Recent Decisions Shed Light on Foreign Investments in France


The Conseil d’Etat recently ruled on disclosure requirements for transactions by foreign investment funds. In a separate case, the French Ministry of Finance issued a verbal notice rejecting a US company’s proposed acquisition of a French technology enterprise.

In Depth

Two separate decisions on foreign investments drew scrutiny in France recently: a Conseil d’Etat ruling on disclosure requirements for transactions by foreign investment funds, and a verbal notice issued by the French Ministry of Finance rejecting the acquisition of a strategic small to mid-size enterprise (SME) by a US company.

According to its statement to the US Securities and Exchange Commission (SEC), the US regulatory body for the securities industry, US company Teledyne Technologies Inc. received verbal notice on 31 March 2020 of the French Ministry of Finance’s unfavourable position regarding Teledyne’s proposed acquisition of Photonis, a leading French company for night vision devices. This decision has yet to be confirmed in writing, and the Ministry announced that no such notice would be issued before the end of the Coronavirus (COVID-19) pandemic. This vague timeline might spare the Ministry of Finance from having to issue a formal veto, a measure that has not yet been used under the foreign investment control regime. The delay also gives the French government additional time to find an alternative solution for the acquisition of Photonis.

Teledyne’s plan to acquire Photonis had been strongly contested by high-ranking officials in the Ministries of the Economy and Armed Forces—including the counter-intelligence services—as well as members of the parliament, who argued that French control of Photonis represents a matter of sovereignty. Photonis plays a strategic role in the French military industry: it is the leading company for the design and manufacture of light intensifier tubes worldwide using innovative digital technology, and is a supplier for the special forces of NATO members. Photonis also provides detection instruments for the Megajoule laser project, a key element of the French nuclear deterrence policy. The French government has encouraged French companies to take over Photonis, with little success so far, and it is uncertain whether the current COVID-19 crisis will lead Ardian to lower its asking price, which has deterred other companies.

In a separate case, on 3 April 2020, the Conseil d’Etat ruled that a foreign investment fund seeking authorisation for direct investments in France must disclose in its application the identities of the fund manager and the persons controlling it, but is not required to disclose the identities of all investors. By decision of 16 December 2015 and in accordance with article L. 151-3 of the Monetary and Financial Code, the Ministry of the Economy allowed FII Co, a company incorporated under Luxembourg Law indirectly owned by two investment funds managed by Warwick Capital Partners LLP, a company incorporated under English Law, to acquire control of B. Industries, a company manufacturing various fibres for the automotive industry. Ms and Mr B. sought the annulment of the authorisation before the Administrative Court of Paris, which denied their request. The Administrative Court of Appeals of Paris affirmed the ruling.

The matter was then brought to the Conseil d’Etat, the highest administrative court, which found that “the Court of Appeals did not in any way err in law by deciding that the applicant seeking authorisation for a transaction by an investment fund is required to disclose the identity of the fund manager and, when the fund manager is a legal entity, the identities of the natural persons or public bodies that control the fund, and by observing that no provision requires all the investors of the fund to disclose their identity.”