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Monitoring foreign investments in France: Simpler rules ?

12/12/2017

The legal framework regarding the monitoring of foreign investments in France was amended by decree n°2017-932, dated May, 10th, 2017 and providing for simplification measures for companies.

As a reminder, prior to this decree, investments contemplated by foreigners (whether or not from the European Union) could give rise to three different formalities, cumulative as the case may be, depending on the contemplated transaction: (i) a prior authorization from the minister of Economy, (ii) an administrative filing with the Treasury / Tax administration and (iii) a statement for statistical purposes (to be filed with the Banque de France or the Tax administration).

The decree clarifies the applicable procedure by removing (i) the mandatory administrative filing with the Tax administration (former art. R. 152-5 of the French monetary and financial code) – while creating at the same time a new legal framework with regard to transactions that are subject to prior authorization (art. R 153-13 of the French monetary and financial code) – and (ii) a statement for statistical purposes to be filed with the Tax administration (former art. R 152-4 of the French monetary and financial code).

From now on, the amended legal framework provides for:

  • A prior authorization (art. L. 151-3 of the French monetary and financial code) from the minister of Economy, regarding transactions made by investors from foreign states (the investments involved are referred to in art. R 153-1 and R. 153-2 of the French monetary and financial code) or from Europe (shorter list of investments involved, see art. R. 153-3 to R. 153-5 of the French monetary and financial code); the authorized transaction must then be subject to an administrative filing with the Tax administration upon completion; and
  • A statement for statistical purposes to be filed with the Banque de France within 20 days as from the completion of the relevant transaction (the investments involved are referred to in art. R. 152-3 of the French monetary and financial code).

This simplified legal framework does not entail a more lenient monitoring of foreign investments in France, but it does show the intent to focus on strategic fields.

The overall legal framework applicable to the monitoring of foreign investments has not been simplified by the decree, insofar as determining which transactions fall within the scope of the prior authorization is still subject to a wide discretion, and accordingly , remains a source of uncertainty and therefore risk for foreign investors, keeping in mind the hefty sanctions incurred in case of failure to comply (notably, up to five years in prison, a fine equal to twice the unlawful investment amount, and nullity of the transaction – art. L. 151-3, III of the French monetary and financial code and, art. 459 of the French customs code, referred to by art. L. 165-1 of the French monetary and financial code).

From a European standpoint, the European Commission has issued proposals, on September, 13th, 2017, as well as a draft European regulation aiming at setting up a European legal framework regarding the monitoring of foreign investments. The stated purpose is to protect European assets from transactions that are likely to harm the essential interests of the Union or a member State. To that end, the Commission suggests a European framework setting forth principles regarding the monitoring of foreign investments without replacing the member States’ monitoring rules, a cooperation mechanism between member States and the Commission, and a filtering mechanism carried out by the European Commission on transactions that could have an impact on projects or programs that are of particular interest to the Union.

Without harming the member States’ sovereignty with regard to foreign investments, European economic patriotism will undoubtedly bring more complexity to foreign investments in Europe and in France. 

Authors

Picture of Jean Robert Bousquet
Jean-Robert Bousquet
Partner
Paris
Adeline Benoit