewed in 2023 involved essential infrastructures, goods, and services in the civil sector (64% of cases reviewed against 52% in 2022). These activities are covered by case groups including energy, water supply, telecoms, transportation, and public health, which are broadly defined and often trigger precautionary filings. A total of 22% of authorised transactions last year involved investments in sensitive activities per se including security and defence-related activities, cryptology services, dual-use goods, and R&D on critical technologies. Mixed investments related to both the defence and civil sectors accounted for 15% of cases, compared to 24% in 2022.
Finally, the report provides some specific trends for investments in activities related to electronic technology. The report emphasises that electronic technology is key to various industrial sectors such as telecommunications, aerospace, transportation, energy, and defence. The report highlights the significance of semiconductors, emphasizing their importance due to the wide range of industrial applications crucial for energy and digital transitions and highlighting the recent EU initiatives in this space such as the “European Chips Act”.3 Since 2020, the French FDI authority has reviewed 42 foreign investments in the electronic technology sector, 24 of which were related to semiconductor companies. It is interesting to note that most of the French targets have been small and medium-sized enterprises (74%), confirming the increased attention to developing high-value technologies irrespective of the size of the business.
1 Law No. 2019-486 of 22 May 2019 on the growth and transformation of companies.
2 Decree No. 2019-1590 of 31 December 2019, on foreign investments in France
3 Regulation (EU) 2023/1781 establishing a framework of measures for strengthening Europe’s semiconductor ecosystem and amending Regulation (EU) 2021/694 (Chips Act).
