France and Monaco
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
France welcomes foreign investment. In the current economic climate, the French government sees foreign investment as a means to create additional jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors, who report they find France’s skilled and productive labor force, good infrastructure, technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone facilitates the efficient movement of people, services, capital, and goods. However, notwithstanding French efforts at economic and tax reform, market liberalization, and attracting foreign investment, perceived disincentives to investing in France include the relatively high tax environment. Labor market fluidity is improving due to labor market reforms introduced by the Macron Administration, but it is still rigid compared to some OECD economies.
Limits on Foreign Control and Right to Private Ownership and Establishment
France is among the least restrictive countries for foreign investment. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises, and engage in all forms of remunerative activity.
France does maintain a national security review mechanism. French law stipulates that control by acquisition of a domiciled company or subsidiary operating in certain sectors deemed crucial to France’s national interests relating to public order, public security and national defense are subject to prior notification, screening, and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure; transportation networks; public water supplies; electronic communication networks; public health protection; and installations vital to national security. In 2018, four additional categories – semiconductors, data storage, artificial intelligence and robotics – were added to the list requiring a national security review. For all listed sectors, France can block foreign takeovers of French companies according to the provisions of the Montebourg Decree.
In 2018, the government held equity positions in approximately 81 firms. Most of the positions were relatively small, but did include provisions, which prevent foreign takeover of these firms. Exceptions, where the government had large holdings included, among others, Aeroports de Paris (50.6 percent), Engie, and Renault. In January 2018, the government sold 4.0 percent of its holding in Engie, lowering its stake to 23.64 percent of the energy company. The government also sold 5.0 percent of its stake in Renault, resulting in its ownership of 15.01 percent of the automaker.
Other Investment Policy Reviews
Given the level of development and stability of the investment climate, France has not recently been the subject of international organizations’ investment policy reviews. The OECD Economic Forecast for France (November 2018) can be found here: .
Business France is a government agency established with the purpose to promote new foreign investment, expansion, technology partnerships, and financial investment. Business France provides services to help investors understand regulatory, tax, and employment policies as well as state and local investment incentives, and government support programs. Business France also helps companies find project finance and potential equity acquisitions. Business France recently unveiled a website in English to help prospective businesses considering the French market ( ).
In addition, France’s public investment bank, Bpifrance, assists foreign businesses to find local investors when setting up a subsidiary in France. It also supports foreign startups in France through the government’s French Tech Ticket program, which provides them with funding, a resident’s permit, and incubation facilities. Both business facilitation mechanisms provide for equitable treatment of women and minorities.
President Macron has made innovation one of his priorities with a EUR 10 billion fund that is being financed through privatizations of State-owned enterprises. France’s priority sectors for investment include: aeronautics, agro-foods, digital, nuclear, rail, auto, chemicals and materials, forestry, eco-industries, shipbuilding, health, luxury, and extractive industries. In the near-term, the French government intends to focus on driverless vehicles, batteries, the high-speed train of the future, nano-electronics, renewable energy, and health industries.
Business France and Bpifrance are particularly interested in attracting foreign investment in the tech sector. The French government has developed a brand “French Tech” to promote France as a location for start-ups and high-growth digital companies. In addition to offices in 17 French cities, French Tech offices have been established in cities including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow, Berlin, and 14 others.
The website Guichet Enterprises ( ) is designed to be a one-stop website for registering a business. The site is available in both French and English although some fact sheets on regulated industries are only available in French on the website.
French firms invest more in the United States than in any other country and support approximately 678,000 American jobs. Total French investment in the United States reached USD 275.5 billion in 2018. France was our eighth-largest trading partner with approximately USD 128 billion in bilateral trade in 2018. The business promotion agency Business France also assists French firms with outward investment. There is no restriction on outward investment.
2. Bilateral Investment Agreements and Taxation Treaties
Investments in France by other EU member states are governed by the provisions of the Treaty of Rome and by European Union Law. France has Bilateral Investment Treaties (BITs) with 96 countries: Albania, Algeria, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Bosnia and Herzegovina, Bulgaria, Cambodia, Chile, China, the Democratic Republic of the Congo, Costa Rica, Croatia, Cuba, Czech Republic, Djibouti, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Georgia, Guatemala, Haiti, Honduras, Hong Kong, Hungary, India, Iran, Israel, Jamaica, Jordan, Kazakhstan, Korea (South), Kuwait, Kyrgyz Republic, Laos, Latvia, Lebanon, Liberia, Libya, Lithuania, North Macedonia (FYROM), Madagascar, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Namibia, Nepal, Nicaragua, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Seychelles, Singapore, Slovakia, Slovenia, Sri Lanka, Sudan, Tajikistan, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen, and Zambia.
Bilateral Investment Treaties between France and the following countries have been signed but are not in force: Belarus, Brazil, Chad, Colombia, Ghana, Iraq, Kenya, and Zimbabwe. France previously had BITs with Mauritius and Syria; new BITs with these two countries have been signed but have not yet entered into force.
The United States and France have enjoyed a Navigation and Commerce Treaty since 1822, which guarantees national treatment of U.S. citizens. Since 1994, a Convention between the Government of the United States of America and the Government of the French Republic continues to be in force for the avoidance of double taxation and the prevention of fiscal evasion.
The Macron government temporarily raised corporate taxes in 2017 after the country’s Constitutional Court ordered the state to pay back 10 billion euros (USD 11.6 billion) in unlawful taxes on investor dividends. From a nominal corporate tax rate of 33.3 percent in 2016, the temporary corporate tax rate rose to 38.3 percent in 2017 for companies with turnover in excess of 1.0 billion euros and to 43.3 percent for those with revenues in excess of 3.0 billion euros.
In early 2019 the government demonstrated its intent to lower corporate taxes over the medium term. The 2018 tax law reduces corporate tax on profits over 500,000 euros (USD 596,000) to 31 percent for 2019, 28 percent in 2020, 26.5 percent in 2021 and 25 percent in 2022.
France has tax agreements with 127 countries: Albania, Algeria, Andorra, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cameroon, Canada, Cambodia, Central African Republic, Chile, China, Cyprus, the Democratic Republic of the Congo, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Equatorial Guinea, Estonia, Ethiopia, Finland, Gabon, Georgia, Ghana, Greece, Guinea, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Island, Ivory Coast, Israel, Italia, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea (South), Kosovo, Kuwait, Kyrgyz Republic, Latvia, Lebanon, Libya, Lithuania, Luxemburg, Macedonia (FYRM), Madagascar, Malaysia, Malawi, Mali, Malta, Mauritania, Mauritius Island, Mayotte, Mexico, Monaco, Mongolia, Montenegro, Morocco, Namibia, Netherlands, New Zealand, New Caledonia, Niger, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, French Polynesia, Portugal, Qatar, Quebec, Romania, Russian Federation, Saudi Arabia, Saint-Martin, Saint Pierre and Miquelon, Senegal, Serbia, Singapore, South Africa, Spain, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Syria, Tajikistan, Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia, and Zimbabwe. A bilateral tax agreement between France and Colombia has been signed but is not in force. Ref:
3. Legal Regime
Transparency of the Regulatory System
France’s government has made considerable progress in the last decade on the transparency and accessibility of its regulatory system. The French government generally engages in industry and public consultation before drafting legislation or rulemaking through a regular but variable process directed by the relevant ministry. However, the text of draft legislation is not always publicly available before parliamentary approval. U.S. firms may also find it useful to become members of industry associations, which can 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.
To increase transparency in the French legislative process, all ministries are required to attach an impact assessment to their draft bills. The Prime Minister’s Secretariat General (SGG for Secretariat General du Gouvernement) is responsible for ensuring that impact studies are undertaken in the early stages of the drafting process. The State Council (Conseil d’Etat), which must be consulted on all draft laws and regulations, may reject a draft bill if the impact assessment is inadequate.
After experimenting with new online consultations, the Macron Administration is regularly using this means to achieve consensus on its major reform bills. These consultations are often open to professionals as well as citizens at large. Another Macron innovation is to impose regular impact assessments after a bill has been implemented to ensure its maximum efficiency, revising, as necessary, provisions that do not work in favor of those that do. Finally, the Macron Administration aims to make all regulations and laws available online by 2022.
Over past decades, major reforms have extended the investigative and decision-making powers of France’s Competition Authority. As a result, the Authority has completed 50 enforcement investigations by end of 2016, with 14 decisions leading to sanctions of 203 million EUR (USD 251 million). The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues 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 saving jobs.
France’s budget documents are comprehensive and cover all expenditures of the central government. An annex to the budget also provides estimates of cost sharing contributions, though these are not included in the budget estimates. In its spring report each year, the National Economic Commission outlines the deficits for the two previous years, the current year, and the year ahead, including consolidated figures on taxes, debt, and expenditures. Since 1999, the budget accounts have also included contingent liabilities from government guarantees and pension liabilities. The government publishes its debt data promptly on the French Treasury’s website and in other documents. Data on nonnegotiable debt is available 15 days after the end of the month, and data on negotiable debt is available 35 days after the end of the month. Annual data on debt guaranteed by the state is published in summary in the CGAF Report and in detail in the Compte de la dette publique. More information can be found at:
International Regulatory Considerations
France is a founding member of the European Union, created in 1957. As such, France incorporates EU laws and regulatory norms into its domestic law. France has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1948. While developing new draft regulations, the French government submits a copy to the WTO for review to ensure the prospective legislation is consistent with its WTO obligations. France ratified the Trade Facilitation Agreement in October 2015 and has implemented all of its TFA commitments.
Legal System and Judicial Independence
French law is codified into what is sometimes referred to as the Napoleonic Code, but is officially the Code Civil des Francais, or French Civil Code. Private law governs interactions between individuals (e.g., civil, commercial, and employment law) and public law governs the relationship between the government and the people (e.g., criminal, administrative, and constitutional law).
France has an administrative court system to challenge a decision by local governments and the national government; the State Council (Conseil d’Etat) is the appellate court. France enforces foreign legal decisions such as judgments, rulings, and arbitral awards through the procedure of exequatur introduced before the Tribunal de Grande Instance (TGI), which is the court of original jurisdiction in the French legal system.
France’s Commercial Tribunal (Tribunal de Commerce or TDC) specializes in commercial litigation. Magistrates of the commercial tribunals are lay judges, who are well known in the business community and have experience in the sectors they represent. Decisions by the commercial courts can be appealed before the Court of Appeals. France’s judicial system is procedurally competent, fair, and reliable and is independent of the government.
The judiciary – although its members are state employees – is independent of the executive branch. The judicial process in France is known to be competent, fair, thorough, and time-consuming. There is a right of appeal. The Appellate Court (cour d’appel) re-examines judgments rendered in civil, commercial, employment or criminal law cases. It re-examines the legal basis of judgments, checking for errors in due process and reexamines case facts. It may either confirm or set aside the judgment of the lower court, in whole or in part. Decisions of the Appellate Court may be appealed to the Highest Court in France (cour de cassation).
Laws and Regulations on Foreign Direct Investment
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all sorts of remunerative activities. U.S. investment in France is subject to the provisions of the Convention of 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, the production of electricity, and professions of a scientific, literary, artistic, and educational nature, as well as certain regulated professions like doctors and lawyers). Treatment equivalent to that of French or third-country nationals is provided with respect to transfer of funds between France and the United States. Property is protected from expropriation except for public purposes; in that case it is accompanied by payment that is just, realizable and prompt.
Competition and Anti-Trust Laws
Major reforms have extended the investigative and decision-making powers of France’s Competition Authority. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues specific guidance on competition law compliance. Government ministers, companies, consumer organizations and trade associations 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 saving jobs.
A new law on Economic Growth, Activity and Equal Opportunities (known as the “Macron Law”), adopted in August 2016, vested the Competition Authority with the power to review mergers and alliances between retailers ex-ante (beforehand). The law provides that all contracts binding a retail business to a distribution network shall expire at the same time. This enables the retailer to switch to another distribution network more easily. Furthermore, distributors are prohibited from restricting a retailer’s commercial activity via post-contract terms. The civil fine incurred for restrictive practices can now amount to up to five percent of the business’s revenue earned in France.
France’s Competition Authority launches regular in-depth investigations into various sectors of the economy, which may lead to formal investigations and fines. On March 6, 2018, the Authority announced that after a two-year examination of the French online advertising market, it may open a full inquiry into the overwhelmingly dominant position of Google and Facebook in internet advertising markets.
Expropriation and Compensation
Government cannot legally expropriate property to build public infrastructure without fair market compensation. There have been no expropriations of note during the reporting period.
ICSID Convention and New York Convention
France is a member of the World Bank-based International Centre for Settlement of Investment Disputes (ICSID) Convention and a signatory to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) which means local courts are obligated to enforce international arbitral awards under this system. The International Chamber of Commerce’s International Court of Arbitration (ICA) has been based in Paris since 1923.
France was one of the first countries to enact a modern arbitration law in 1980-1981. In 2011, the French Ministry of Justice issued Decree 2011-48, which introduced further international best practices into French arbitration procedural law. As a result of that decree, parties are free to agree orally to settle their disputes through arbitration, subject to standards of due process and a newly enacted principle of procedural efficiency and fairness.
International Commercial Arbitration and Foreign Courts
French law provides conditions for the recognition and the enforcement of foreign arbitral awards in relation to the New York Convention. The provisions of French law are contained in the Code of Civil Procedure and the Code of Civil Enforcement Procedures. The French Civil Code envisions several mechanisms of alternative dispute resolution (ADR) including out-of-court arbitration and conciliation where a judicial conciliator puts an end to a dispute. France is a member of UNCITRAL. Local courts recognize and enforce foreign arbitral awards as mentioned above. The recognition of judgments of foreign courts by French courts is possible, but judgements must be accompanied by the issuance of an exequatur – a legal document issued by a sovereign authority that permits the exercise or enforcement of a foreign judgement.
Investor-State Dispute Settlement
The President of the Tribunal de Grande Instance (High Civil Court of First Instance) of Paris has the authority to issue orders related to ad-hoc international arbitration. Paris is the seat of the International Chamber of Commerce’s International Court of Arbitration, composed of representatives from 90 countries, that handles investment as well as commercial disputes.
France does not have a bilateral investment treaty with the United States. The European Commission directly negotiates on behalf of the EU on foreign direct investment since it is part of the EU Common Commercial Policy. In 2015, the EU agreed to pursue an investment court approach to investor-State dispute settlement. While this model is included in the Comprehensive Economic and Trade Agreement (CETA) with Canada and the EU-Vietnam FTA, no actual court has yet been established in any form or context; no disputes have been brought under these post-2015 treaties.
France has extensive and detailed bankruptcy laws and regulations. Any creditor, regardless of the amount owed, may file suit in bankruptcy court against a debtor. Foreign creditors, equity shareholders and foreign contract holders have the same rights as their French counterparts. Monetary judgments by French courts on firms established in France are generally made in euros. Not bankruptcy itself, but bankruptcy fraud – the misstatement by a debtor of his financial position in the context of a bankruptcy – is criminalized. Under France’s bankruptcy code managers and other entities responsible for the bankruptcy of a French company are prevented from escaping liability by shielding their assets (Law 2012-346). France has adopted a law that enables debtors to implement a restructuring plan with financial creditors only, without affecting trade creditors. France’s Commercial Code incorporates European Directive 2014/59/EU establishing a framework for the recovery and resolution of claims on insolvent credit institutions and investment firms. In the World Bank’s 2019 Doing Business Index, France was ranked 32nd of 190 on ease of resolving insolvency.
The Bank of France, the country’s only credit monitor, maintains files on persons having written unfunded checks, having declared bankruptcy, or having participated in fraudulent activities. Commercial credit reporting agencies do not exist in France.
4. Industrial Policies
France offers financial incentives, generally equally available to both French and foreign investors. The government provides incentives for capital investment in small companies. For instance, a French company or a subsidiary of a foreign firm that would invest in a minority shareholding (less than 20 percent) of a small, innovative SME would benefit from a five year, linear amortization of their investment. To qualify, SMEs must allocate at least 15 percent of their spending on research.
Incentivizing research and development (R&D) and innovation is a high priority for the French government. Business France, the country’s export and investment promotion agency, reported that R&D operations accounted for 10 percent of foreign investments projects in 2018 and created or maintained 2,793 jobs, up 23 percent from last year. The United States is the leading foreign investor in R&D in France, accounting for 26 percent of 2018 investment decisions. International companies may join France’s 71 innovation clusters, increasing access to both production inputs and technical benefits of geographical proximity. Other components of this policy include: the Innovative New Company (Jeune Enterprise Innovante) and the French Young Entrepreneurs Initiative.
Foreign Trade Zones/Free Ports/Trade Facilitation
France is subject to all EU free trade zone regulations. These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited. France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union. The French Customs Service administers them, and provides details on its website (http://www.douane.gouv.fr). French legal texts are published online at http://legifrance.gouv.fr.
In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents. The program provides incentives for employers, who have created 600 new jobs since 2016. Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by EUR 15 million a year in State funds.
Performance and Data Localization Requirements
While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related 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. PAT has been revised to benefit SMEs, with the objective of promoting the development of businesses in priority regional zones, including EUR 30 million in direct government subsidies. In 2018, a reform of the national security review system expanded the list of sensitive sectors subject to prior authorization by the Ministry of Economy and Finance. Decree 2018-1057 of November 29, 2018, expanded the scope of activities under review to include: artificial intelligence, data storage, and the space sector, when the direct objective of this investment pertains to national defense, national security, public order and public authority. A new set of measures amending the review mechanism were included in the proposed PACTE law (Plan d’Action pour la Croissance et la Transformation des Entreprises), which was still under review at the end of 2018. Parliamentary leaders from most parties said the PACTE would be approved during the first quarter of 2019. The law would toughen sanctions on both sides of an acquisition for non-compliance with investment review mechanism.
The French government imposes the same conditions on domestic and foreign investors in cultural industries: all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must invest a percentage of their revenues to finance French film and television productions. They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).
5. Protection of Property Rights
Real property rights are regulated by the French civil code and are uniformly enforced. In the World Bank’s Doing Business Report (DBR), France ranks 32nd of 190 on registering property. French civil-law notaries (notaires) – highly specialized lawyers in private practice appointed as public officers by the Justice Ministry – handle residential and commercial conveyance and registration, contract drafting, company formation, successions, and estate planning. The official system of land registration (cadastre) is maintained by the French public land registry under the auspices of the French tax authority (Direction Generale des Finances Publiques or DGFiP), available online at . Mortgages are widely available, usually for a 15-year period.
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: twelve months for patents and six months for trademarks.
Counterfeiting is a costly problem for French companies, and the government of France maintains strong legal protections and a robust enforcement mechanism to combat trafficking in counterfeit goods — from copies of luxury goods to fake medications — as well as the theft and illegal use of intellectual property. The French Intellectual Property Code has been updated repeatedly over the years to face this challenge. Parliament recently passed a law reinforcing France’s anti-counterfeiting law and its implementation of EU directives on intellectual property rights. The new legislation increases the Euro amount for damages to companies that are victims of counterfeiting and extends trademark protection to smartcard technology, certain geographic indications, plants, and agricultural seeds. The new legislation also increases the statute of limitations for civil suits from three to ten years and strengthens the powers of customs officials to seize fake goods sent by mail or express freight.
The government also reports on seizures of counterfeit goods. In 2018, French Customs seized 5.4 million counterfeited goods, down from 8.5 million counterfeited goods in 2017. This sharp drop has been attributed to an increase of online purchases of fake goods, which are harder to control. France’s top private sector anti-counterfeiting organization, UNIFAB, called on the government in 2018 to launch a national public awareness campaign. France has robust laws against online piracy. A government agency called the High Authority for the Dissemination of Artistic Works and the Protection of Rights on Internet (Haute Autorite pour la Diffusion des Œuvres et la Protection des droits sur Internet – HADOPI) administers a “graduated response” system of warnings and fines. It has taken enforcement action against several online pirate sites, including Megaupload. HADOPI cooperates closely with the U.S. Patent and Trademark Office (USPTO) including pursuing voluntary arrangements that target intermediaries that facilitate or fund pirate sites. (Note that one of HADOPI’s tasks is to ensure that the technical measures used to protect works do not prevent the right of individuals to make personal copies of television programs for their private use.) In October 2018, HADOPI released a study showing that 27 percent of French people acquired and consumed music, films and television series through illegal sites (44 percent for television series and 42 percent for films). This figure has remained steady over the past few years. Hadopi further noted a 6 percent increase in the use of legal sites for downloading media to 48 percent in 2018. Offenders risk fines of between EUR 1,500 and EUR 300,000 and/or up to three years imprisonment. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .
France does not appear on USTR’s 2019 Special 301 Report, but it is mentioned throughout the 2018 Notorious Markets List with regard to illicit streaming and copyright infringement websites.
6. Financial Sector
Capital Markets and Portfolio Investment
There are no administrative restrictions on portfolio investment in France, and there is an effective regulatory system in place to facilitate portfolio investment. 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. As in most EU countries, France’s 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. Foreign banks are allowed to establish branches and operations in France and are subject to international prudential measures. Under IMF Article VIII France may not impose restrictions on the making of payments and transfers for current international transactions without the (prior) approval of the Fund.
Foreign investors have access to all classic financing instruments, including short-, medium-, and long-term loans, short- and medium-term credit facilities, and secured and non-secured overdrafts offered by commercial banks. These 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. Most loans are provided at market rates, although subsidies are available for home mortgages and small business financing.
Euronext Paris (also known as Paris Bourse) is part of a regulated cross-border exchange located in six European countries. Euronext Growth is an alternative exchange for medium-sized companies to list on a less regulated market (based on the legal definition of the European investment services directive), with more consumer protection than the Marche Libre still used by a couple hundred small businesses for their first stock listing. A company seeking a listing on Euronext Growth must have a sponsor with status granted by Euronext, and prepare a French language prospectus for a permit from the Autorite des Marches Financiers (AMF or Financial Markets Authority), the French equivalent of the U.S. Securities and Exchange Commission. Small and medium-size enterprises (SMEs) may also list on EnterNext, a new subsidiary of the Euronext Group. The bourse in Paris also offers Euronext Access, an unregulated exchange for Start-ups.
Money and Banking System
France’s banking system recovered gradually from the 2008-2009 global financial crises and passed the 2018 stress tests conducted by the European Banking Authority. The French banking sector is healthy. Non-performing loans were 3.1 percent in France at the end of 2017, compared to a ratio of 3.6 percent in the previous year. The French banking industry is notable for its universal banking model: a single bank offers a full range of financial business lines: retail banking, specialist finance, corporate and investment banking, asset management and insurance.
Four French banks are ranked among the world’s 20 largest. The assets of France’s largest banks totaled EUR 7.5 trillion (USD 8.47 trillion) in 2018. Acting on a proposal from the Banque de France in June 2018, the High Council for Financial Stability (HCSF) told the country’s largest banks to raise the “countercyclical capital buffer” from zero to 0.25 percent of their bank’s risk-weighted assets. HCSF cited international “factors of economic and political uncertainty that could put growth at risk.”
France has a central bank, namely the Banque de France, that is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. The Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy, financial stability together with the High Council of financial stability (Haut Conseil de la Stabilite Financiere) which implements macroprudential policy, and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.
Foreign banks can operate in France either as subsidiaries or branches but need to obtain a license. Credit institutions’ licenses are generally issued by France’s Prudential Authority (ACPR – Autorite de Controle Prudentiel et de Resolution) which reviews whether certain conditions are met (e.g. minimum capital requirement, sound and prudent management of the bank, compliance with balance sheet requirements, etc.). Both EU law and French legislation apply to foreign banks. Foreign banks or branches are additionally subject to prudential measures and must provide periodic reports to the ACPR regarding operations in France, including detailed reports on their financial situation. At the EU level, the ‘passporting right’ allows a foreign bank settled in any EU country to provide their services across the EU, including France. There are about 1,028 credit institutions authorized to carry on banking activities in France; the list of foreign banks is available on this website:
Foreign Exchange and Remittances
France’s investment remittance policies are stable and transparent. All inward and outward payments must be made through approved banking intermediaries by bank transfers. There is no restriction on the 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 French government 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 freely converted into dollars or any other currency and transferred abroad.
France is one of nineteen countries (known collectively as the Eurozone) that use the euro currency. Exchange rate policy for the euro is handled by the European Central Bank, located in Frankfurt, Germany. The average euro to USD exchange rate from April 11, 2018 to April 12, 2019 was 1 USD to 0.88 euro.
France is a founding member of the OECD-based Financial Action Task Force (FATF, a 34-nation intergovernmental body). As reported in the Department of State’s France Report on Terrorism, the French government has a comprehensive anti-money laundering/counterterrorist financing (AML/CTF) regime and is an active partner in international efforts to control money laundering and terrorist financing. Tracfin, the French government’s financial intelligence unit, is active within international organizations, and has signed new bilateral agreements with foreign countries.
Sovereign Wealth Funds
France has no sovereign wealth fund per se (none that use that nomenclature), but does operate funds with similar intent. The Public Investment Bank (Banque Publique d’Investissement – BPI, now known as Bpifrance) supports small and-medium term enterprises (SMEs), larger enterprises (Entreprises de Taille Intermedaire) and innovating businesses. The government strategy is defined at the national level and aims to fit with local strategies. Bpifrance may hold direct stakes in companies, hold indirect stakes via generalist or sectorial funds, venture capital, development or transfer capital. Bpifrance has minority stakes in 214 firms and 56 investment funds that invest in businesses. It also provides export insurance.
7. State-Owned Enterprises
The 12 listed entities in which the French State maintains stakes are Aeroports de Paris (50.63 percent), Airbus Group (11.03 percent), Air France-KLM (14.29 percent), CNP Assurances (holds 1.11 percent; controls 66 percent), Dexia (5.73 percent), EDF (83.66 percent), ENGIE (23.64 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.1 percent), Safran (10.81 percent of shares and 21.9 percent of voting rights), and Thales 25.71 percent). Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank). In all, the government has majority and minority stakes in 81 firms, in a variety of sectors.
Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs may get subsidies and other financial resources from the government.
France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization. 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. 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 French government 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 Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat). A recent APE annual report highlighted the government’s strategy to keep a sufficient level of control in strategically important companies while scaling back its shareholdings in traditional industrial sectors to invest in fast-growing companies in key sectors for economic growth.
The government has partially privatized many large companies, including Air France, Orange, Renault, PSA, and ENGIE in order to create a 10 billion EUR fund for innovation and research. However, the government continues to maintain a strong presence in some sectors, particularly power, public transport, and defense industries.
In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.
France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II, came into effect on June 1, 2017. It brought France’s legislation in line with European and international standards. Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers. The Sapin II law also established a High Authority for Transparency in Public Life (HATVP). The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly. After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license. The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website. In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.
The U.S. embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 21rd of 180 on Transparency International’s (TI) 2018 corruption perceptions index. See https://www.transparency.org/country/FRA.
Resources to Report Corruption
The Central Office for the Prevention of Corruption (Service Central de Prevention de la Corruption or SCPC) was replaced in 2017 by the new national anti-corruption agency – the Agence Francaise Anticorruption (AFA). The AFA is charged with preventing corruption by establishing anti-corruption programs, making recommendations, and centralizing and disseminating information to prevent and detect corrupt officials and company executives. The AFA will also administrative authority to review the anticorruption compliance mechanisms in the private sector, in local authorities and in other government agencies.
Contact information for Transparency International’s French affiliate:
Transparency International France
14, passage Dubail
Tel: (+33) 1 84 16 95 65
10. Political and Security Environment
France is a politically stable country. Occasionally, large demonstrations and protests occur (sometimes organized to occur simultaneously in multiple French cities); these normally don’t result in violence. When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers. In March 2018, railway workers, teachers, students, and air traffic controllers went on strike to protest President Macron’s reforms. Rolling two-day strikes of the national rail system took place from April to June 2018, but a railways labor agreement was reached in early summer. The reform of the state controlled SNCF railway company gradually introduces competition on some railways and changes to SNCF unemployment benefits and pension system.
From mid-November, Paris and other cities in France faced weekly “Gilets Jaunes” Yellow Vest demonstrations initiated by protestors upset over the high cost of living, taxes, and social exclusion. Authorities permitted peaceful protests. During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety. Police response included water cannons, rubber bullets and tear gas.
According to the 2018 American Chamber of Commerce in France – Bain Barometer Survey on the attitudes of U.S. investors in France, 86 percent of American investors were positive about the overall investment climate in France and the prospects for continued reforms to the economy. Among the U.S. investors, 62 percent found the Yellow Vest protests to be a nuisance, but 42 percent of U.S. firms planned to hire new employees in France over the next two to three years.
In recent years, more than 230 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 Bataclan concert hall and national stadium attacks, and the 2016 Bastille Day truck attack in Nice. While terrorists continue to target French interests, since July 2016 attacks have been smaller in scale and most often perpetrated by lone actors inspired by, but with little direct connection to, ISIS or other international terrorist organizations. French security agencies continue to disrupt plots and cells, and their efforts have been aided by recent legislation and executive measures which strengthen search and detention authorities. Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture. Americans and investors from all over the world continue to invest heavily in France.
11. Labor Policies and Practices
France’s private sector labor force is a major asset in attracting foreign investment. With a return to growth (1.5 percent in 2018) and a drop in unemployment to 8.8 percent in 2018 from 8.9 percent in 2017, President Macron launched a labor market reform to reduce regulations and spur new hiring. Five ordinances (executive orders), which came into effect on January 1, 2018, introduced measures easing companies’ ability to fire workers including by capping potential damage claims in cases of wrongful dismissal, and a one-year time limit for making claims, which business organizations have requested for several decades. In order to make these proposals acceptable to labor unions, Labor Minister Penicaud increased regular required severance pay by 25 percent. For example, an employee paid a monthly EUR 2,000 and fired after 10 years will be entitled to a severance pay of EUR 5,000, instead of the previous EUR 4,000.
Mandatory company employee councils for consultations on economic, social and public safety issues have been reduced from three to one participants. Companies of all sizes are now able to initiate wide-scale voluntary layoffs with severance provisions for employees for any reason without fear of lawsuit, but with the agreement of labor unions representing a majority of employees. Finally, foreign-owned companies no longer have to justify job cuts in France on the basis of their global turnover, but can base them on poor performance in France. These measures have been welcomed by the business community.
The number of apprenticeships in France has increased by 7.7 percent in 2018 and now totals 318,000 in both the public and private sectors, according to Labor Ministry figures. Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences. Growth of apprenticeship and reform of vocational training help to explain the recent drop in the unemployment rate. The unemployment rate fell to 8.8 percent in the fourth quarter of 2018 from 9.1 percent in the previous period. Youth unemployment was at 20.8 percent in 2018, from 22.3 percent in 2017. The number of job-seekers over age 50 remains steady at 6.4 percent, down from 6.7 percent in 2017.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||874,521||100%||Total Outward||1,451,663||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||$2,887,607||100%||All Countries||$931,712||100%||All Countries||$1,995,895||100%|
|United States||$307,540||11%||United States||$107,912||12%||Italy||$211,644||11%|
|United Kingdom||$269,065||9%||Ireland||$71,831||8%||United States||$199,628||10%|