Control of Foreign Investment in France

The principle of freedom of investment by foreigners in France has, with few statutory exceptions, long been recognized in French law. In practice, however, exchange controls, requiring French government authorization for all foreign exchange transactions within France, have supplied the legal foundation for governmental control of foreign investment. Initiated in 1939 as a wartime measure to stem the outflow of the nation’s currency to safer havens,1 exchange controls were continued in the postwar era to protect a weak currency and were elaborated, in piecemeal fashion, to suit diverse and changing governmental policies. The complex and pervasive regulations provided an instrument which could be used not only to protect France’s monetary position but also to safeguard other national interests affected by foreign investment. In fact, exchange controls were used by the government to screen all foreign investment, and to limit those deemed inconsistent with French economic planning or political interests.