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Country Commercial Guides
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CHAPTER VII: INVESTMENT CLIMATE
A. FRENCH INVESTMENT REGIME
Ensuring that France's investment climate is attractive to foreign investors is a priority for French government officials, who see foreign investment as a way to create jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives to foreign investors is available. The investment promotion agency, DATAR, provides active and extensive assistance to potential investors both in France and through agencies around the world. Foreign investors say they are attracted to France by its skilled labor force, central location in Europe, and good infrastructure. However, despite a decade or more of economic reforms and liberalizations, U.S. and foreign companies often say they find relatively high payroll and income taxes, pervasive regulation of labor and products markets, and sometimes negative attitudes toward foreign investors to be disincentives to investing in France.
Foreign investment represents a significant percentage of production in many sectors. Foreign investment has been growing at a rate considerably higher than that of the economy as a whole, and U.S. investment has been growing at a rate faster than total foreign investment. Using Bank of France balance of payments data based on the historical book value of investment, the United States is the largest foreign investor in France, with U.S. firms representing over 19 percent of the stock of foreign investment. However, using the book value instead of the market value of investments tends to underestimate the value of U.S. investments in France. This is because investments by U.S. companies tends to be considerably older than other countries' investments and because U.S. firms often finance expansions and acquisitions on domestic French capital markets or through subsidiaries in third countries. Thus, much U.S. investment in France is not recorded in balance of payments statistics, even though it is ultimately controlled by U.S. citizens.
Correcting for these statistical biases, the market value of the stock of U.S. investment in France may be as much as double the $47 billion book value for 1997 reported in U.S. Department of Commerce data (www.bea.doc.gov/bea/di1.htm). U.S. data also report that in 1996, over 1,200 affiliates of U.S. firms employed over 450,000 people in France and had net sales of $135 million.
A1. Openness to Foreign Investment
The Formal Investment Regime
The formal French investment regime is among the world's least restrictive. There is no generalized screening of foreign investment. Only acquisitions, irrespective of size or the nationality of the investors, involving the health sector, public order or the national security of France are subject to a one- month official review. Nevertheless, there are certain sectorally based foreign investment restrictions that in practice tend to favor investors from other EU countries. France has notified to the OECD restrictions in the following sectors (more details can be found in OECD reports, including the April 1996 Review of Foreign Direct Investment in France. The OECD internet address is www.OECD.org):
Agriculture
Aircraft Production
Air Transport
Atomic Energy
Audiovisual
Banking/Financial Services/Accounting Services
Defense Industry
Insurance
Maritime Transportation
Publishing
Radio and Television
Road Transportation
Telecommunications
TourismIn applying sectoral restrictions, French authorities look to the place of residence rather than to the nationality, of a potential investor. The place of residence of a corporate investor is determined by the place of residence of its ultimate beneficial owners, without regard to place of incorporation. Firms established or incorporated in other EU countries, but owned or controlled by American residents, have therefore been deemed to be non-EU residents. On the other hand, firms owned or controlled by American citizens legally resident in an EU country are considered to be EU residents. For publicly traded entities, a firm is considered not to be an EU resident if a physical person, or group of persons acting together, who are not EU residents own more than 20 percent of a firm's capital. Non-publicly traded entities are considered to be non-EU residents if a physical person or group of persons who are not EU residents ultimately own or control more than 33.3 percent of a firm's capital, unless physical persons who are EU residents also own more than 50 percent of the firm's capital.
However, for publicly and non-publicly traded firms, the French government retains the authority to declare that a firm is controlled by non-EU investors, even if the share of capital held by non-EU investors falls short of the thresholds noted above. To determine if non-EU investors control a firm, the French government may look at, among other factors, the residency of members of the board of directors, and the ability of non-EU investors to veto key management decisions or commercial ties (such as loans, guarantees, options, licenses or contracts) if these factors effectively make the French company dependent on foreign investors. Firms with questions about their residency status should contact the Office of Foreign Investments at the following address:
Service des Financements et Participations
Direction du Trésor
139, rue de Bercy
75012 Paris, France
Tel: (33-1) 44.87.72.43The website of the Paris Chamber of Commerce and Industry provides detailed English summaries of regulations covering direct foreign investment: www.CCIP.fr/uk/etudes/invdir.htm.
Informal Impediments to Foreign Investors
France's participation in Economic and Monetary Union (EMU) has increased the competitive pressures on France to improve its domestic business and investment climate in order to promote growth and create new jobs. In addition, France has responded to a more competitive international investment climate by implementing market-oriented economic reforms that increase the attractiveness of the French economy to foreign investors and by offering a variety of investment incentives. Foreign investors also say they are attracted to France by its central location in Europe, highly skilled labor force, and good infrastructure (although France lags behind the U.S. and some other European countries in personal computer use and internet access).
Yet, while today's foreign investors face far less interference than was once the case, over a decade of reforms has not entirely overcome a traditional preference for national control of business and a sometimes reflexive opposition to foreign investment. In some cases, this can be seen in labor organizations' opposition to acquisitions of French businesses by U.S. firms, often reflecting a perception that U.S. firms focus on short-term profits at the expense of employment. In other cases, French firms have stated a preference for working with French and European, rather than U.S., firms. A degree of opaqueness in the privatization process (see below) can also aggravate suspicions about the equal treatment of foreign investors in publicly-held firms.
In addition, deregulation is far from complete and the state remains very involved in economic life. There is extensive regulation of business and labor markets and business taxation rates are high compared to other leading industrial countries. Foreign investors most often cite unnecessary labor regulation and high income and payroll taxes as the greatest disincentive to investing in France. In the case of labor market regulation, the impact on companies of the transition to a 35-hour legal workweek (beginning in 2000 for firms with over 20 employees and by 2002 for other firms) is so far unclear. Key elements of this transition, such as the rate of overtime pay and the impact on the minimum wage system, remain to be worked out in a process of negotiation between firms and labor organizations that should be concluded by the end of 1999.
A specific tax burden faced by U.S. investors is the treatment by French authorities of two social security taxes, the "Contribution Sociale Generalisée" (CSG) and the "Contribution au Remboursement de la Dette Sociale" (CRDS), as income taxes rather than social security contributions. The French government has thus far been unwilling to consider these taxes as subject to the provisions of the bilateral social security totalization agreement between the United States and France, under which U.S. contributors to the U.S. Social Security System would be exempt from paying them. Therefore, companies and employees effectively contribute to the financing of two social security systems. Since companies often compensate foreign workers for the extra tax burdens of working abroad, the result can be considerably higher costs for employing highly skilled expatriate workers, notably to work in headquarters operations in France.
An English summary of tax regulations applicable to foreign companies in France is available at the Paris Chamber of Commerce and Industries' website:
www.CCIP.fr/uk/etudes/fisapp.htm.France's Privatization Program
The current government that took office in July 1997 has restarted a process of privatization and opening of government controlled firms to private investment that had been essentially stalled since 1993. The current policy is that sales of government holdings will be allowed when in the national interest or the competitive interest of the specific firm. Since 1997, the government has returned to the private sector all or parts of its stakes in France Télécom, Air France, Aerospatiale, and a number of other large companies, banks and insurance groups. The privatization of Crédit Lyonnais, a major retail bank, should be concluded in 1999. U.S. firms have shown an interest in some of these sales. France Télécom shares are quoted on the New York Stock Exchange.
Sales of government interests are conducted either through market-based public offerings or, more often, through an off-market bidding process. In both cases, key decisions are made by the Ministry of Economy, Finance and Industry on the advice of the quasi-independent "Commission des Participations et des Transferts" (formerly known as the Privatization Commission). Both of these consider financial and business plans submitted by bidders. While there is a strict legal and procedural process regulating these decisions, the confidential nature of off-market sales can raise suspicions about the equal treatment of foreign versus French bidders. This can in itself have a chilling effect on foreign investment. In the past, a policy of selling former holdings to "core" shareholders in an effort to avoid the splitting-up of companies or sales of sensitive state assets to foreign investors also hampered market efficiency and tended to favor French firms.
When privatizing state-owned firms either through off-market placements or market-based offerings, the 1993 privatization law gives the French government the option to maintain a so-called "golden share" to "protect national interests." This provision is not specifically targeted at foreign companies, and has not been a part of every case of privatization. A golden share gives the government three legal rights:
To require prior authorization from the Ministry Economy and Finance for any investor or group of investors acting in concert to own more than a certain percentage of a firm's capital. The thresholds would apply to all investors;
* To name up to two non-voting member's of the firm's board of directors; and
* To block the sale of any asset to protect "national interests." Assets could include not only shares, but buildings, technology, patents, trademarks, and any other tangible or intangible property.
Foreign Participation in R&D Programs
The French government sponsors R&D and technology development programs at three different levels:
* International/European programs (e.g. ESA, CERN, EUREKA);
* technology development programs in the private sector (49.5 percent of R&D expenditures are funded by French government) , with specific programs to encourage transfer of research and to aid small and medium firms; and
* national research programs, with specific emphasis given to space, physical science, aeronautics, telecommunications, electronics, nuclear, and engineering research.
The main orientations of France's global (public and private) R&D budget are reflected in the budget allocations: industrial innovation (50.5 percent funded by private companies); basic research and training (15.5 percent); military research (14.8 percent); civilian-grands programmes' in aerospace, electronics, telecommunications, and nuclear (8.2 percent); support to public research agencies (7.2 percent). The French contribution to EU programs (1.3 percent, USD 4 billion), also constitutes a research incentive with an important driving force.
In May 1999, the Interministerial Committee for Scientific and Technological Research defined five priorities in the following sectors:
-- life science (genomics and post-genomics; fight against infectious diseases; neuro- and cognitive sciences);
-- information technologies (nanotechnologies; software development);
-- human and social sciences;
-- energy and transportation;
-- earth and environmental sciences.An extra US dollar 200 million annual fund was set up to boost research in these specific areas.
For access to R&D subsidies, the French government gives national treatment to all foreign companies registered in France, allowing them to receive the same treatment as French companies. U.S. companies have experienced no difficulty in participating in these opportunities.
Visa, Work Requirements
The government of France requires that foreign citizens follow an extensive procedure if they wish to work in France. The requirements are essentially the same whether foreign citizens work for French or foreign-controlled firms. Non-EU nationals who intend to work or conduct any commercial activity in France must receive a long-term visa and a work permit (carte de travail) or business permit (carte de commerçant) before establishing residence in France. Information can be obtained from French embassies and consulates. The web address of the French embassy in Washington is www.info-france-usa.org/fembassy.htm, the internet address of the U.S. embassy in Paris is www.amb-usa.fr.
In addition, a foreigner's ability to practice a profession may be curtailed by government regulation and the regulations of French professional associations. For example, lawyers seeking to practice in France must become members of the French bar before they can practice any type of law under their own names. This requires passing the bar examination in French. (The ABA and Paris bar are working to develop a less onerous qualification system for American lawyers wishing to practice international law.)
A2. 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.
France has few effective exchange control regulations. For exchange control purposes, the French government considers foreigners as residents from the time they arrive in France. French and foreign citizens are subject to the same rules. Residents are entitled to open an account in foreign currency with a bank established in France and to establish accounts abroad. Residents must report the account number for all foreign accounts on their annual income tax returns. French-source earnings may be transferred abroad.
A3. Expropriation and Compensation
Under French law, private investors are entitled to compensation if their properties are expropriated, and such compensation must be adequate and paid promptly. In France's bilateral investment treaties, the French government promises to provide both prompt and adequate compensation. There have been no recent disputes involving expropriation of U.S. investments.
A4. Dispute Settlement
There have been few major disputes involving established U.S. firms in recent years. Government decisions in investment cases can be appealed to administrative tribunals and ultimately to the Council of State (Conseil d'Etat). The rights of U.S. investors are also protected by the U.S.-French bilateral convention (see Section B below).
The judicial system is independent. Property and contractual rights are enforced by the French civil code. Judgments of foreign courts are accepted and enforced by courts in France once they have been "declared executory" by a French judge through "exequatur" proceedings (Art. 2123 of the French Civil Code and Art. 509 of the Civil Procedure Code). However, in some civil cases and in bankruptcy cases, foreign judgments are recognized and enforced by French courts without executory proceedings.
France is a member of the World Bank's International Center for the Settlement of Investment Disputes (ICSID -- www.WORLDBANK.org/html/extdr/ICSID.html). In addition, in most of its bilateral investment treaties (BIT's) it has agreed to accept binding arbitration to resolve investor-state disputes. However, because most of France's BIT partners are developing countries, investors from these countries have few investments in France. (See below).
A5. Performance Requirements and Incentives
Investment Incentives
France offers a range of financial incentives to foreign investors. Its planning and investment promotion agency, DATAR (Delegation à l'Aménagement du Territoire et à l'Action Régionale), provides extensive assistance to potential investors. In addition, financial subsidies and tax incentives are offered at the local, regional and national government level to attract investment to the country's less affluent areas. Incentives are available equally to French and foreign investors and eligibility requirements are the same.
Within the French government, foreign investment promotion is the responsibility of the "Invest in France Mission" headed by an ambassador at-large, who is based at the Ministry of the Economy, and backed-up by DATAR. DATAR maintains offices throughout France and around the world to seek out and advise potential investors on project development, site selection, investment incentives (the largest of which are administered by DATAR) and administrative and legal requirements. There are four DATAR "Invest in France" agencies in the United States:
Eastern States
DATAR-IFA New York
810 Seventh Avenue, Suite 3800
New York, NY 10019
Tel: (212) 757-9340
Fax: (212) 245-1568Western States
DATAR-IFA Los Angeles
1801 Avenue of the Stars, Suite 1248
Los Angeles, CA 90067
Tel: (310) 785-9735
Fax: (310) 785-9213Midwestern States
DATAR-IFA Chicago
401 North Michigan Ave., Suite 565
Chicago, IL 60611
Tel: (312) 661-1640
Fax: (312) 661-0623Southern States
DATAR-IFA Houston
2411 Fountainview Drive, Suite 130
Houston, TX 77057
Tel: (713) 266-9772
Fax: (713) 266-9884Besides DATAR, several French cities and regions have developed their own investment promotion agencies that advise potential investors, offer administrative assistance, and oversee investment incentives. All incentives are covered by regulations set by the European Commission. The DATAR and Invest in France internet addresses are www.InvestinFranceNA.org (in English) and www.DATAR.gouv.fr.
The primary investment incentive offered through DATAR is the Prime d'Amenagement du Territoire (PAT). For industrial projects, PAT availability is differentiated. The standard PAT incentive of up to 17% of the value of the investment and FF 50 billion per job created by the investment can increase to 25%, 28% or 33% in more disadvantaged zones (including eastern France, part of the North and Corsica), plus FF 70,000 per job created. For projects in the services sector, the PAT incentive is generally FF 70,000 per job created. DATAR will apply new rules in January 2000.
Other investment incentives may also be available. Potential investors should consult DATAR and Invest in France to determine the full range of possibilities, including,
* Research and development project grants
* Special tax treatment for company headquarters
* Local and regional tax holidays and special subsidies
* "Industrial conversion" zones featuring tax breaks and grants for job-creation
* Special access to credit for small and medium-sized enterprises
* Assistance for training, including a portion of wages paid to employees in training
Performance Requirements
Other than those linked to incentives, there are no mandatory performance requirements established by law. However, the French government will generally require commitments regarding employment or research and development from both foreign and domestic investors seeking government financial incentives. For example, to be eligible for DATAR grants, the French government usually requires that firms, whether owned by EU or non-EU residents, create a minimum of 20 jobs within the first three years. As noted above, PAT and R&D subsidies are based on the number of jobs created. In addition, the authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.
Nonetheless, foreign firms need the French government's approval on a variety of regulatory issues, and in France, officials generally have much wider discretion than their U.S. counterparts. This can leave firms subject to "unwritten" performance requirements, with regulatory officials making it known that a firm's request would be more favorably viewed if it increased employment, R&D, or exports.
A6. Right to Private Ownership and Establishment
The French government maintains legal monopolies in the following sectors: postal services (La Poste), national rail transportation (SNCF), Parisian bus and metro services (RATP), the supply and production of gas and electricity (GDF/EDF), and tobacco manufacturing and distribution (Seita).
The French government also remains a major shareholder in enterprises that compete with private firms. French and foreign private sector firms sometimes complain that government-owned enterprises receive favorable treatment in getting licenses, credit, and procurement contracts from the government. In addition, the French government has come to the financial rescue of state-owned firms experiencing difficulties. Private sector firms argue that these arrangements unfairly reduce state-owned firms' financing costs.
A7. Protection of Property Rights
France is a strong defender of intellectual property rights and has highly developed protections for intellectual property. Under the French system, industrial property is protected by patents and trademarks, while literary/artistic property is protected by copyrights. By virtue of the Paris Convention and the Washington Treaty regarding industrial property, U.S. Nationals have a "priority period" after filing 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.
A8. Transparency of the Regulatory System
The French government has made considerable progress in recent years improving the transparency and accessibility of its regulatory system. Government Ministers, companies, consumer organizations and trade associations may petition the Unfair Competition Council to investigate anti-competitive practices.
Of most concern to foreign companies has been standards setting. With standards different from those in the U.S., rigorous testing and approval procedures must sometimes be undertaken before goods can be sold in France, particularly those that entail risk. When EU-wide standards do not exist, specific French standards apply. Mutual recognition agreements covering the testing and certification of certain specified regulated products have been negotiated by the United States and the EU. Information about these agreements and efforts to extend them can be found at the websites of the Trans-Atlantic Business Dialogue, www.TABD.com and the Commerce Department, www.MAC.DOC.gov/TABD/TABD.html. The National Institute of Standards and Technology, www.NIST.gov, is represented at the International Bureau of Weights and Measures, www.BIPM.fr, located in Sevres, France, and may be of assistance to firms.
Industry associations have an influential role in developing both government policies and influencing self-regulatory organizations. U.S. firms may find it useful to become members of local industry groups. Experience has shown that even "observer" status can offer U.S. firms an insight into new investment opportunities and greater access to government-sponsored projects, even if U.S. firms sometimes feel they are not always given an adequate opportunity to participate in the determination of regulations.
A9. Efficient Capital Markets and Portfolio Investment
Access to Capital and Capital Markets
France has an open financial market that gives firms easy access to a variety of financial products in both French and international markets. As markets expand, foreign and domestic portfolio investment has become increasingly important forms of investment. France continues to make progress in modernizing its marketplace, although progress in introducing tax-advantaged individual retirement funds, authorized by a 1996 law, has been blocked since July 1997. Facing the prospect of increasingly tough competition with other European marketplaces following the introduction of the euro, French financial markets are continually modernizing and adapting their products, procedures and services. The French stock market has also joined with eight European counterparts in an effort to create a pan-European stock market. France is actively involved in the international effort to create a system of internationally accepted accounting standards (to read more, go to www.IASC.org.uk or search the SEC's website at www.SEC.gov). French market and banking regulators continue to enhance and develop cooperation with their foreign counterparts. French legal, regulatory and accounting systems may not be as transparent as U.S. systems, but are consistent with international norms.
Commercial banks offer all classical financing instruments, including short, medium, and long-term loans, short-and medium-term credit facilities, and secured and non-secured overdrafts. Commercial banks also assist in public offerings of shares and corporate debt, and mergers, acquisitions and takeovers. Banks offer hedging services against interest rate and currency fluctuations. France also had 136 foreign banks with total assets of over FF1 trillion at the end of 1997, some with sizable branch networks. Foreign companies have access to all banking services. Although some subsidies are available for home mortgages and small business financing, most loans are provided at market rates.
Increasingly, firms in France are bypassing banks and going directly to financial markets for their financing needs. The center of the French market is the Paris stock exchange (the Bourse) (local exchanges were closed in 1990), which listed 962 companies with a total capitalization of FF4.1 trillion (50% of GDP) in 1998. In 1996, a new electronic trading floor called the "Nouveau Marché" was created in which new companies, especially smaller ones with an emphasis on growth and technology, can raise start-up capital. A financial futures market, the "Marché à Terme des Instruments Financiers," commonly known as the MATIF, trades standard contracts on interest rates, short- and long-term bonds, stock market, indices and commodities. It has established linkages with its German and Swiss counterparts and well as with the Chicago Mercantile Exchange. An options exchange, the "Marché des Options Négociables de Paris (MONEP)," was established in September 1987. These markets operate under the auspices of the ParisBourse SBF, whose website address is (www.bourse-de-paris.fr). Finally, though not nearly as developed as in the United States or the United Kingdom, venture capital has become an increasingly important way for start-up firms to raise funds.
According to unofficial estimates, foreigners held approximately 36% of the capital of publicly traded French companies at the end of 1998. For a foreign company incorporated in an OECD country to be listed on the French stock exchange, it must be sponsored by a French bank or broker and prepare a French language prospectus. An application to the "Commission des Operations de Bourse (COB)" (the French equivalent to the SEC) must include French translations of three years of financial statements and an auditor's report on these statements. The sponsoring bank or broker is responsible for placing the securities with investors when the securities are listed and for acting as a market-maker. Special procedures apply to listing on the "Nouveau Marché." Companies must offer at least 100,000 shares with a value of at least FF10 million, or be able to demonstrate comparable liquidity in their home market if already listed on another exchange. Information is available at the Nouveau Marché's website, www.nouveau-marche.fr/bourse/nm/homenm-gb.html.
Cross-Shareholding
An intricate network of cross-shareholdings among French corporations has often been seen as a barrier to foreign acquisition of French firms. Often, two French companies will each own a significant share of the other. This system, which was traditionally a means to help ensure state-control of the economy, has weakened in recent years under the pressure of the marketplace.
Mergers and Acquisitions
In the 1990s, takeovers have become increasingly frequent, particularly those aimed at integrating complementary operations or product lines or at expanding market share. While French laws regarding takeovers do not discriminate against foreign investors, a hostile takeover in France by a foreign investor would face a good deal of public and even official scrutiny. Provisions of the company takeover law are designed to limit hostile takeovers of publicly traded companies For example, stockholders are required to reveal themselves to company management and the authorities when their holdings total 5, 10, 20, 33 or 50 percent of the capital of the company. On crossing the 10 percent threshold, purchasers must declare their "intentions" for the period covering the coming twelve months. When a potential investor makes a "public offer to purchase" (OPA) shares in a publicly traded company, that offer must remain open for at least 20 working days for "friendly" bids and 35 working days for "unfriendly" bids. Both of these last two provisions were tightened in early 1997. Newcomers to the French stock market should also be aware of the possibility that by-laws of individual companies may impose requirements that purchasers of significant amounts of stock in a company report that purchase to the management of the company.
A10. Political Violence
Occasionally, anti-American sentiments, particularly among groups likely to be economically harmed by U.S. policies, produce demonstrations against U.S. investments. For example, in 1993, during the GATT negotiations, French farmers demonstrated against several American icons, such as McDonalds restaurants or the Euro Disney resorts, and in certain instances damaged property. However, these were mostly isolated incidents, and there is little risk of nascent insurrection, belligerent neighbors, or widespread civil disturbances.
A11. Corruption
France has laws, regulations and penalties that effectively combat acts of corruption committed in France. A 1993 law established a Central Service for the Prevention of Corruption under the aegis of the Ministry of Justice. The French judiciary is responsible for prosecution, and is active in doing so. There have been numerous investigations and convictions of public officials and businessmen under the anti-corruption statutes. Penalties for acts of corruption vary according to the circumstances; they often include fines and prison terms.
France has ratified and is in the process of developing legislation to implement the OECD Anti-Bribery Convention. More information about the agreement can be found at the OECD's internet address, www.OECD.org.
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. More information on the international fight against corruption can be found at the internet site of Transparency International, www.Transparency.de, a private organization.
B. BILATERAL INVESTMENT AGREEMENTS
1959 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 is still in force. Some of the rights it provides to U.S. nationals and companies include:
* the right to be treated like domestic nationals in all types of commercial activities including the right to establish offices and acquire majority control of French firms. (This right does not apply to firms involved in communications, air transportation, water transportation, banking, the exploitation of natural resources, certain "professions," and the production of electricity) and in obtaining and maintaining patent and trademarks;
* the right to receive the best treatment accorded to either domestic nationals and companies or third country nationals and companies with respect to transferring funds between France and the U.S.; and
* the requirement that property may only be expropriated for a public purpose and that payment must be just, realizable, and prompt.
The treaty does not apply to the use of production or fissionable materials, arms, or any materials used directly or indirectly to supply military establishments. The treaty 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 61 countries: Albania, Argentinia, Armenia, Bangladesh, Bolivia, Bulgaria, Chile, China, Congo (DROC), Czech Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Haiti, Hong Kong, Hungary, Indonesia, Israel, Jamaica, Jordan, Korea (South), Kuwait, Kyrgzistan, Laos, Latvia, Liberia, Lithuania, Malaysia, Malta, Mauritius, Mongolia, Morocco, Nepal, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Romania, Russia, Singapore, Slovakia, South Africa, Sri Lanka, Sudan, Syria, Trinidad and Tobago, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Vietnam, Yemen, and Yugoslavia (Federal Republic).
Bilateral Investment Treaties signed with the following countries have not yet been ratified: Algeria, Azerbaijan, Brazil, Byelorussia, Costa Rica, Cuba, the Dominican Republic, Georgia, Guatemala, Honduras, India, Kazakhstan, Lebanon, Macedonia, Mexico, Moldova, Morocco, Namibia, Nicaragua, Qatar, Slovenia, and Tunisia.
French BITs generally cover the following:
* just and equitable treatment that is no less favorable than that accorded to domestic investors or the most favored investor from a third country;
* restrictions on expropriation of investments, and requirements that, in the case of expropriation, compensation be prompt and adequate;
* free transfers; and
* the ability to resolve investor-state disputes through binding international arbitration.
C. 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). You can connect with OPIC at www.OPIC.gov.
D. LABOR
France's private sector labor force is one of the country's strongest points in attracting foreign investment, combining high quality with competitive unit wage costs.
The labor code sets minimum standards for working conditions including the work week, layoffs, overtime, vacation and personal leave. Other labor standards are contained in collective agreements, which are usually negotiated on a national or regional basis by the various unions and employers' associations. French absenteeism is modest by European standards and, in the private sector, peaceful labor relations have prevailed.
While the rate of unionization in France has steadily declined to about half that of the United States, French labor law provides an extensive institutional role for employee representatives and for organized labor.
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 work week. Management is required to meet with employee delegates at least monthly.
A company 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 also 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 tend to use less labor intensive procedures and rely more on labor saving technology than businesses in other countries. This is one reason for France's high unemployment rate.
E. FOREIGN FREE TRADE ZONES/PORTS
France is subject to all European Union free trade zone regulations and arrangements. These allow member countries to designate portions of their customs territory as free trade zones and free warehouses. France has taken advantage of these regulations in several specific instances. The French Customs Service administers these zones and can provide more details: Customs can be contacted at the finance ministry web address: www.finances.gouv.fr.
In addition, the French government has established urban "enterprise zones" (Zones Franches Urbaines) in a 38 depressed or impoverished municipalities in France or its overseas territitories. There are also two special investment zones (Zones d'Investissement Privilégié) located in the Nord-Pas-de-Calais region in which firms can benefit from certain tax credits.
More information on enterprise and investment zones is available from DATAR and Invest In France: InvestinFranceNA.org and www.DATAR.gouv.fr.
F. FOREIGN INVESTMENT STATISTICS: See Appendix D
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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