French foreign investment control regime extended to new sectors

A new decree dated 29 November 2018 widened the scope of foreign investments which will be subject to prior authorization by the French Ministry of Economy to new sectors including artificial intelligence, digital data storage, semi-conductors and the space industry.

This decree echoes the agreement on a foreign investment screening framework reached by the European Parliament, the Council and the Commission at the European level which leaves the final say to the Member States on whether a specific foreign investment should be authorized on their territory; thereby not interfering with the Member States’ sovereignty.

This extension of the scope of foreign investment control will give significant leeway to the French Ministry of Economy in order to closely monitor foreign investments in strategic digital technology areas.

In this international and European trend towards strengthening the screening on foreign investments, the French “Pacte” bill, currently under discussion at the French Parliament, intends to (i) enhance the panel of possible penalties which can be imposed in case of non compliance with the foreign investment control rules and (ii) vest the French Ministry of Economy with increased powers to order injunctions and monitor, post-closing, the compliance with any commitments made by the foreign investor upon being granted the authorization by the French Authorities.

Likewise, the German government has recently tightened its foreign investment rules in order to allow the German government to scrutinize direct and indirect acquisitions of at least 10% of the voting rights of German companies that operate in the area of critical infrastructure or manufacturing, or develop certain military-related products. For all other sectors, the current 25% threshold will remain in place.

Jean-Nicolas Soret, Partner

Géraldine Malfait, Associate

Find out more: “Foreign Direct Investment Under Greater European and French Scrutiny”, American Lawyer, May 2018