FDI Screening in France: Approval Process, Execution Risk and Strategy

Can a fully compliant transaction still fail under the French FDI regime?

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A transaction may be fully compliant, financially robust and industrially justified, yet still be blocked, delayed or materially restructured by the State depending on its perceived strategic impact.

This reflects a fundamental reality of FDI Screening in France: approval is not the mechanical outcome of legal criteria, but the result of a strategic decision shaped by national interests and policy objectives.

A transaction can therefore comply with all applicable regulations and still be rejected or conditioned if it raises concerns related to national security, technological sovereignty or critical infrastructure protection.

French authorities assess not only formal legal criteria, but also the investor’s profile, the sensitivity of the target and the broader geopolitical and industrial context surrounding the operation.

Approval is not purely rule-based and involves a case-by-case sovereign assessment, which introduces a significant level of execution uncertainty for investors and transaction stakeholders.

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What you need to know

• FDI screening in France applies to foreign investors acquiring control, influence or certain rights over entities operating in sensitive sectors

• Sensitive sectors include defense, cybersecurity, artificial intelligence, energy, critical infrastructure and strategic data activities

• The process is governed by the French Monetary and Financial Code and its implementing regulations

• The Ministry of Economy reviews transactions and may approve, condition or prohibit them depending on the perceived risks

• Approval is not purely rule-based and involves a case-by-case sovereign assessment reflecting national strategic priorities

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Why FDI screening in France creates deal uncertainty

The French FDI regime introduces a level of uncertainty that exceeds traditional regulatory risk, because the assessment framework combines legal analysis with strategic, political and industrial considerations.

This uncertainty is driven by several structural characteristics that investors must understand and anticipate in order to preserve transaction feasibility and execution certainty.

• the discretionary nature of administrative decision-making, allowing authorities to go beyond strictly codified legal criteria

• an evolving doctrine reflecting shifting industrial policy, geopolitical context and national security priorities

• the influence of political and institutional dynamics in transactions involving high visibility or strategic assets

• the existence of informal expectations that are not explicitly codified but materially influence the outcome of the review process

As a result, investors are evaluated not only on compliance, but on their perceived alignment with national interests, strategic autonomy and long-term industrial considerations.

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Regulatory framework

FDI Screening in France is primarily governed by the Monetary and Financial Code, notably Article L.151-3 and its implementing provisions, which define the scope of sensitive activities subject to review.

This framework grants the Ministry of Economy the authority to review, condition or prohibit foreign investments in sectors considered essential to national security, public order and economic sovereignty.

It provides a structured legal basis for the review process, while leaving significant room for interpretation and strategic assessment by the competent administrative authorities.

→ official guidance from the French Ministry of Economy

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Approval process

The approval process follows a structured administrative sequence designed to assess the potential impact of a foreign investment on national interests, critical assets and strategic capabilities.

• submission of a formal filing to the Ministry of Economy by the investor or the target entity

• initial review phase (Phase I) to determine whether the transaction raises identifiable concerns

• in-depth investigation (Phase II) where risks require further analysis and engagement with authorities

• final decision consisting of unconditional approval, conditional approval or outright rejection of the transaction

While the process is formally defined and governed by regulatory timelines, the outcome is largely shaped by informal interactions and the administration’s perception of strategic risk.

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What determines approval in practice

Beyond the formal regulatory framework, the outcome of an FDI Screening in France review is determined by a combination of strategic, industrial and political factors that extend well beyond legal compliance.

• credibility, governance standards and perceived reliability of the investor over the long term

• industrial rationale of the transaction and consistency of the underlying business and strategic project

• implications for national sovereignty, control over critical technologies and continuity of key capabilities

• broader political, institutional and geopolitical context surrounding the transaction

• ability to anticipate regulatory concerns and propose credible, proportionate and operational mitigation measures

Approval is not the result of submitting a compliant file — it is the result of effectively positioning the transaction within a complex and evolving strategic environment.

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Strategic insight: compliance vs acceptability

One of the most critical aspects of the French FDI regime lies in the distinction between compliance and acceptability, which fundamentally shapes the outcome of transactions involving sensitive sectors.

A transaction may fully comply with applicable legal requirements of FDI Screening in France and still be rejected if it is not considered acceptable from a strategic, political or sovereignty perspective.

This distinction explains why purely legal approaches often fail to secure approval in complex transactions where the State evaluates broader industrial and national interest considerations.

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Key risks for investors

Foreign investors face several categories of risk when engaging in transactions subject to FDI screening in France, all of which can materially affect deal certainty, valuation and execution timelines.

• outright rejection of the transaction by public authorities following the review process

• conditional approvals imposing governance, operational or divestment constraints affecting transaction structure

• delays affecting transaction timelines, financing arrangements and overall deal execution

• reputational exposure in transactions involving politically sensitive sectors or strategic national assets

These risks must be identified, assessed and managed at an early stage in order to preserve both the feasibility and the economic value of the transaction.

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Evaluate whether your transaction will be approved — before you structure it

Most transactions fail or are significantly constrained because FDI risk is addressed too late in the deal process, when strategic flexibility and negotiation leverage are already limited.

A structured assessment conducted at an early stage allows execution risk to be identified, mitigated and, in certain cases, avoided altogether through proper transaction design.

Assess approval risk

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Relians — Strategic advisory for sensitive transactions

Relians advises investors, companies and their advisors on transactions where regulatory, political and strategic considerations directly influence feasibility, structuring and execution of complex operations.

We intervene at a stage where legal structuring alone is no longer sufficient to secure approval and where the outcome depends on the ability to position the transaction strategically.

Our approach focuses on:

• early identification and qualification of FDI-related risks affecting the transaction

• strategic positioning of the deal in light of explicit and implicit State expectations

• anticipation of administrative, regulatory and political concerns likely to arise during the review

• design of mitigation measures aligned with regulatory requirements and institutional expectations

• support in interactions with public authorities throughout the review and decision-making process

We have been involved in transactions involving critical technologies, defense-related assets and strategic infrastructure where execution depended directly on obtaining regulatory approval.

Discuss your transaction

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FAQ — FDI screening in France

Can a transaction be blocked even if it is compliant with FDI Screening in France?

Yes. Compliance does not guarantee approval, as authorities assess broader strategic and national security implications beyond strictly legal criteria.

What is considered a sensitive sector in France?

Sensitive sectors include defense, dual-use technologies, cybersecurity, artificial intelligence, energy, critical infrastructure and data-related strategic activities.

What is the role of the Ministry of Economy in FDI screening in France?

The Ministry of Economy is the competent authority responsible for reviewing filings, assessing risks and issuing approval, conditional approval or prohibition decisions.

How long does the FDI approval process take in France?

The process typically includes an initial review phase followed, where necessary, by a more detailed investigation phase, which may extend overall timelines.

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“A sensitive transaction is never secured by compliance alone — it is secured by anticipating how the State will assess, position and ultimately decide on the deal.”