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The French Dispatch - A newsletter from Paris


Since his first five-year term, French President Emmanuel Macron has made attractiveness one of the key themes of his economic policy. With results: France ranks now first in the European FDI table. The Government leveraged the country’s traditional assets. Not only does France benefit from structural advantages: the size of the French market, the quality of its infrastructure, and the high level of qualification of its workforce. But to succeed in its endeavour, the Government also profoundly revamped the French economic and fiscal landscape. To shore up attractiveness, the Government rolled out structural reforms of the economy and built an attractive tax and regulatory framework. Gabriel Attal, France’s Public Accounts Minister, said in September: “I am working with Bruno Le Maire to ensure that our country is attractive for investment and economic development. For several years we have taken decisions to lower taxes on companies on the assumption that this would [...] attract investment”.​

The yearly flagship event “Choose France”, initiated by President Macron in 2018, is a testament to the Government’s commitment to promoting France’s attractiveness and encouraging inter-national investments across the country. Each year, under the auspices of the President and with high level representatives of the Government attending, “Choose France” is the place where global CEOs can directly engage with France’s top decision-makers and where some deals are settled. ​

“I am working with Bruno Le Maire to ensure that our country is attractive for investment and economic development.’’​

Gabriel Attal,​
Public Accounts Minister​

1. Three FGS Global insights

_ Energy prices, the new battleground for attracting investments​

Energy should be now more than ever a deciding factor when it comes to investment decisions and competition among member states. When it comes to FDIs, this new variable hasn’t left governments indifferent. On the contrary, countries have been rushing to implement contingency measures to shield (and retain) companies from soaring energy prices. Latest Germany’s €200 billion economic stimulus plan has raised concern in Europe with many states worrying about the distortions of competitive distortions within the internal market arising from such measures. ​

_ It’s decarbonization, stupid!​

Since the 2000s, due to the high share of nuclear and hydropower sources in the French electricity mix, more than 90% of the electricity produced in France is already decarbonated. As European countries struggle to meet their ambitious commitments to reach carbon neutrality by 2050, this is seen by French government as a tremendous asset for France’s attractiveness in the coming years. ​

_ FDI control beyond borders​

Since 2020, an EU Regulation is fostering cooperation among Member States regarding FDI screening. Member States have the power to refer to the Commission FDIs when they have the sentiment that an operation, in another jurisdiction, could have adverse effects for them. The Commission, in charge of the coordination, has proved committed to its role, with more than 1,500 cases centralized by its services last year. For foreign investors active in Europe, they now need to carefully anticipate the potential cross-border consequences of their deals and operation and be able to address a wide range of stakeholders among various member States and within European institutions. ​

Keyword of the month:


A potential acquisition in France requires careful preparation ahead of any public announcement with selected public decision-makers, employee representatives and French media. ​

At FGS Global, we help foreign investors to prepare for a proactive dialogue with selected decision-makers and influential media to convey their commitment to France. ​

Investors' stories must be ready and fine-tuned to explain the rationale behind their investments. Not only because this is a legal requirement, but also because stakeholders need to be convinced that the operation will be fruitful and in their interest. Engaging and delivering tailored message has become as important as respecting basic legal requirements.

2. France is the leading FDI destination in Europe in 2021

While 2020 was a sluggish year for the economy globally, affected by the consequences of the covid-19 pandemic, 2021 has seen a remarkable pick-up in activity. According to World Bank statistics for 2021, global GDP grew by +5.8% and France stood out with a +7.0% dynamic growth. This strong performance is well above the average for the euro zone (+5.4%) and confirms France’s economic resilience as well as the protective and contra cyclic effects of the policy measures (stimulus and support plans) implemented during the covid-19 crisis.​

According to Business France data (French governmental agency in charge of supporting the international development of France), this economic rebound has helped a recovery of the FDI flow, which is back to pre-crisis levels (+77% in 2021 globally, after -63% in 2020). As the #1 destination for international investments in Europe for the third consecutive year in 2021 - with 1,607 projects over the year (+32% compared to 2020 and after 1468 projects in 2019) - France confirms its attractiveness for foreign investments.​

Business France reports 66% of projects being initiated in France by European investors in 2021; with German investors leading the way (300 projects), the majority of which is new business. Nevertheless, expansion of existing projects is also significant (44% of total projects) and reflects investors' renewed confidence in the French economic ecosystem.

FDI levels in France reflect investors’ positive sentiment towards the country.​

In 2021, geopolitical and economic uncertainties have caused stagnation in capital investments in companies globally1, especially given the questioning of globalized supply chains. Yet, France saw a significant increase in investment projects (+32%) which drove job creation in France. In total, more than 45,000 jobs resulted from foreign investment in 2021. Growth in industrial projects is in line with a political willingness to rein-dustrialize France: a record number (460 projects) of new investments in manufacturing sectors can be counted for 2021 (29% of projects and 34% of total job creations). ​

France is also well positioned for investments in innovation, ahead of the United Kingdom and Germany, with 155 foreign investment projects in R&D and engineering (10% of total FDIs projects, stable compared to 2019). This attractiveness is partly due to public funding policies and R&D tax incentives (France ranks first among OECD countries for this type of initiatives) and helps generate high value-added jobs. ​

FDI levels in France reflect investors’ positive sentiment towards the country. In a study, EY reports an increase in investment intentions, with 56% of executives planning to expand or set up operations in France in the next three years and 50% of them wanting to strengthen their R&D activities. Confidence in France's future attractiveness remains high in 2022, despite a slight deterioration compared to the previous year (probably due to political uncertainties related to the presidential and legislative elections). Indeed, 63% of respondents anticipate an improvement in the country's attractiveness over the next three years (compared to 74% in 2021) and it reaches 96% when respondents are part of companies already established in France. ​​

3. Three insights into France

from Alexis Coskun, Senior Associate Paris

1. Foreign Investments screening is on the rise in France.

Following a common trend in all European jurisdictions, FDI screening is registering a growing trend in France. 2021 saw a peak in activity with 328 cases being submitted to and reviewed by the services of the Economy and Finances Ministry. ​

In the last period, two cases raised high on the public and media agenda:​

  • The Government blocked the acquisition of Photonis by the US based Teledyne. This objection clearly demonstrates that being an ally to France, should it be a NATO ally, is not enough to ensure the approval of decision makers.​

  • The Government rejected the acquisition of the French retailer Carrefour by its Canadian incumbent Couche Tard, on the ground that the operation would endanger France’s food sovereignty. The episode sent a clear signal to potential investors: “Sovereignty”, “Strategic autonomy” are neither vague words nor concepts confined to defence and security sectors. The protection of sovereignty, which French decision makers are eager to wave, is on the contrary a flexible concept that is likely to be mobilized in case of foreign investments. ​

2. Foreign investments control in France: a moving dynamic​

Foreign investments scrutiny in France is moving. Dynamically. Not only because it has been the object of major legal and regulatory reforms since 2014, but also because its purpose is facing a critical evolution. ​

​For years FDI control in France was endorsed in a defensive way as a tool designated to mitigate job losses in the industry. Today, faced with a growing international competition in critical sectors, things have changed. The outbreak of the COVID-19 pandemic turned into a powerful vehicle to bolster a strategic turn in FDI control. FDI screening is now considered as an integral part of a wider politization of trade and business relations. ​

As a result, successive reforms have widened the scope of the scrutiny and lowered the threshold triggering the control. This allows the French Treasury in the Economic and Finance Ministry to grasp a greater number of operations, in a wider array of sectors. ​

  • Today, FDI screening in France has evolved toward three main priorities:​

  • The protection of national and European sovereignty.​

  • The restoration and the safeguard of a fair level playing field for businesses globally.​

A focus on critical sectors such as, raw materials, bio-technologies and infrastructures.​

3. FDI control in France: ever diversifying stakeholders’ interferences​

For years, FDI scrutiny was confined to specialized lawyers, high-level public servants, and stakeholders active in the defence and security sector. This time is over. The array of stakeholders interfering in deals and FDI processes in France has been widening over the past years.​

A very diverse range of stakeholders is now directly interfering in both FDI deals and around the regulatory and legislative debates. ​

  • The FDI arena in France is France is witnessing:​

  • Enhanced scrutiny around both cases and legal scrutiny. ​

  • Increased parliamentary activity around FDI operations. Reports calling for the reinforcement of FDI screening are blooming and potential foreign investors in critical sectors must stand ready to face parliamentary hearings and inquiries. The use of public questions tabled by Members of Parliament requesting information to Ministers is also a growing trend. ​

  • As a result, France is at hand with an over mediatization of FDI cases going well beyond top-tier financial press.​

  • NGOs and Unions are equally increasingly active regarding cross border-deals. They do liaise with decision makers and are eager to make their voice heard. ​

4. Despite being the #1 destination for FDIs, France must up its game to remain in first position​

For France, attractiveness is a crucial lever of reindustrialization. During the French presidential campaign in spring, all candidates set out ambitious proposals to reindustrialize the country, highlighting the complexity of the battle ahead. At the root of the phenomenon lies a shared and worrying observation: in 2020, industry accounted for only 13% of France’s GDP, half as much as in 1949, far from Germany, Italy, and the UK. Despite a record year for France in 2021, it is still too early to talk about a total reindustrialization. According to Trendeo (a French observatory on employment and investments), France is still a small player with regards to major industrial projects that involve more than 250 jobs. In 2021, the French industry mainly attracted smaller investment projects and generated fewer jobs compared to its neighbours​.

Nonetheless, in 2021, Business France argued that France reindustrialisation was a reality and Bruno Le Maire, Economy and Finance Minister, stressed that “these excellent results [for 2021] testify to the reality of our country's reindustrialization, and to the success of the attractiveness strategy deployed by the Government since 2017, through ambitious reforms”. ​

It is still uncertain if this trend in investment seen until now will continue given the current trend of energy prices and a looming recession. The slowdowns of factories, hampered by the cost of energy, are beginning to take hold in France; public authorities are expecting a 10% decrease of its industrial production in Q4 2022. As Gilles Attaf, President of the French Forces Industry Club points out, “France is losing the momentum of reindustrialization”, which could be detrimental to its attractiveness.​

A decisive challenge for France to remain attractive to foreign investors and to maintain its current leadership in Europe will be how it deals with a complex and heavy fiscal environment. Although the government has committed in its last term to foster fiscal attractivity, France ranked 2nd out of 38 OECD countries in terms of the tax-to-GDP ratio in 2020, according to the OECD. In 2020, France had a tax-to-GDP ratio of 45.4% compared with the OECD average of 33.5%.

These excellent results [for 2021] testify to the reality of our country's reindustrialization, and to the success of the attractiveness strategy deployed by the Government since 2017, through ambitious reforms.’’​

Bruno Le Maire,​
Economy and Finance Minister

France’s attractiveness which is notably driven by the quality of the skill sets of its workforce remains an asset France must continue to cultivate. As part of a Parliamentary hearing, Industry Minister Roland Lescure argued that 70,000 jobs were still to be filled in the industry sector, confirming the major hurdle the country must address: matching talent and companies. Investing in education, training and upskilling is essential to retaining talents and will be crucial for keeping on attracting FDIs.​

Additionally, despite labour reforms implemented since 2017, France must remain vigilant on labour costs to continue attracting foreign investors. According to Eurostat, the hourly cost of labour for the entire euro zone was estimated in Q3 2021 at 33.1 euros when it is estimated in France at 38.8 euros.​

France will also have to prepare the right investment environment for the future. Investors are already looking ahead on innovation and the green transition. Innovation is a differentiating factor for foreign investors. According to the Executives surveyed by EY in 2022, 49% of them believe that innovation is the area in which France should focus its efforts as a priority. Investors also cite social and environmental responsibility as essential in decision-making, together with the green transition. ​

“49% of executives believe that innovation is the area in which France should focus its efforts as a priority”​

EY survey, 2022​

5. How to reconcile FDI with strategic and industrial sovereignty: Bringing politics in​

Sovereignty is a vivid source of debate in France, that always lied at the heart of the decision makers’ concerns. This environment has the potential to threaten the smooth closure of FDI deals. Applied to FDIs, the doctrine stresses the apparently innate contradiction between allowing foreign players to monopolize key parts of the economy, and safeguarding the country’s strategic and industrial autonomy.​

Such a trend is deeply rooted in the political debate in France and has also seeped into the debate on European integration. It was core to the campaign for the French referendum which allowed the signing of the Maastricht Treaty founding the EU in 1992 (won by a mere 51% of the votes). It was also one of the key grounds for the rejection of the Treaty establishing a Constitution for Europe in 2005 . ​

In an attempt to resolve such a contradiction, Emmanuel Macron advocated in his 2017 Sorbonne speech in favour of ‘European strategic autonomy’, making a link with economic sovereignty. Indeed, focusing initially on Defence issues, the notion was extended to other key industrial sectors, in view of reducing Europe’s dependence towards foreign countries.​

Against this background, the Government has developed a three-step narrative to support its policy on attracting FDIs in France:​

  1. FDIs are often described in government communication as a tool empowering the French economy to reach strategic and industrial sovereignty, rather than the opposite. ​

  2. Following Emmanuel Macron’s stance in favour of “European strategic autonomy”, the Government has made economic sovereignty at the European level a priority. As such, the rhetoric of the “European champion” and the need to pool efforts on a continental scale is often used.​

  3. In view of balancing such an appetite for FDIs and in line with the European Commission approach, the French Government has strengthened its scrutiny over FDIs in France. In particular, the so-called “Loi Pacte” (standing for bill on growth and transformation of companies), a milestone in Macron’s economic policy in his previous term, included few articles on FDI scrutiny. These articles give the Government the power to filter foreign investments in additional “strategic” sectors (chips, space, drones and whenever related to national security AI, cybersecurity, robotics, and data mass storage), and reinforced sanctions procedures.​

“The notion of ‘European strategic autonomy’ was extended to other key industrial sectors, in view of reducing Europe’s dependence towards foreign countries.”​

​Source: French FDI screening guidelines – September 2022

6. The investors’ toolbox: France’s FDI guidelines​

The strengthening of the FDI screening procedure also comes with increased complexity in the process, which is likely to deter some foreign companies to invest in France. To mitigate this risk, the Economy and Finance Ministry sought to reinforce the transparency of its screening procedure by publishing guidelines. The latest document was issued in September 2022 and provides foreign investors with technical clarification on the French FDI regulations such as: the depth with which the investor supply chain must be analysed, details on the application procedure and the types of decisions rendered by the Ministry. ​

Overall, foreign investors welcomed the transparency offered by the French authorities. Notably, the international law firm White & Case described the initiative as a “best practice” encouraging other EU Member States to adopt similar guidelines. ​​

7. The dynamics of foreign investment control in Germany​

View from Ellen Harte and Alexander Otto from Berlin

In a climate of heightened geopolitical tensions and keen awareness of economic dependencies, FDI screening has become an important instrument in the German government’s political toolbox. As Germany’s efforts to promote strategic autonomy and diversification further intensify, the importance of FDI screening as a policy tool is also expected to grow. The Coalition Agreement opens up the possibility of further tightening of FDI screening rules, with FDI screening rules expected to be amended in the near future.​

Three key trends are visible on Germany’s FDI control:​

  • Chinese investments are viewed critically across the board. However, even investments from allied countries are affected by FDI scrutiny. China has been the focus of FDI screening in Germany for a while now and will continue to attract careful governmental scrutiny. Germany’s Economic Affairs and Climate Action Minister, Robert Habeck, recently underlined his scepticism of Chinese investment in Germany, particularly in the infrastructure sector: “Naivety towards China is over.”​

  • Behavioural remedies are preferred. Unlike in merger control proceedings, where structural remedies are typically imposed, the German FDI regulator imposes behavioural remedies instead, e.g., the obligation to continue supplying goods in Germany or keep assets in Germany.​

  • Enhanced control over strategic sectors. The German government’s primary concern generally relates to such sectors as critical infrastructure (including, inter alia, energy, water, telecoms, finance, transportation, and food), health and high-tech. However, the past few years have shown that as political priorities shift, other sectors can quickly come into focus. Accordingly, the government now pays very close attention to any deal involving the energy sector or infrastructure. Attention to healthcare deals could decrease as the COVID-19 pandemic becomes less predominant.​

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