From Incorporation to the First Export Contract, a Clear Authorization Path for the State
A foreign industrial group designing defense systems and dual-use technologies decided to create a French defense subsidiary tasked with developing, integrating, selling and exporting its products.
It retained Relians, alongside its law firm, for the regulatory and institutional architecture of that French defense subsidiary, from the choice of entities to the preparation of the first export contracts.
The challenge did not lie in a single filing but in the entire sequence of procedures, each authorization regime governing the next and setting the date of the first signed contract.
AFCI authorization stood at the center of that path, since no exporter of war materiel may obtain an export license without holding it first.
Context and Challenges
In France, the manufacture, trade and brokering of war materiel are subject to prior authorization, known as AFCI, which every exporter of such materiel must hold before obtaining a license.
For a joint stock company, AFCI authorization requires directors of French nationality and a majority of the capital held by French nationals, the minister being able to waive that condition only exceptionally, on national security grounds.
A French defense subsidiary wholly owned by a foreign group therefore falls, by construction, within the waiver route, which lengthens the review and calls for a national security argument built very early.
According to the DGA guide, every application presupposes the prior classification of each item, the review takes on average six to nine months from the complete file, and silence from the administration beyond nine months amounts to rejection.
The filing platform, for its part, indicates a timeframe of about three months at best and more than a year for an incomplete file or one requiring numerous exchanges, so that the quality of the file is the first lever on the timetable.
The Key Issue: the Order of the Steps
Each regime depends on the previous one, since without classification there is no AFCI authorization, without AFCI authorization no license is granted, and without a license no contract can be signed with a foreign customer.
The exporter must then keep registers, submit semi-annual reports and undergo post-shipment control, obligations that extend the authorization well beyond the date it is granted.
Relians reconstructed that sequence before any step was taken, then built the action plan from it, which allowed the group to align its industrial timetable with the reality of the procedures.
In a French defense subsidiary project, the value of advice lies less in knowing each regime in isolation than in mastering the dependencies that link them and the delays those dependencies create.
Our Assignment
Relians worked in tandem with the group’s law firm, regulatory and institutional analysis falling to the consulting firm, legal advice and filings falling to the lawyers.
The assignment was organized around six workstreams conducted in parallel, their simultaneity being imposed by the length of the review and by the commercial ambition assigned to the French defense subsidiary.
1. Architecture of the Establishment
Relians settled the choice of entities, then the allocation of activities, intellectual property and technologies subject to foreign rules, in order to delimit the exact scope of the authorization sought for the French defense subsidiary.
That work produced a scope that is clear and defensible before the administration, which avoids the requests for clarification that mechanically lengthen the review of a waiver file.
2. Classification of the Products
Each product line underwent a technical analysis determining whether it fell within war materiel, dual-use items or the civil domain, followed by a reasoned classification request.
The competent authority and the applicable regime were thus known before any filing, a condition without which no AFCI authorization application can usefully be reviewed.
3. AFCI Authorization File
The file was built around governance and the nationality waiver, a three to five year business plan, financial capacity, demonstrated need and the physical security of the premises.
That construction aimed at a file free of ambiguity, able to limit exchanges with the administration and therefore to protect the timetable announced to the group’s first customers.
4. Exports and Flows
Relians mapped intra-group flows, both physical and intangible, then drew up the matrix of applicable regimes and documented the options open for the first contracts.
The first exports of the French defense subsidiary could thus be prepared during the review and signed in accordance with the rules, without ever anticipating a license that had not been granted.
5. Security and Investments
The security clearance needs of the French defense subsidiary and its staff, the classified perimeter and the qualification of future acquisitions were addressed at incorporation rather than when the first contracts arrived.
Access to classified information and external growth were thus anticipated, French foreign investment screening not covering the creation of a subsidiary as such, but capable of covering its subsequent investment transactions.
6. Institutional Dialogue and Compliance
Exchanges with the administration were prepared and carried by a single voice, backed by a compliance program and by a training scheme for the French teams.
That discipline builds a lasting relationship of trust with the State, an asset that proves decisive when the group later presents its acquisition or expansion projects.
The Cross-Cutting Regimes Around the Sequence
Around that sequence, several regimes apply simultaneously to a French defense subsidiary and often escape the attention of groups establishing themselves in France for the first time.
The communication or storage of information without any movement of a physical medium may fall within war materiel export control, while dual-use items fall within Regulation (EU) 2021/821, the French Dual-Use Goods Service being responsible for classification and for issuing licenses.
The supply, import, intra-Community transfer and export of a cryptology means are, save for exceptions, subject to declaration or authorization with ANSSI.
The United States ITAR and EAR regulations finally have an extraterritorial reach that extends to the re-export from France of items incorporating controlled American components, with no threshold for the former and beyond a de minimis threshold for the latter.
Access to classified information further requires a security clearance, granted for Ministry of the Armed Forces contracts, other than those of the DGSE, by the DGA on the opinion of the DRSD.
Results
The group now holds, for its French defense subsidiary, a single map of the regimes, the competent authorities and the dependencies between steps, shared by executive management, the lawyers and the technical teams.
Each product line received a reasoned classification that fixes the scope of the authorization, and the AFCI authorization file was rebuilt around the criteria the administration actually verifies, namely classification, need, nationality, good standing and security of the premises.
Documented export options were prepared for the first projects while the review was pending, and the action plan assigns to each action an owner and a deadline.
Executive management was able to decide, in full knowledge of the consequences, on the nationality of directors and capital, on the allocation of activities and intellectual property, and on the timing of the first contracts against the review periods.
A Representative Case of a French Defense Subsidiary Established by a Foreign Group
This establishment illustrates what an institutional reading produces when it is conducted before the first steps, rather than in reaction to refusals and requests for further information.
In defense and dual-use technologies, the difficulty lies not in the isolated complexity of each regime but in the way they follow one another and in the delays that sequence imposes.
Relians operates precisely at that interface, translating regulatory constraint into an industrial timetable and into the points to be negotiated with the State.
Three points of vigilance remained constant throughout the assignment, no manufacture or sale before the authorization, no export contract signed before the license, and sustained attention to the foreign rules that follow imported components.
What This Case Study Demonstrates
This case study brings out five lessons that any foreign group should absorb before committing to a French defense subsidiary project.
Classification governs the competent authority, the content of the file and the very possibility of exporting, and governance is settled at incorporation, since the nationality of directors and capital determines the review route.
A complete file can save several months, no contract is signed before the license, and each administration must find facing it a single point of contact speaking with one voice.
Relians, Strategic Adviser for Sensitive Transactions
Founded in 2002, Relians is a strategic consulting firm specializing in sensitive transactions and foreign investment screening, working alongside law firms, investment banks and mergers and acquisitions advisers.
Its defense and security sector expertise, built within the DGA and alongside the major prime contractors, allows it to validate business plans and identify the points to be negotiated with the State.
Relians operates at every critical stage of a French defense subsidiary project or a sensitive acquisition, from sensitivity qualification and the French FDI risk assessment to classification, AFCI authorization, export licenses, security clearance and institutional dialogue.
Relians – Strategic advisory in foreign investment screening and sensitive transactions
