On 18 December 2020, the French Minister of the Economic Affairs, Finance and Recovery, Mr. Bruno Lemaire, announced a one-year extension of the provisions adapting the French scheme for the control of foreign investments to the crisis resulting from the COVID-19 pandemic.

1. France established a scheme for controlling investments made by foreign investors, whether originating or not from the European Union, in French companies and businesses operating in industries deemed strategic by the French Government.  This scheme is provided for in Articles L. 151-1 et seq. and R. 151-1 et seq. of the French Monetary and Financial Code (Code monétaire et financier).  It was the subject of a major reform by Decree (décret) No. 2019-1590 of 31 December 2019 and an Order (arrêté) of 31 December 2019 (see our article of 30 April 2020)

2. As a reminder, transactions meeting the three following cumulative conditions fall under the French foreign investment control mechanism:

(i)         the direct or indirect acquisition of

(a)        the control of a business having its registered office in France,

(b)       all or part of a branch of activity of a business having its registered office in France, or

(c)        a share of the capital or voting rights in a business having its registered office in France when this acquisition results in meeting a threshold of 25% of the capital or voting rights of this business;

(ii)        by an investor from another State, whether it is a Member State of the European Union or the European Economic Area or not, except in the case of an acquisition mentioned in 2.(i)(c) above for which only an investor from a third-party State to the European Union or the European Economic Area falls within the scope of the control mechanism; and

(iii)       insofar as the target exercises a so-called “sensitive” activity, the activities qualified as “sensitive” being listed in Articles L.151-3 and R. 151-3 of the French Monetary and Financial Code and including e.g. the manufacture and trade of war materials and dual-use goods, computer security, cryptology, gambling (excluding casinos), data storage, water or energy supply networks, transport or electronic communications networks and services, agricultural business, the press or the research and development on critical technologies.

3. To take into account the current crisis resulting from the COVID-19 pandemic, French Decree No. 2020-892 of 22 July 2020 was adopted.  This regulation lowered the 25% threshold mentioned in 2.(i)(c) above to 10% of the capital or voting rights of an undertaking having its registered office in France and which shares are admitted to trading on a regulated market.  This reduction was deemed temporary and, due to an express provision of the Decree, was supposed to cease automatically to apply on 31 December 2020 at midnight ( see our article of 29 July 2020 )

4. In addition, foreign investments benefited from an expedited procedure for their clearance when meeting this new temporary 10% threshold but remaining below the permanent 25% threshold and having to be closed within six months from their notification to the Minister in charge of economic affairs.  They were deemed to be authorized if within ten days from the reception of this notification, the Minister has not objected the project.

5. In a press release dated 18 December 2020, the French Minister of the Economic Affairs, Finance and Recovery (ministre de l’Economie, des Finances et de la Relance), Mr. Bruno Lemaire, announced that the provision adapting the French foreign investment control to the crisis resulting from the COVID-19 pandemic introduced by Decree No. 2020-892 of 22 July 2020 would be extended for one year from 31 December 2020 to 31 December 2021.  To do this, a new Decree must be adopted before the end of this year.

Jérémy BERNARD

Partner - Competition law
Attorney at the Paris Bar, Jérémy Bernard is a partner of Delcade Avocats & Solicitors.

He has developed a practice covering EU and French competition and distribution law as well as the regulation of liberalized sectors, litigation and arbitration.

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