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

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In France, foreign direct investment is subject to a national screening mechanism designed to protect public order, public security and national defense. This framework, commonly referred to as FDI screening in France, plays a decisive role in cross-border transactions involving strategic activities.

However, the French FDI regime is not limited to a formal regulatory process. In practice, approval depends on how authorities assess the transaction in light of broader economic, technological and geopolitical considerations. A transaction may therefore comply with all applicable rules and still face delays, conditions or even refusal.

Understanding FDI screening in France requires going beyond legal provisions and analyzing how the system operates in real transactional environments.

• FDI screening in France is a prior authorization regime under which certain foreign investments in strategic sectors must be approved by the Ministry of the Economy. Approval is not automatic and depends on how the transaction is perceived in terms of national interests, strategic autonomy and security considerations.

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When does FDI screening in France apply in practice?

FDI screening in France applies when three cumulative conditions are met:

• a foreign investor (direct or indirect)

• a qualifying transaction (control, threshold crossing or business acquisition)

• an activity considered sensitive

→ Learn more about the legal framework

While this framework appears clear, its application is often complex in practice, particularly in transactions involving diversified or technology-driven businesses.

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What actually triggers FDI risk beyond the legal criteria?

In practice, FDI screening in France is not triggered solely by formal thresholds. Authorities assess whether the transaction may affect national interests, even indirectly.

Risk may arise from:

• the strategic nature of the target’s activities

• its integration within critical value chains

• access to sensitive data or technologies

• contractual links with public authorities

• the investor’s profile and geopolitical exposure

As a result, two legally similar transactions may lead to different outcomes depending on how the administration interprets the situation.

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What are the sensitive sectors under the French FDI regime?

Sensitive sectors are at the core of FDI screening in France. They include defense, dual-use technologies, critical infrastructure, artificial intelligence, data-related activities, healthcare and other strategic industries.

However, these categories should not be treated as exhaustive. Sensitivity is not defined solely by regulation, but by how the activity is perceived within a broader strategic context.

→ See detailed analysis of sensitive sectors in France FDI

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How does the FDI screening process work in France?

The process is structured around a prior authorization mechanism:

Phase 1 — Initial review (up to 30 business days)

• clearance

• clearance without conditions

• or opening of Phase 2

Phase 2 — In-depth review (additional 45 business days)

• authorization

• authorization with conditions

• or refusal

While timelines are defined by law, the actual duration and outcome depend on the perceived sensitivity of the transaction and the interaction with authorities.

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Why FDI screening in France directly impacts deal execution

FDI screening introduces a level of uncertainty that directly affects transaction execution.

Investors should anticipate:

• potential delays in closing

• regulatory conditions affecting governance or operations

• valuation adjustments reflecting regulatory risk

• negotiation leverage shifting during the process

FDI screening in France is therefore not a procedural step, but a core component of deal feasibility.

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How to anticipate FDI screening risk before signing

Anticipating risk requires early-stage analysis integrated into the transaction process.

Key steps include:

• identifying exposure to sensitive sectors

• mapping operational and contractual realities

• assessing how the transaction may be perceived by authorities

• preparing a filing strategy if needed

• integrating regulatory constraints into deal structuring

This analysis should be treated as a strategic workstream influencing execution certainty, not as a compliance formality.

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Explore the French FDI Framework

Understanding foreign investment screening in France requires a structured analysis of three cumulative criteria: the investor, the transaction and the target’s activities.

Explore the key components of the French FDI framework:

• Who qualifies as a foreign investor in France

• FDI thresholds in France

• FDI screening triggers in France

• Sensitive sectors subject to FDI screening in France

• Control and influence in France FDI

• FDI approval process in France

• France FDI review timeline

Each of these elements plays a decisive role in determining whether a transaction may fall within the scope of French foreign investment control and how authorities are likely to assess it.

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What Are the Legal Texts Governing Foreign Direct Investment screening in France – French FDI regime ?

The principles, exemptions, and enforcement measures related to foreign investment control in France are set out in Articles L.151-1 et seq. of the French Monetary and Financial Code.

• Article L.151-1 establishes the principle of freedom of foreign investment in France, stating that “financial relations between France and foreign countries are free. This freedom is exercised in accordance with the provisions of this chapter and with due regard for France’s international commitments.”
• Article L.151-2 limits this principle by allowing foreign investments to be subject to prior declaration, authorization, or control. Paragraph 1(c) is particularly relevant to FDI control.
• Article L.151-3 defines the scope of the prior authorization regime, focusing especially on the criterion of activity, as detailed in the regulatory part of the Code.
• Article L.151-3-1 outlines the enforcement powers granted to the Minister of the Economy, including injunctions, daily penalties, and precautionary measures such as suspension of voting rights, appointment of a trustee, and restriction on asset disposal or dividend distribution.
• Article L.151-3-2 sets forth applicable financial penalties and conditions for their imposition.
• Article L.151-4 provides for the nullity of any investment completed in violation of the prior authorization regime.
• Article L.151-5 imposes an obligation on the parties to comply with information requests from public authorities, without the possibility of invoking business secrecy.
• Article L.151-6 mandates the Government to submit an annual statistical report to Parliament on FDI control, including breakdowns by investor origin and economic sector. A parliamentary debate may be held on this basis.
• Article L.151-7 establishes parliamentary oversight of foreign investment operations reviewed by the Minister.

The regulatory provisions in Articles R.151-1 et seq. specify the scope and operational procedures for FDI control in France:

• Article R.151-1: Defines a foreign investor.
• Article R.151-2: Defines what constitutes an investment in a French-law entity, including relevant thresholds.
• Article R.151-3: Lists the 23 sensitive activities of national interest.
• Article R.151-4: Concerns the preliminary review request.
• Article R.151-5: Governs the filing of a prior authorization request.
• Article R.151-6: Establishes the 30- and 45-business-day review timelines.
• Article R.151-7: Details exemptions from prior authorization.
• Article R.151-8: Covers conditions imposed on authorizations.
• Article R.151-9: Covers modification of imposed conditions.
• Article R.151-10: Covers ministerial refusal of authorization.
• Article R.151-11: Concerns acknowledgment of receipt for filings.

Articles R.151-12 to R.151-15 address enforcement and sanctions:

• Article R.151-12: Provides for a formal notice procedure.
• Article R.151-13: Details the Minister’s powers of injunction.
• Article R.151-14: Establishes the regime of daily penalties.
• Article R.151-15: Provides for the appointment of a court-appointed trustee.

Common Provisions

• Article R.151-16: Concerns the composition of the application files (preliminary review or authorization request).
• Article R.151-17: Allows for international cooperation.

Complementary Texts:

• Order of 31 December 2019: Specifies the list of required documents and sensitive technologies for FDI filings.
• Decree No. 2023-1293 of 28 December 2023: Lowers the threshold for FDI control in publicly listed companies to 10%.
• Article 459 of the French Customs Code: Governs litigation related to financial relations with foreign entities.
• Regulation (EU) 2019/452 of 19 March 2019: Establishes a framework for the screening of foreign direct investments into the European Union.

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Diagnostic — is your transaction exposed to FDI screening in France?

Before launching a transaction, investors should assess:

• exposure to sensitive sectors
• control or influence thresholds
• ambiguity in activity classification
• potential geopolitical sensitivity
• integration of regulatory timelines

Any uncertainty may indicate exposure to the French FDI regime.

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Speak to an expert — secure your transaction in France

Most investors identify FDI risk too late — once execution is already impacted.

FDI screening in France is not only about compliance, but about how a transaction is assessed within a strategic framework.

Speak to Relians to anticipate regulatory exposure, structure your transaction effectively and secure deal feasibility before risk impacts valuation, timing or execution certainty.

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“FDI screening in France is not only a regulatory process — it is a strategic filter that determines whether a transaction is acceptable to the State.”