FDI Archives - Regulatory & International Trade

Extended Screening of Foreign Investment in France: A Risk of Incompatibility with Company Law?

Control of foreign direct investments in France (FDI) has been steadily tightened since 2014. The provisions of Articles L. 151-3 and R. 151-1 et seq. of the French Monetary and Financial Code (CMF), as supplemented by the Decree of December 31, 2019, organize this national screening mechanism based on the prior authorization of certain investments in sectors and activities considered sensitive.

In 2022, of the 131 FDI authorized, 70 were conditionally authorized, not without question as to the compatibility of these commitments with the free movement of capital and company law.

1. The filtering of FDI justifies questioning its compatibility with European requirements, as the European Commission or the Court of Justice is likely to consider it too restrictive. Moreover, it is by no means certain that all commitments imposed by the Minister of the Economy on the foreign investor in order to obtain authorization will pass the proportionality test of the Court of Justice of the European Union (CJEU).

The control of FDI in France is triggered when three cumulative conditions are met:

i. The investor is deemed a foreign investor within the meaning of Article R. 151-1 of the CMF, i.e. any individual of foreign [...]

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How to Determine Which Investors Should be Disclosed Under the Foreign Direct Investment Screening Regime in France, the United Kingdom and the United States

Where a transaction is carried out by an investment fund, the question of which investors should be disclosed under Foreign Direct Investment will eventually surface. We consider the necessary disclosures under French, US and UK FDI screening.

There is significant potential for divergence as to how new(er) FDI rules are applied in practice, in particular in relation to common structures used by private equity. One question that arises regularly is whether the FDI regimes are catching the limited partner investors (LPs) in the same way as any other direct investors.