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2013 Investment Climate Statement - France


2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report
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Openness To, and Restrictions Upon, Foreign Investment

The French government (GOF) seeks foreign investment as a way to create jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors. A public organization, the French Agency for International Investment (Agence Francaise pour les Investissements Internationaux – AFII) coordinates investment promotion. The agency combines the overseas offices of the Invest in France Agencies (IFA), with the Invest in France Network (IFN) association. In October 2012, AFII and the French Patent and Trademark office INPI launched a communication campaign called "Say OUI to France, Say OUI to Innovation," with the objective of attracting more foreign investors.

Foreign investors say they find France’s skilled and productive labor force, good infrastructure, technology, and central location in Europe attractive. France’s EU and eurozone membership facilitates the movement of people, services, capital, and goods. However, notwithstanding French efforts at economic reform, market liberalization, and attracting foreign investment, U.S. and foreign companies often point to the tax environment, high cost of labor, rigid labor markets and occasional negative attitudes toward foreign investors planning to restructure, downsize or close as disincentives to investing in France. The 2012 Amcham Bain Survey, released just before Christmas 2012, details U.S. concern about some of France’s economic policies under the Hollande administration, notably recent tax reforms affecting businesses and individuals.

The Formal Investment Regime

The formal French investment regime is among the least restrictive in the world. While there is no generalized screening of foreign investment, French law (decree 2005-1739) stipulates that acquisitions in “sensitive” sectors are subject to prior notification, screening, and approval by the Finance Minister. The decree lists a total of eleven strategic sectors:

  • gambling and casino activities
  • private security services
  • research, development and production of pathogens or toxic substances for unlawful or terrorist activities
  • wire tapping and mail interception equipment
  • testing and certification of security for IT products and systems
  • goods and services related to the information security systems of companies managing critical infrastructure
  • dual-use (civil and military) items and technologies
  • encryption services
  • the activities of firms entrusted with national defense secrets
  • research, production or trade of weapons, ammunition, and explosive substances intended for military purposes
  • any business supplying the Defense Ministry with any of the above goods or services

The GOF must review any investment in these sectors that acquires control of a firm, surpasses a 33 percent ownership threshold, or involves any part of any firm that has established headquarters in France. Some investments in sensitive sectors require the consent of several ministries. The AFII website’s "Doing Business in France" section explains French regulations on foreign direct investment.

Informal Impediments to Foreign Investors

A tradition of state intervention in the French economy can pose challenges to both French and foreign investors, as corporate governance and employment decisions frequently attract political attention. French labor unions tend to see U.S. firms as focused on short-term profits at the expense of employment and not sufficiently committed to social dialogue or respect for their legal obligations to employees when restructuring. A degree of opaqueness in the privatization process (see below) can also arouse suspicions about the equal treatment of foreign investors in publicly held firms.

Corporate tax rates are high compared to those in other leading industrial countries. The Hollande administration's reform of corporate taxation, the announcement in 2012 of a new tax rate on income over USD 1.3 million, and increased taxation of stock options have increased investor concerns. Foreign investors most often cite high wages, including a minimum wage (“Salaire Minimum Interprofessionnel de Croissance – SMIC”) of USD1859 per month, payroll taxes and complicated labor regulation as the greatest disincentives to investing in France.

The United States and France have a bilateral tax treaty addressing, among other things, double taxation and tax evasion. English summaries of labor and tax regulations applicable to foreign companies in France are available at the AFII's website (http://www.investinfrance.org/) and at the Paris Chamber of Commerce and Industries' website (http://www.inforeg.CCIP.fr).

Government Stakes in the Corporate Sector

As of December 2012, the GOF maintained stakes in Aéroports de Paris (54.54 percent), Air France KLM (15.88 percent), Areva (14.33 percent), CNP Assurances (1.10 percent), EADS (14.96 percent), EDF (84.44 percent), France Telecom (13.45 percent), GDF-Suez (36.74 percent), Renault (15.01 percent), Safran (30.20 percent), and Thalès (27.08 percent), and in unlisted companies including SNCF, RATP, CDC and La Banque Postale. By the end of 2011, the government has a majority stake in 1,500 smaller firms in a variety of sectors, and a minority stake in 540 other firms.

GOF stakes in these companies are sometimes sold through market-based public offerings, but more commonly through an off-market bidding process. In both cases, the Ministry of Economy, Finance and Industry makes determinations based on bidders’ business plans, and with the advice of the quasi-independent "Commission des Participations et des Transferts" (formerly known as the Privatization Commission). The confidential nature of off-market sales can raise suspicions about the equal treatment of foreign and French bidders, cooling interest from foreign investors. In the past, a policy of selling holdings to "core" shareholders to avoid splitting up companies or selling sensitive state assets to foreign investors favored French firms.

The 1993 privatization law gives the French government the option to maintain a so-called "golden share" in privatized companies “to protect national interests." A golden share gives the GOF the right to:

  • Require prior authorization from the Ministry of the Economy, Finance and Industry for any investors acting in concert to own more than a certain percentage of a firm's capital;
  • Name up to two non-voting members to the firm's board of directors; and
  • Block the sale of any asset to protect "national interests."

In June 2002, the European Court of Justice reaffirmed the basic principle of free movement of capital in the EU and stated that the use of golden shares was a serious impediment to that principle. Nonetheless, a December 2006 French law related to the energy sector allowed the government to keep a golden share in Gaz de France (GDF) to ensure the security of energy supplies. The GOF received approval from the European Commission (EC) to maintain its golden share following the merger of GDF with Suez, and has reserved the right to retain a golden share in any restructuring of Areva.

(For additional information see “State-owned Enterprises” section, below.)

French Government Participation in R&D Programs:

The GOF sponsors Research and Development programs at three different levels:

  • International/European programs (e.g. ESA, CERN, EUREKA, EU Framework program). The new Administration has indicated that it wants future French R&D projects to compete more actively for European funding, which is entering a new phase under the “Horizon 2020” program that will govern R&D in 2014-2020;
  • Private sector programs in 2010 (the most recent year for which statistics are available). 51 percent of R&D expenditures in France were funded by the private sector;
  • National research programs (mostly administered by the Higher Education and Research Ministry (MESR). The Administration is still setting new R&D priorities, but has indicated that they will be aligned with EU-wide priorities under 2020. Some key objectives are to bridge the gap between research and the marketplace; promote innovation; increase multi-disciplinary work and cross-cutting themes; and boost international cooperation. Focus research areas will include climate change, sustainable transport, renewable energy, food safety and security, and health sciences including gerontology; and information and communications technology.

The GOF relies on tax credits and incentives to boost industrial research, notably among innovation SMEs. Total annual R&D expenditure increased to 2.2 percent of GDP between 2008 and 2010, its highest level since 1993. The GOF’s 2013 budget confirmed its commitment to promoting higher education and research; for the fifth consecutive year, the budget for higher education and research will increase, by €2.2 million to a total of €22.9 billion.

Visas, Work Requirements:

The GOF requires non-EU citizens to fulfill a number of requirements in order to work in France. Non-EU nationals who intend to work or conduct commercial activity in France must receive a long-term visa and work permit (Carte de travail) or business permit (Carte de commercant - foreign trader's card) before establishing residence in France. Information on both can be obtained from French consulates in the United States, while the Invest in France website provides information on obtaining the foreign trader's card. A foreigner's ability to practice a profession may be restricted by government regulation and the regulations of French professional associations.

Global Benchmarks:

Measure

Year

Index/Ranking

TI Corruption Index

2012

71/100/22 (out of 176)

Heritage Economic Freedom

2012

63.2/67 (out of 179)

World Bank Doing Business

2012

32 (out of 185)

Capital Conversion and Transfer Policies

All inward and outward payments must be made through approved banking intermediaries by bank transfers. There is no restriction on repatriation of capital. Similarly, there are no restrictions on transfers of profits, interest, royalties, or service fees. Foreign-controlled French businesses are required to have a resident French bank account and are subject to the same regulations as other French legal entities. The use of foreign bank accounts by residents is permitted.

For purposes of controlling exchange, the GOF considers foreigners as residents from the time they arrive in France. French and foreign residents are subject to the same rules; they are entitled to open an account in a foreign currency with a bank established in France, and to establish accounts abroad. They must report all foreign accounts on their annual income tax returns, and money earned in France may be transferred abroad.

France established its own tax-haven black list in February 2010, and plans to update it annually. France uses its powers under national law to freeze terrorist’s assets, and cooperates internationally and at the United Nations on terrorist financing issues. As part of international efforts to combat money laundering and the financing of terrorism, France introduced regulations tightening reporting on checks, their amounts, origins and destinations, as recommended by the Financial Action Task Force. France established its own tax-haven black list in February 2010, and plans to update it annually. France uses its powers under national law to freeze terrorist’s assets, and cooperates internationally and at the United Nations on terrorist financing issues.

Expropriation and Compensation

Under French law, private investors are entitled to compensation if their properties are expropriated, and such compensation must be prompt and adequate. This is reflected in France's bilateral investment treaties. There have been no recent disputes involving expropriation of U.S. investments.

Dispute Settlement

There have been few major disputes involving U.S. firms in recent years. Government decisions in investment cases can be appealed to administrative tribunals and ultimately the Council of State (Conseil d'Etat). The rights of U.S. investors are also protected by the U.S.-French bilateral convention (see below). In 2010, the GOF appointed a Mediator for corporate relations between industry and subcontractors; the mediator works with French and foreign firms to resolve intercompany disputes regarding contractual obligations.

The French judicial system is independent. Property and contractual rights are enforced by the French civil code, and the judgments of foreign courts are accepted and enforced by courts in France once those courts have been declared “executor" by a French judge. In some civil and bankruptcy cases, foreign judgments are recognized and enforced by French courts without this declaration.

France is a member of the World Bank's International Center for the Settlement of Investment Disputes (ICSID). In addition, in most of its bilateral investment treaties (BIT's) France agrees to accept binding arbitration to resolve investor-state disputes. Most of France's BIT partners are developing countries that generate few investments in France (see below).

Performance Requirements and Incentives

Investment Incentives

France offers a range of financial incentives, equally available to both French and foreign investors.

The GOF introduced a competitiveness and employment tax credit ("Crédit d'Impôt pour la Compétitivité et l'Emploi - CICE"), effective January 2013, that reduces payroll taxes paid by SMEs, and temporarily exempts some firms based on geographic location (urban tax-free zones, rural regeneration zones, etc.) or status as an innovative start-up. Detailed information is provided in English on the Economic Ministry website at http://www.economie.gouv.fr/ma-competitivite/tax-credit-for-encouraging-competitiveness-and-jobs.

France's domestic planning and investment promotion agency, DATAR (Delegation Interministerielle a l’Amènagement du Territoire et à l'Attractivite Regionale) has a broad mandate to attract and assist foreign investors. DATAR offers local, regional and national subsidies and tax incentives for investment in less affluent areas, and maintains offices throughout France and around the world to provide advice and assistance. DATAR's overseas offices are called "Invest in France Agencies" (IFA), or IFANA in North America. There are three IFA offices in the United States:

North and East

IFANA New York
Philippe Parfait, Director
1700 Broadway, Suite 3000
New York, NY 10019
Tel: (212) 757-9340
Fax: (212) 245-1568
usa@investfrance.org

West and South

IFANA San Francisco
Caroline Laporte, Director
88 Kearny Street, Suite 700
San Francisco, CA 94108
Tel: (415) 781 0986
Fax: (415) 781 0987
usa@investfrance.org

Midwest

IFANA Chicago
Michel Gilbert, Director
205 North Michigan Avenue, Suite 3750
Chicago, IL 60611
Tel: (312) 628-1054
Fax: (312) 628-1033
usa@investfrance.org

The primary investment incentive offered by DATAR is a financial bonus – called the Prime d'Amenagement du Territoire (PAT) – for investment in an eligible geographical zone. Investors are required to create jobs (see Performance Requirements), but the subsidies can be generous, and the system is even more flexible for SMEs. Other incentives include:

  • R&D project grants for businesses located in competitiveness clusters
  • Special tax treatment for company headquarters
  • Local and regional tax holidays and subsidies
  • "Industrial conversion" zones featuring tax breaks and grants for job-creation
  • Special access to credit for SMEs
  • Assistance for training, including a portion of wages paid to employees in training.

Besides DATAR/IFA at the national level, several French cities and regions have developed their own investment promotion agencies that advise potential investors, offer administrative assistance, and oversee investment incentives. Regional councils have full powers to provide direct aid to companies. All incentives are subject to EU regulations.

Performance Requirements

While there are no mandatory performance requirements established by law, the GOF will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. PAT and R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

Protection of Intellectual Property Rights

France is a strong defender of intellectual property rights. Under the French system, patents and trademarks protect industrial property, while copyrights protect literary/artistic property. By virtue of the Paris Convention and the Washington Treaty regarding industrial property, U.S. nationals have a "priority period" following filing of an application for a U.S. patent or trademark in which to file a corresponding application in France. This period is twelve months for patents and six months for trademarks.

The French Intellectual Property Code has been updated many times. In 2006, France was the first European country to introduce digital copyright protection, and set up an authority to promulgate new laws to combat illegal downloading: the High Authority for the Distribution of Works and the Protection of Rights on the Internet ("Haute Autorité pour la Distribution des Oeuvres et la protection des Droits sur Internet") or HADOPI. The administration of President Francois Hollande, elected in June 2012, intends to revise the mission of Hadopi to include protection of all cultural industries in the digital era. It appointed a special commission that is due to make its first proposals in Spring 2013 and develop new copyright legislation by the end of the year.

Transparency of the Regulatory System

The GOF has made considerable progress in recent years on the transparency and accessibility of its regulatory system. A major reform in 2009 extended the investigative and decision-making powers of France's Competition Authority, and in 2011 the authority published its methodology for calculating fines imposed on companies charged with abuse of a dominant position. In 2012, it issued specific guidance on competition law compliance, and government ministers, companies, consumer organizations and trade associations now have the right to petition the authority to investigate anti-competitive practices. While the authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness or maintenance of employment.

Foreign companies express the greatest concern regarding the setting of standards. Rigorous testing and approval procedures are sometimes required before goods approved in the U.S. are cleared for sale in France. The United States and the EU have negotiated mutual recognition agreements covering the testing and certification of some products, but where EU-wide standards do not exist French standards apply.

Information can be found on the websites of the International Trade Administration (ITA), the International Bureau of Weights and Measures (BIPM), the National Institute of Standards and Technology (Department of Commerce), and the Office of Market Access and Compliance (Department of Commerce). U.S. firms may also find it useful to become members of industry associations, which play an influential role in developing government policies. Even "observer" status can offer insight into new investment opportunities and greater access to government-sponsored projects.

Efficient Capital Markets and Portfolio Investment

Access to Capital and Capital Markets

France’s open financial market allows foreign firms easy access to a variety of financial products both in France and internationally. France continues to modernize its marketplace; as markets expand, foreign and domestic portfolio investment has become increasingly important.

Like most EU companies, French listed companies are required to meet international accounting standards. Some aspects of French legal, regulatory and accounting regimes are less transparent than U.S. systems, but they are consistent with international norms.

The assets of France's largest banks totaled €6,175 billion (USD 8,596 billion) in 2011. France has 142 foreign banks, 48 percent of which are non-EU banks, with assets accounting for some 10 percent of total French bank assets. Commercial banks offer all classic financing instruments, including short, medium, and long-term loans, short-and medium-term credit facilities, and secured and non-secured overdrafts. They assist in public offerings of shares and corporate debt, as well as mergers, acquisitions and takeovers, and offer hedging services against interest rate and currency fluctuations. Foreign companies have access to all banking services. Although subsidies are available for home mortgages and small business financing, most loans are provided at market rates.

Euronext, the primary French stock exchange, created “Alternext” to offer companies an unregulated market (based on the legal definition of the European investment services directive) with more consumer protection than the “Marche Libre” still used by some 335 small businesses for their first stock listing. A company seeking a listing on Alternext must have a sponsor with status granted by NYSE Euronext, and prepare a French language prospectus for a permit from "Autorité des Marchés Financiers - AMF,” the French equivalent of the SEC. Foreign companies can provide statements in English with a short summary in French. Details may be found on the AMF web site, and more information is available on the Paris Stock Exchange website EuronextCross-Shareholding.

Foreigners held 43.3 percent of the capital of large publicly traded French companies (CAC 40) as of December 2011. An intricate network of cross-shareholdings among French corporations has often been seen as a barrier to foreign acquisition; often, two French companies will own a significant share of each other, with the same executives sitting on both Boards of Directors. This has grown less common in recent years under pressure from the marketplace.

Mergers and Acquisitions

French takeover law is designed to limit hostile takeovers of publicly traded companies. Shareholders are required to disclose holdings in French listed companies to both the AMF and the listed company whenever holdings reach or exceed 5 percent of the company’s shares or voting rights, and thereafter every time the holding reaches or exceeds 10, 15, 20, 25, 33 1/3, 50, 66 2/3, 90 or 95 percent. Anticipating forthcoming revisions to the EU Transparency Directive, AMF recently implemented a March 2012 law requiring cash-settled instruments to be aggregated in calculations of major shareholdings of French listed companies, and included in declarations of intent. This will enter into force in October 2012.

A hostile takeover of a French company by a foreign investor could face public and even governmental scrutiny. French companies can suspend implementation of a takeover when targeted by a foreign company whose country of origin does not apply reciprocal rules, and GOF regulations allow a U.S.-style “poison pill” takeover defense, including granting existing shareholders and employees the right to increase their leverage by buying discounted shares through stock purchase warrants.

State-Owned Enterprises (SOEs)

SOEs dominate common carrier transportation (rail, bus, air) and are active in energy, defense, and the media. Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code. The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance updated in 2008. SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest.

The GOF appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Economics Ministry. New industrial policy measures in 2010 strengthened the state's shareholding role in companies where the GOF holds stakes: GOF representation on the Boards was increased, and the companies’ CEOs were required to meet annually with relevant ministries to discuss investment strategy and leadership succession. In September 2010, the government appointed a Commissioner of State Shareholdings, a new position that reports directly to the Minister of Economy.

Following the recent financial crisis, the government’s Strategic Investment Fund began investing in select small and medium-sized firms deemed capable of playing a "strategic" role in the French economy. These minority government stakes, meant to last approximately 10 years, typically accompany private-sector investment. The government-sponsored financial institution Caisse des Dépôts plays an important role in administering the fund.

In December 2010 France adopted a law on the modernization of the French electricity market to enable competition with Electricité de France (EDF), which still controls 85 percent of the market. The public transmission grid operator “Gestionnaire du Réseau de Transport d'Electricite” (RTE), a division of EDF, continues to maintain its monopoly. However, EDF no longer has a majority on RTE's supervisory board, the modernization law allocated half of RTE's shares to a portfolio of assets meant to cover future costs associated with decommissioning nuclear reactors, and the law authorizes third-party access to electricity generated by EDF’s nuclear plants.

The GOF maintains legal monopolies in the following sectors: national rail transportation (SNCF), Parisian bus and metro services (RATP), and tobacco manufacturing and distribution (Altaldis – former Seita). French law 2009-1503 implements an EU directive on the organization and regulation of rail transport (the "ORTF law") requiring the opening of international passenger rail transport to competition, and created a sector regulator, the Regulatory Authority of Rail Activities (ARAF).

To comply with the new legislation, the SNCF created the entity “Gares et Connections," which took over management of all passenger stations on the national rail network (3,026 passenger stations and stops) in January 2010. The legacy electricity and gas providers EDF and GDF no longer have monopolies on production, distribution and sale of electricity and gas in France, but EDF remains the exclusive operator of nuclear plants, which generate some 80 percent of the country's electricity. France's independent Energy Regulatory Commission (CREG) ensures open access to transmission and distribution networks for electricity and gas, and provides tariff recommendations to the government. The opening of the European market continues, leaving consumers more free to choose another supplier, though few have done so.

Finally, France's postal service has been open to competition since February 2010, when legacy provider La Poste became a limited liability company owned by the state. La Poste dominates the market for letter delivery, but faces stiff competition in non-postal sectors. Arcep, the French telecoms regulatory authority, oversees postal services and so far has licensed 19 new package and express delivery firms.

(For additional information see “Government stakes in corporate sector” at top.)

Corporate Social Responsibility (CSR)

The term “Corporate Social Responsibility” is defined broadly in France, covering environmental, social, and transparency concerns in both business operations and interactions with stakeholders. France was a trail-blazer of responsible reporting and implementation among EU nations, passing legislation in 2001 that made annual sustainability reporting mandatory for all nationally listed companies. The legislation focused on financial issues, such as increasing the transparency of take-over bids, improving corporate governance, and fortifying antitrust regulation, but also mandated disclosure of companies' "triple bottom line" performance, which takes into account not only financial but also social and environmental factors. It requires reporting in three key areas: human resources and labor standards; interaction with the local community; and the environment. Annual reports are available to the public.

GOF policies use both incentives and penalties to promote diversity and deter discrimination. Since 2009, firms of over 20 employees must meet a 6 percent quota of disabled people or pay a fine; since 2010, all firms of 50 employees or more must employ workers over 50 years of age. The GOF awards diversity certifications to companies that meet certain criteria, and established an independent authority to handle discrimination-related complaints.

Political Violence

As one of the world's leading democracies and a founding member of the EU, France faces little threat of insurrection or widespread civil disturbances. Politically motivated damage to projects and/or installations is rare, but in October 2012 some 70 members of a far-right nationalist group “Génération Identitaire” (Generation of Identities) occupied the projected site of a mosque in Poitiers and demanded a referendum on immigration and mosque construction. Perceived discrimination and lack of economic opportunity contribute to minor unrest in the poorer, largely immigrant suburbs of France’s largest cities.

Anti-American incidents are rare. In September 2012, some 200 to 250 individuals staged an unauthorized gathering outside the U.S. embassy to protest a U.S.-made film deemed to ridicule the prophet Mohammed.

Corruption 

There have been no specific complaints from U.S. firms of unfair competition or investment obstacles due to corrupt practices in France in recent years. According to Transparency International’s French chapter, the sectors most affected by corrupt practices are public works and the defense industry. TI France also works with French companies of all sizes to avoid corruption when investing in foreign countries. Information on the international fight against corruption can be found on the Transparency International website.

The OECD’s October 2012 report on French implementation of the OECD Anti-Bribery Convention called for increased prosecution of French officials who bribe foreign officials to win contracts, and criticized France for initiating only 33 foreign bribery-related proceedings – resulting in just five convictions – since 2000, when France implemented the convention. The OECD recommended that France drop its practice of pursuing only offenses punishable under the laws of both France and the foreign nation involved. The report praised the GOF for the efficiency of its anti-money laundering unit, TRACFIN. The OECD report on France can be found at: http://www.oecd.org/daf/briberyininternationalbusiness/france-oecdanti-briberyconvention.htm.

Bilateral Investment Agreements

U.S.-France Convention on Establishment

U.S. investment in France is subject to the provisions of the Convention on Establishment between the United States of America and France, which was signed in 1959 and remains in force. The rights it provides U.S. nationals and companies include:

  • Rights equivalent to those of French nationals in all commercial activities excluding communications, air transportation, water transportation, banking, the exploitation of natural resources, certain "professions," and the production of electricity;
  • Treatment equivalent to that of French or third country nationals with respect to transfer of funds between France and the U.S.;
  • Property protected from expropriation except for public purposes, accompanied by payment that is just, realizable and prompt.

The treaty does not apply to the use or production of fissionable materials, arms or any materials used directly or indirectly to supply military establishments, and does not prevent application of measures necessary to protect essential security interests.

Bilateral Investment Treaties

Investments in France by other EU member states are governed by the provisions of the Treaty of Rome and by Union Law. France has also signed Bilateral Investment Treaties (BITs) with the following 91 countries: Albania, Algeria, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Bolivia, Bosnia and Herzegovina, Bulgaria, Cambodia, Chile, China, the Democratic Republic of the Congo, Costa Rica, Croatia, Cuba, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Georgia, Guatemala, Haiti, Honduras, Hong Kong, Hungary, India, Indonesia, Iran, Israel, Jamaica, Jordan, Kazakhstan, Korea (South), Kuwait, Kyrgyz Republic, Laos, Latvia, Lebanon, Liberia, Libyan Arab Jamahiriya, Lithuania, Macedonia, Madagascar, Malaysia, Malta, Mexico, Moldova, Mongolia, Morocco, Mozambique, Nepal, Nicaragua, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, the Dominican Republic, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Sudan, Syria, Tajikistan, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen.

Bilateral Investment Treaties signed with the following 10 countries have yet to be ratified: Belarus, Brazil, Chad, Djibouti, Ghana, Kenya, Mauritius, Syrian Arab Republic, Zambia and Zimbabwe. The list of ratified and non ratified BITs is on the UNCTAD website.

French BITs generally cover the following:

  • Just and equitable treatment no less favorable than that accorded to domestic investors or the most favored investors from a third country;
  • Restrictions on expropriation of investments, and requirements that, in the case of expropriation, compensation is prompt and adequate;
  • Free transfers;
  • The ability to resolve investor-state disputes through binding international arbitration.

Tax Treaties

The United States and France have a bilateral tax treaty addressing, among other things, double taxation and tax evasion. English summaries of labor and tax regulations applicable to foreign companies in France are available at the AFII's website (http://www.investinfrance.org/) and at the Paris Chamber of Commerce and Industries' website (http://www.inforeg.CCIP.fr).

OPIC and Other Investment Insurance Programs

Given France's high per capita income, investments in France do not qualify for investment insurance or guarantees offered by the Overseas Private Investment Corporation (OPIC). Further information can be found on the OPIC website

Labor

France's private sector labor force is a major asset in attracting foreign investment, despite the relatively high cost of labor and rigid labor regulations.

The labor code sets minimum standards for working conditions including the workweek, layoffs, overtime, vacation and personal leave. The French generally work 35 hours per week and retire at the age of 62 (recently raised from 60). Work contracts follow requirements stipulated in industry-wide collective bargaining agreements. An employee of a large company who is laid off for economic reasons may benefit from training, short-term contracts, or transfer to another company. A “transport allowance” benefits employees who commute using public or private transportation. Other labor standards are contained in collective agreements, usually negotiated by sector (on a national or regional basis) by various trade union federations and employers' associations

The new government appointed in May 2012 is preparing new labor laws designed to introduce more flexibility in France's labor market; on January 11, 2013 negotiators for ownership groups and some unions agreed to a variety of reforms including providing for temporary reductions in hours worked and pay, a streamlined process for adjudicating layoff disputes, taxes on short-term contracts of one month or less, and employer contributions to employee health care. The government will submit legislation implementing these changes in 2012.

While the rate of unionization in France has steadily declined to just over half that of the United States, French labor law provides an extensive institutional role for employee representatives and organized labor, determined by the size of the work force:

  • In companies with more than 10 employees, employee delegates are elected for a one-year term. They are authorized to present individual or collective claims and grievances relating to working conditions, to inform government labor inspectors of any complaints under the labor law, and to concur with management in any reorganization of the workweek. Management is required to meet with employee delegates at least monthly.
  • Companies with more than 50 employees must have a joint management/employee enterprise committee, to which employee representatives are elected. The committee must be consulted for all major corporate decisions, but has no veto. The enterprise committee must be provided with the same information that is made available to shareholders. It is funded by the company at a rate equal to at least 0.2 percent of the firm's payroll, and uses this money to finance social and cultural activities for the benefit of employees.
  • Workers hold most slots on occupational health and safety committees, which are mandatory in medium and large size companies. Labor tribunals (playing a role largely equivalent to the NLRB in resolving labor disputes) are comprised of equal numbers of union and employer representatives. Appeals are possible to the level of the “Cour de Cassation,” one of France's high courts.

Due to a variety of macro and microeconomic factors, including high payroll taxes, a high minimum wage, and rigid labor laws, French businesses traditionally use less labor-intensive procedures and rely more on labor-saving technology than businesses in other countries.

Foreign Free Trade Zones/Ports and Competitiveness Clusters

France is subject to all European Union free trade zone regulations. These allow member countries to designate portions of their customs territory as free trade zones and free warehouses in return for commitments favoring employment. France has several, which benefit from exemptions on corporate taxes, payroll taxes, and real estate taxes. The French Customs Service administers them, and provides details through its website (Douane.gouv.fr). Related information is available at a website dedicated to French city governments (legifrance.gouv.fr).

France has also created "competitiveness clusters," geographical groupings of companies, research centers, and university labs that carry out R&D projects. They were designed to encourage French companies to keep R&D, high-value added production and marketing in France, and benefit from income and social tax exemptions. Those involved in research and innovation also receive financial support from the state-owned investment bank Caisse des Dépôts.

Foreign Investment Statistics

Foreign investment represents a significant percentage of production in many sectors. According to AFII, some 20,000 companies established in France receive foreign investment. They employ two million people, are responsible for one third of French exports and undertake more than 20 percent of corporate R&D expenditures. Rapid growth in new technologies has given way to renewed growth in traditional sectors: automobiles, metalworking, aerospace, capital goods, consultancy and services.

Although France remains a top destination for foreign direct investment (FDI), according to UNCTAD estimates it fell from the second largest recipient of foreign direct investment inflows in 2009 to the tenth largest in 2011, when FDI inflows accounted for 1.3 percent of GDP. The U.S. remains one of the largest sources of FDI in France, accounting for 12.6 percent in 2011, down from 13.2 percent the previous year. Based on recent estimates, U.S holdings of French securities in 2011 totaled USD 213 billion, down from the 2010 level of USD 244 billion.

Those figures likely understate U.S. investment in France, as the U.S. investments tend to be considerably older than those of other countries, and U.S. firms often finance expansions and acquisitions on domestic French capital markets or through subsidiaries in third countries. As a result, much U.S. investment in France is not recorded in balance of payments statistics, even though it may ultimately be controlled by U.S. citizens.

Firms with questions about foreign investment operations requiring Banque de France notification can contact the bank at:

Banque de France
Service de la Balance des Paiements
31, rue Croix-des-Petits Champs
Tel: 01.42.92.42.92

An updated list of recent U.S. investment projects may be found on the Invest in France website.

A listing by industry of over 400 foreign investors in France can be found in the 2012 AmCham directory published by:

American Chamber of Commerce in France
77, rue de Miromesnil
75008 Paris
Tel: 01 56 43 45 67 Fax: 01 56 43 45 60.
Information spreadsheets may be sent by e-mail; consult the amchamfrance website at (http://www.amchamfrance.org/).

Note: FDI data published by the Bank of France have been revised in anticipation of a European norm to be implemented in 2014, according to which loans between companies of the same group are classified according to the residence of the group's headquarters. For example, a loan from a Dutch subsidiary of a French group to another subsidiary of the same group in France is no longer counted as a Dutch direct investment in France, but as a French disinvestment in the Netherlands. This method results in a significant decrease in direct investment flows and stocks compared to previous estimates based on the IMF definition. The geographical breakdown below uses the new norm. End note.

Stock by country of origin (book value in USD billions)

(FDI stock held by Foreign Countries in France)

 

2009

2010

2011

EU (27)

445

432

475

EU (16)

363

358

394

Netherlands

101

97

114

Belgium

67

58

68

Germany

62

60

67

Luxemburg

75

88

92

Italy

21

18

19

Other EU (Total)

115

98

113

UK

70

64

69

Sweden

5

3

5

Other Industrialized Countries (Total)

130

131

141

USA*

77

77

81

Switzerland

36

37

43

Japan

10

9

10

Other Countries (Total)

22

22

30

Total

597

585

645

Total as percent of GDP

22.7

22.8

23.2

exchange rate:

     

USD 1.00 equals Euro

0.7

0.8

0.7

source: Bank of France

*BEA estimates the stock of U.S. FDI in France at USD 89.3 billion in 2011. See note on calculation methods above.

Stock of Foreign Investment in France (market value in USD billions)

 

2009

2010

2011

Total

649

681

656

Total as percent of GDP

24.7

26.5

23.6

source: Bank of France

Stock of Foreign Investment in France by Industrial Sector (book value in USD billions)

 

2009

2010

2011

Manufacturing (Total)

143

144

179

Pharmaceuticals

33

35

40

Chemicals

17

10

25

Processed food

22

20

25

Other Manufacturing

71

78

90

Real estate

126

130

132

Finance

177

165

197

Other

151

145

137

Total

597

585

645

source: Bank of France

Annual Investment Flows to France by country of origin (market value in USD billions)

 

2009

2010

2011

EU (27)

-5

10

22

EU (16)

-1

18

16

Netherlands

3

5

12

Spain

-3

1

0

Belgium

13

-2

6

Italy

-2

-2

0

Other EU (Total)

-4

-8

-8

UK

-6

-6

5

Other Industrialized Countries (Total)

7

7

7

USA

3

6

1

Switzerland

1

1

7

Japan

1

0

1

Other Countries (Total)

4

3

7

Total

6

20

37

Total as percent of GDP

0.2

0.8

1.3

exchange rate:

     

USD1.00 equals Euro

0.7

0.8

0.7

source: Bank of France

FDI Stock held by France abroad, by country of destination (book value in USD billions)

 

2009

2010

2011

EU (27)

658

682

769

EU (16)

514

532

590

Netherlands

112

116

123

Belgium

171

178

195

Germany

67

71

79

Luxemburg

38

42

41

Italy

52

49

67

Other EU (Total)

143

150

179

UK

104

109

135

Other Industrialized Countries (Total)

280

309

342

USA

199

210

231

Switzerland

36

50

51

Japan

20

22

26

Other Countries (Total)

151

177

210

Total

1088

1168

1321

Total as percent of GDP

41

45

48

exchange rate:

     

USD 1.00 equals Euro

0.7

0.8

0.7

source: Bank of France

Stock of French FDI Abroad (market value in USD billions)

 

2009

2010

2011

Total

907

1118

1297

Total as a percent of GDP

34.5

43.5

46.7

FDI Stock by Industrial Sector Destination (book value in USD billions)

 

2009

2010

2011

Manufacturing (Total)

282

279

339

Pharmaceuticals

40

46

65

Chemicals

18

17

30

Processed Food

33

34

30

Other

191

181

214

Finance

324

339

385

Real estate

48

58

57

Other

434

492

540

Total

1088

1168

1321

exchange rate:

     

USD 1.00 equals Euro

0.7

0.7

0.8

source: Bank of France

French Investment Flows by country of destination (market value in USD billions)

 

2009

2010

2011

EU (27)

-66

-38

-50

EU (16)

-52

-32

-31

Belgium

-32

-17

-12

Germany

-2

-3

-1

Italy

0

0

-17

Netherlands

-1

-6

-3

Other EU (Total)

15

-6

-19

UK

11

-7

-17

Other Industrialized Countries (Total)

-3

-10

-8

USA

-3

0

-6

Switzerland

2

-11

3

Japan

-1

1

-1

Other countries (Total)

-20

-18

-29

Total

89

-66

-86

Total as a percent of GDP

3.4

2.6

3.1

exchange rate:

     

USD 1.00 equals Euro

0.7

0.8

0.8

source: Bank of France

Note: (-) corresponds to outflows



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