Foreign Investments in France: last step of the reform
2018 and 2019 saw both the extension of the sectors subject to foreign investment control and the strengthening of sanctions. 2020 starts with the last step of the reform, which should make treatment of most cases faster, while further extending the scope of foreign investment control to food safety and the press and lowering the applicable threshold from 33.33% to 25%. The new rules will apply to filings submitted as from 1 April 2020.
Key changes are as follows:
Treatment of simple cases is made faster
One of the most important innovation of the new rules is that the rules on foreign investment control will apply when crossing a 25% threshold in shares or voting rights compared to 33.33% previously, capturing more transactions. This new threshold will not apply to investors located in the European Union (for which the trigger remains the acquisition of control).
Investors having obtained an authorisation to cross the 25% threshold will now be able to acquire control at a later stage based on a simplified notification procedure (with a possibility for the Ministry for the Economy to oppose the transaction within 30 calendar days).
List of sectors is extended
Two new sectors now fall under the scope of the foreign investment regulation: food safety and the press (including online press). The main other change is the inclusion in the list of research and development related to quantum technologies and energy storage.
The list of sectors subject to foreign investment control is now the same for all foreign investors, regardless of whether they are located within or outside the European Union.
Conditions can now be modified
As authorised by the so-called “PACTE” bill, conditions imposed on investors can now be relaxed, notably in the case of unforeseeable economic or legal changes. This is a welcome change. Conditions can also be revised by the Ministry for the Economy, but only if this is provided for in the authorisation or in case this is justified by a change in the control chain or in the shareholding of the target.
Also coming soon: increased cooperation within the EU
In addition, the 2019 EU regulation establishing a framework for the screening of foreign direct investments into the Union will become applicable in October 2020. This EU regulation sets forth a number of basic requirements that Member States adopting foreign investment screening regulations shall follow (including transparency and lack of discrimination between third party countries) and creates a cooperation mechanism between the European Commission and Member States to facilitate coordination of screening decisions (1). The European Commission may issue a non-binding opinion to the attention of that Member State that is reviewing a transaction subject to its approval under its foreign investment regulations, and the other Member States will have the opportunity to provide comments to that Member State. This is not expected to have any further impact on the timing of transactions, since the French Authorities already cooperate with their counterparts throughout the EU in practice.