CMS Expert Guide to Foreign Investment Screening Laws in France

The main provisions are set forth in Art. L. 151-3 et seq. and R. 151-1 et seq. of the French Monetary and Financial Code (the “MFC”). The most recent amendments to these articles were made by Decree No. 2023-1293 of 28 December 2023, which came into force on January 1, 2024. These rules also have to be combined with those provided in the EU FDI Screening Regulation ((EU) 2019/452), which is applicable in France.

An Order dated 31 December 2019 describes the information that must be provided when notifying a transaction and sets out further detail on the scope of some of the activities subject to French control of foreign direct investment. This Order was last amended by a new Order dated 28 December 2023.

In September 2022, the Treasury Department published guidelines on FDI screening in France. These Guidelines were updated in July 2025 to incorporate the latest extensions to the scope of application of the aforementioned Order and Decree of 28 December 2023 and to clarify certain concepts (in particular the definition of critical raw materials).

Operations which fulfil the three following conditions are caught by the French FDI regime

• the operation qualifies as an “investment” (see 2.1 below);
• the operation is carried out by a “foreign investor” (see 2.2 below); and
• the activity of the target of the investment falls into one of the listed “sensitive activities” (see 2.3 below).

These rules are applicable in continental France and overseas French departments and collectivities, including New Caledonia, French Polynesia and the Wallis and Futuna Islands.

Four different sorts of transaction qualify as an “investment” within the meaning of the French FDI regime (there are no financial thresholds).

The prior authorisation requirement for the first two types of transaction applies to transaction realized by any foreign investors (i.e. both EU/EEA and non-EU/EEA investors):

• the acquisition of control of an entity governed by French law or a “commercial establishment”. The concept of “control” covers situations in which an individual or a legal entity either (i) holds, directly or indirectly, a fraction of the capital conferring the majority of the voting rights in that company, (ii) has the majority of the voting rights in that company by virtue of an agreement concluded with other shareholders which is not contrary to the interests of the company, (iii) effectively determines the decisions of that company by virtue of its voting rights, or (iv) is a shareholder of that company and has the power to appoint or remove the majority of the members of the administrative, management or supervisory bodies of that company. There is a presumption of control where the person concerned holds, directly or indirectly, a fraction of the voting rights exceeding 40% and no other partner or shareholder holds, directly or indirectly, a bigger interest;
• the acquisition of all or part of a branch of activity of a French entity;

The prior authorisation requirement for the last two types of transaction only applies to foreign investors from a non-EEA country, and to foreign investors from an EEA Member State who have a non-EEA investor in their chain of control:

• The crossing of the threshold of 25 % of voting rights of an entity governed by French law, alone or in concert;
• The crossing of the threshold of 10 % of voting rights of a French listed company, alone or in concert.

Transactions are outside the scope of the French FDI regime if the investor of last resort in the chain of control has already acquired, prior to the investment, control of the entity which is the subject of the investment within the meaning of Art. L. 233-3 FCC. However, this exemption does not apply to transactions intended to transfer a branch of activity outside France or to prevent an investor from complying with the conditions for which it has been held responsible in accordance with the procedure described below.

A foreign investor is either (i) an individual of foreign nationality, (ii) an individual of French nationality who is not tax-domiciled in France, (iii) a foreign-registered entity, or (iv) a French entity that is under the control of one or more persons or entities listed above.

All persons and entities in the same chain of control constitute investors, which means that any member of the chain of control is considered an investor. Thus, it is sufficient that only one member of the chain is a foreign investor within the meaning of the FDI regulation for the foreign investor test to be met.

The French FDI control regime applies if the French target company engages in one of the following “sensitive activities”:

• activities sensitive per se which are likely to jeopardise national defence interests involved in the exercise of public authority or which are likely to jeopardise public order and public safety. This includes activities related to, but not limited to, weapons, ammunition, powders and explosive substances for military purposes, dual-use goods and technologies, cryptology or communication interception activities or activities related to the illicit use of pathogens;
• activities which do not belong to the previous sectors but concern infrastructure, goods or services that are “essential” for guaranteeing public safety and public order in France. This includes infrastructure, goods or services essential for the continuity of water and energy supplies, the operation of transport, or the protection of public health; or
• research and development activities on dual-use goods and technologies or related to a list of “critical technologies”.

If a transaction is caught by the French FDI regime (see above 2), filing is mandatory and the filing has a suspensory effect. For borderline cases both the foreign investor and the French company in which a foreign investment may take place may voluntarily request an opinion from the Ministry of the Economy before initiating an investment transaction in order to confirm whether prior authorisation is required.

Grounds for review are widely defined as the “defence of national interests”. The Minister’s powers are constrained by the principle of proportionality and the Minister can only prohibit the transaction on the following grounds:

• If the implementation of binding commitments is not sufficient to ensure the preservation of the French national interests. The Minister may take into consideration the fact that the investor has links with a foreign government or public agency;
• if there is a serious suspicion that the investor is likely to commit certain criminal and fiscal offences defined by French law (these offences include, but are not limited to, drug trafficking, human trafficking, pimping, fraud, money laundering, terrorism or corruption.), or if the investor has been convicted by a final judgment for one of these offences or for equivalent offences under the legislation of another State during the five years preceding the filing; or
• if, during the five years preceding the filing, the investor has been the subject of a sanction imposed for carrying out an investment without prior authorisation, for obtaining prior authorisation by fraud, for failing to comply with the conditions attached to a prior authorisation decision or for failing to comply with orders issued as a result of the aforementioned infringements.

Foreign investment clearance requests are addressed to the Minister of Economy, through the Foreign Investment Office at the Treasury Department (Direction Générale du Trésor).

The party responsible for the filing is the investor (any entity involved in the chain of control of the purchaser can be considered as an “investor” and can file the application). Since October 2023 all filings must be submitted via a dedicated online portal.

The process is organized in two phases:

• in Phase 1, within 30 business days of a complete notification, the Minister of Economy may either decide that (i) the proposed investment is out of scope, (ii) the proposed investment is in scope and is authorised without any condition, (iii) the proposed investment is in scope, and further examination (i.e., Phase 2) is necessary to determine whether French national interests can be protected by issuing the authorisation subject to certain conditions.
• if the Minister decides to launch a Phase 2 review, the Minister must, within 45 business days following the foreign investor's receipt of the Minister's Phase 1 decision, decide either to: (i) issue an authorisation subject to the foreign investor and its designated affiliate(s) entering into certain binding commitments with the Minister of Economy, or (ii) reject the proposed investment.

If the Minister does not respond to the foreign investor within the legal time periods for Phase 1 or Phase 2 review, the authorisation is deemed rejected. The deadline starts running only when the application is considered as complete by the Ministry’s services, which in practise can substantially extend the deadlines for review.

In case of requests for information during the review process, the deadline is suspended until the parties have provided the requested information.

There are no filing fees under the MFC.

The procedure is confidential and the French Ministry for Economy does not publish any announcement regarding transactions under review. Decisions taken under FDI regulation are not published either.

The Minister of Economy publishes an annual report containing aggregated statistical data relating to the operation of the regime.

Any commitment, agreement or clause that directly or indirectly leads to the implementation without authorisation of a foreign investment covered by the regime is null and void.

If a transaction which is covered by the French FDI regime is carried out without authorisation, the investor may be ordered (possibly under penalty) to (i) apply for authorisation ex post, (ii) restore the previous situation at his own expense and/or (iii) modify the investment.

The Minister may also take precautionary measures (e.g., suspension of voting rights attached to the investor’s shares, prohibition on the distribution of dividends, etc.) if the protection of national interests is or may be compromised.

The Minister of Economy may, after giving the investor at least 15 days to submit its observations on the facts complained of, impose financial penalties not exceeding the higher of the following amounts:

• twice the amount of the unlawful investment;
• 10% of the annual turnover before tax of the target company;
• EUR 5 million for undertakings; or
• EUR 1 million for individuals.

Pursuant to Article 459 of the Customs code, a prison term of 5 years may also be imposed.