France has decided to tighten screening of foreign investment in its strategic corporations on national security grounds. Going forward, non-European Union (EU) investors must obtain government approval to acquire 10% or more equity in French listed corporations in sensitive industries related to national security.
On the 2nd (local time), according to Reuters, Prime Minister Sébastien Lecornu of France signed a decree to strengthen foreign investment screening for non-EU investors. The new rules are scheduled to take effect this month.
The core of the new decree is a mandate that when a non-EU investor acquires 10% or more equity in a French listed corporation in a sensitive sector related to national security, the investor must obtain government approval. Sensitive sectors include areas tied to national security and critical technologies under France's existing foreign investment screening regime, such as semiconductors, artificial intelligence (AI), defense, and energy. The rules apply the same even if the corporation is listed on an overseas exchange outside France.
Previously, only when 25% or more of the voting rights of a French corporation were transferred did it fall under government review. However, to block "opportunistic equity acquisitions" by non-EU capital that could threaten national security, the French government lowered the review threshold to 10%. The existing list of sectors subject to review remains unchanged.
This is seen as a measure to protect related corporations and critical technologies as national security has grown in importance amid rising geopolitical tensions. The Finance Ministry, however, said it would decide within 10 days whether a transaction requires in-depth review once an investment application is filed, to prevent a squeeze on corporations' fundraising. Once the new rules are fully implemented, equity acquisitions by non-EU investors in national security-related strategic corporations are expected to face stricter screening than before.