COVID-19: Following the paths of Spain, and soon Germany, the French Government Further Strengthens Foreign Investments Control

The French Foreign Investments Control regime has recently been reinforced following a reform introduced by Decree n° 2019-1590 of 31 December 2019 and the Ministerial Order of 31 December 2019 relating to foreign investments in France. This reform, entered into force on 1 April 2020, seeks to capture new strategic sectors, refine certain concepts, and provide a clearer review framework for investors. 

In view of the COVID-19 virus outbreak, the Commission called on EU Member States to screen foreign investments more closely by adopting stricter rules and enhancing enforcement. In this context, the French Minister of the Economy announced in an interview on 29 April 2020 the adoption of two new measures aimed at protecting French companies that are active in strategic sectors from potentially opportunistic buyouts. 

The first measure is to expand the list of sensitive activities to include R&D related to biotechnologies, as per a Ministerial Order of 27 April 2020, published today (30 April 2020) in the French Official Journal. Biotechnology is a large and fast growing sector that covers applications in major industrial areas, including health care (medical), crop production and agriculture, non-food (industrial) uses of crops and other products (e.g. biodegradable plastics, vegetable oil, biofuels), and environmental uses. France has the third largest number of biotech companies in Europe after Germany and the UK. It is worth mentioning that under the current regime, acquisitions of activities essentials for the protection of public health are already subject to prior authorisation. In including biotechnologies within its control, the French Minister of the Economy is clearly affirming its objective to review foreign investments in French companies participating to the COVID-19 vaccine research.

The second measure is to lower the threshold for review of non-EU/EEA investments. A recent reform had already lowered this threshold from the acquisition of 33.33% of shares or voting rights to the acquisition of 25 % of voting rights made directly or indirectly by a sole investor or by several investors acting in concert. According to the French Minister of the Economy’s announcement, effective as of the second semester of 2020 through 31 December 2020, this threshold will be further lowered to 10% for non-EU/EEA investors. The French Minister of the Economy has not yet given any guidelines concerning how the threshold will be  determined in practice. In addition, this measure will only cover investments in the relevant “large” companies, but further clarifications are expected as to whether this measure will only apply to listed companies.

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