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FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 4318
INFO RUEATRS/DEPT OF TREASURY WASHDC
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RUCPCIM/CIMS NTDB WASHDC
RUCNMEM/EU MEMBER STATES
RUEHFT/AMCONSUL FRANKFURT 6055

UNCLAS SECTION 01 OF 20 PARIS 000232 
 
SIPDIS 
 
SIPDIS 
 
PASS FEDERAL RESERVE 
PASS OPIC 
PASS USTR 
STATE FOR EB/IFD/OIA, EUR/WE 
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL 
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER 
USDOC FOR 4212/MAC/EUR/OEURA 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ELAB PGOV KTDB OPIC USTR FR
SUBJECT: FRANCE 2007 INVESTMENT CLIMATE STATEMENT 
 
REF: 06 STATE 178303 
 
PARIS 00000232  001.2 OF 020 
 
 
¶1.  Investment Climate Statement 
 
Contents 
 
¶A. French Investment Regime 
 
A1. Openness to Foreign Investment 
A2. Conversion and Transfer Policies 
A3. Expropriation and Compensation 
A4. Dispute Settlement 
A5. Performance Requirements and Incentives 
A6. Right to Private Ownership and Establishment 
A7. Protection of Property Rights 
A8. Transparency of the Regulatory System 
A9. Efficient Capital Markets and Portfolio 
Investment 
A10. Political Violence 
A11. Corruption 
 
¶B. Bilateral Investment Agreements 
 
¶C. OPIC and Other Investment Insurance Programs 
 
¶D. Labor 
 
¶E. Foreign Free Trade Zones/Ports 
 
¶F. Foreign Investment Statistics 
 
 
 
¶A. French Investment Regime 
 
Ensuring that France's investment climate is 
attractive to foreign investors is a stated priority 
for the French government, which sees foreign 
investment as a way to create jobs and stimulate 
growth.  The 2005 debate in France over Qeconomic 
patriotismQ caused some observers to question the 
depth of this commitment.  Nevertheless, investment 
regulations are simple, and a range of financial 
incentives for foreign investors are available.  A 
public and commercial establishment, the French 
Agency for International Investment (Agence Francaise 
pour les Investissements Internationaux Q AFII) 
integrates all offices responsible for promoting 
investment in France.  The agency combines the 
overseas offices of the Invest in France Agencies 
(IFA), with the Invest in France Network (IFN) 
association. 
 
Foreign investors say they are attracted to France by 
its skilled and productive labor force, good 
infrastructure, technology, and central location in 
Europe.  EU membership, which mandates the free (with 
certain limitations) movement of people, services, 
capital and goods across the European Union, took on 
even greater significance with the introduction of 
Euro coins and bills in January 2002. However, 
despite considerable economic reform and market 
liberalization over the past decade, U.S. and foreign 
companies often point to high payroll and income 
taxes, over-regulation, rigid labor markets and 
occasional negative attitudes toward foreign 
investors as disincentives to investing in France. 
 
A1. Openness to Foreign Investment 
 
The Formal Investment Regime 
 
The formal French investment regime remains among the 
least restrictive in the world. While there is no 
generalized screening of foreign investment, 
legislation passed at the end of 2005 dictates that 
acquisitions, irrespective of size or nationality, 
involving QsensitiveQ sectors are subject to prior 
approval by the Finance Minister 
([http://www.legifrance.gouv.fr] Q search for the 31 
December 2005 French Official Journal, decree 2005- 
 
PARIS 00000232  002.2 OF 020 
 
 
1739 of 30 December 2005).  For investors from non-EU 
countries (or those who are not members of the 
European Common Market that have signed an 
administrative convention with France), protected 
sectors include: gambling activities, private 
security services, research, development or 
production of chemical or biological medicines, 
equipment for intercepting communications or 
eavesdropping, security services for computer 
systems, dual-use (civil and military) technologies; 
cryptology, firms that are repositories of defense 
secrets, firms that research, produce and sell 
 
SIPDIS 
military equipment, and lastly any other industry 
supplying the defense ministry any of the goods or 
services described above. The EU Commission has said 
it would study the December 2005 decree to ensure it 
is consistent with European Community law. 
 
The decree also changes the triggers for Government 
of France (GOF) investment scrutiny for firms in the 
sensitive sectors.  The prior decree required the GOF 
to review a proposed investment if it was above the 
threshold of 33% of the outstanding shares or voting 
rights. Now, the decree states that any investment 
that grants control of a firm, or surpasses the 33% 
threshold, or involves any part of any branch of any 
firm that has established headquarters in France, is 
subject to GOF review. 
 
Authorities also consider the place of residence 
rather than the nationality of a potential investor. 
The place of residence of a corporate investor is 
determined by the location of its owners, without 
regard to place of incorporation.  While firms owned 
or controlled by American citizens that are legal 
residents in an EU country will usually be considered 
as EU residents, France will normally consider firms 
established or incorporated in other EU countries, 
and owned or controlled by American residents as non- 
EU residents. 
 
To determine if non-EU investors control a firm, the 
French government looks at the residency of the 
headquarters (Qsiege socialQ) and the ability of non- 
EU investors to veto key management decisions or 
commercial ties (such as loans, guarantees, options, 
licenses, or contracts) that might 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 addresses: 
 
Ministere de l'Economie, des Finances et de 
l'Industrie, 
Direction Generale du Trisor et de la Politique 
Economique: 
 
Multicom 2 - Services, Investissements et Propriete 
Intellectuelle 
139, rue de Bercy 
75012 Paris, France 
Tel:  (33)1 44-87-72-87 
 
Service du Financement de L'Economie 
FINENT 1 Epargne et Marchi Financier 
139, rue de Bercy 
75012 Paris, France 
Tel:  (33)1 40-04-04-04 
 
Agence des  Participations de lQEtat 
139, rue de Bercy 
75012 Paris, France 
Tel:   or (33)1 40-04-04-04 
 
AFIIQs website 
(http://www.investinfrance.org/NorthAmerica in 
English) explains the basic regulations covering 
foreign direct investment. It provides a general 
framework on legal issues to help businesses in its 
"Doing Business in France" section.  The website of 
the Paris Chamber of Commerce and Industry provides 
 
PARIS 00000232  003.2 OF 020 
 
 
French summaries of regulations applicable to foreign 
direct investment:  (http://www.inforeg.CCIP.fr). 
 
Informal Impediments to Foreign Investors 
 
The January 1, 1999 introduction of the Euro as the 
single currency of the European Monetary Union (EMU), 
including France, 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 some 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.  France is closing 
the gap with the U.S. and some other European 
countries in personal computer use and Internet 
access. 
 
Yet, while today's foreign investors face less 
interference than before, after more than a decade of 
reforms, France has not entirely overcome a 
traditional preference for state intervention and a 
sometimes-reflexive opposition to foreign investment. 
In some cases, this can be seen in labor organization 
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. 
 
The process of deregulation is far from complete and 
the state remains very involved in economic life. 
There is extensive regulation of business and labor 
markets. Also, the corporate tax rates are high in 
comparison to other leading industrial countries. 
Foreign investors most often cite complicated and 
pervasive labor regulation, high income and payroll 
taxes as the greatest disincentives to investing in 
France.  In the case of labor market regulation, the 
impact on companies of the 35-hour legal workweek is 
mixed. Many companies used the transition to the 35- 
hour workweek as an opportunity to negotiate work- 
hour annualization programs with employees that allow 
for greater labor flexibility.  Companies also 
benefited from a further cut in payroll taxes on low 
wages.  On the negative side, the 35-hour workweek 
increased unit labor costs since total wages remained 
unchanged even though the number of hours worked 
declined. The government is taking measures to make 
the law less rigid and is seeking to introduce more 
flexibility in employment contracts (See D. Labor). 
 
The French and U.S. business communities initially 
described France's new "social modernization law", 
passed in July 2001, as creating burdensome new 
obligations.  The center-right government elected in 
2002 selectively implemented the law through its 
power to implement by decree.  In addition, the 
Government introduced a broad range of new investment 
promotion and competitiveness measures in 2005. 
 
In making its decision on raising the minimum wage an 
average of 3.05% (effective July 2006), the 
Government sought to increase purchasing power and 
stimulate household consumption.  Despite the 
increase in the minimum wage, base gross wages in the 
private sector are expected to increase at the same 
rate compared with last year (2.8%) as the high 
unemployment rate restrains wage demands. 
 
The government decision to apply income tax cuts in 
2007 should benefit the French economy, making France 
 
PARIS 00000232  004.2 OF 020 
 
 
a more attractive place for both French and foreign 
investment.  Tax rates became a campaign issue before 
the 2007 presidential elections, and are likely to 
continue to divide politicians across the political 
spectrum. 
 
The French have two social security taxes, the 
"Contribution Sociale Generalisee" (CSG) and the 
"Contribution au Remboursement de la Dette Sociale" 
(CRDS).  U.S. contributors to the U.S. Social 
Security system do not pay these taxes.  (Based on 
the "May 2 2001-377 ordonnance" to apply the 1408/71 
EEC regulation, only "individuals who are subject to 
income taxes in France and contribute to the French 
social security system including health insurance pay 
CSG and CRDS".  The related "circulaire 
d'application" was published in the May 20, 2001 
"Bulletin Officiel du Travail, de l"Emploi et de la 
Formation Professionnelle" 
[http://www.travail.gouv.fr]. 
 
On December 8, 2004, the United States amended the 
income tax convention between the United States and 
France to avoid double taxation and prevent fiscal 
evasion; along with the estate and gift tax 
convention to avoid double taxation with respect to 
taxes on estates, inheritances and gifts 
[http://www.treas.gov/offices/tax- 
policy/treaties.shtml].  In December 2005, the French 
government ratified the two amendments, and they 
entered into force on December 21, 2006. The 
provisions resolve problems related to the double 
taxation of partnerships and estates. The U.S. 
Treasury provided a technical explanation in February 
2006 [http://www.treas.gov/offices/tax- 
policy/treaties.shtml]. 
 
English summaries of labor and tax regulations 
applicable to foreign companies in France are 
available at the AFII's website 
[http://www.investinfrance.org/] and at the Paris 
Chamber of Commerce and Industries' website 
([http://www.inforeg.CCIP.fr] search Qfiches 
pratiquesQ). 
 
France's Privatization Program 
 
The former Socialist-led government that took office 
in July 1997 returned to the private sector all or 
parts of the governmentQs stakes in a number of large 
companies, banks and insurance groups.  U.S. firms 
showed interest in some of these sales.  The current 
center-right government, elected in 2002, announced 
preliminary plans for further privatization, but the 
global slump in air transportation and equity markets 
put a brake in privatizations through the sale of 
shares.  In 2003 and 2004 the government reduced its 
stakes in large companies such as Air France-KLM (to 
44.6 from 54.0 percent), France Telecom (to 42.2 from 
54.5 percent), Thales (formerly Thomson CSF, to 31.3 
from 33.3 percent), Renault (to 15.6 from 26.0 
percent), and Thomson (to 2.0 from 20.8 percent 
through TSA).  Smaller projects, including the 
privatization of SAPRR (Paris-Rhin-Rhone highway 
company) and of the electricity company SNET, also 
were carried out.  In the energy sector, the 
government sold shares in EDF and GDF, retaining a 
85.3% stake in EDF and a 79% stake in GDF, but 
postponed the privatization of the nuclear power 
company, Areva.  A December 7, 2006 law authorizes 
the reduction of the government stake in GDF to 
33.33% from 70% to permit the merger of Gaz de France 
(GDF) and Suez.  The deal is pending.  After a long 
selection process in 2005, toll-road companies ASF, 
APRR and Sanef were privatized in 2006.  The 
government reduced its stake in Aeroports de Paris to 
67.5%.  The government still has stakes in Bull and 
Safran (renamed after Sagem merged with Snecma), and 
controls 1,143 smaller firms in a variety of sectors. 
Privatization is an issue for the candidates in the 
2007 presidential elections.  In public 
 
PARIS 00000232  005.2 OF 020 
 
 
pronouncements, center-right politicians generally 
are supportive of further privatization while 
politicians on the left are opposed. 
 
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 consider the financial and 
business plans submitted by bidders.  There is a 
strict legal and procedural process regulating these 
decisions, but the confidential nature of off-market 
sales can raise suspicions about the equal treatment 
of foreign versus French bidders.  This can 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 
targeted at foreign companies and has not been a part 
of every privatization process.  A golden share gives 
the government three legal rights: 
 
-- To require prior authorization from the Ministry 
of the Economy, Finance and Industry 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 members to the firm's 
board of directors; and 
 
-- To block the sale of any asset to protect 
"national interests."  Assets could include shares, 
but also buildings, technology, patents, trademarks, 
and any other tangible or intangible property. 
 
The French Government will have to reconsider its use 
of golden shares in future privatization operations 
following the June 2002 European Court of Justice's 
decision to reaffirm the basic principle of free 
movement of capital in the EU.  The Court stated that 
the use by some EU countries, including France, of 
golden shares was a serious impediment to that 
principle.  Nonetheless, the December 7, 2006 law 
related to the energy sector includes the possibility 
for the government to keep a golden share in Gaz de 
France (GDF) to oppose any measure that might 
jeopardize the security of energy supplies.  The 
Government has also considered retaining a golden 
share in the privatization of Areva due to loopholes 
in the court's decision.  ArevaQs chairman has stated 
that the golden share could be consistent with EU 
requirements. 
 
French Government Participation in R&D Programs 
 
Total annual R&D expenditures in France represent 
2.13 percent of GDP (2005 figures).  The French 
government (GOF) contributes 0.81 percent of GDP to 
R&D and the industrial sector 1.32 percent.  The GOF 
decided to increase public spending for research by 
an additional one billion euros annually from 2005 to 
¶2007.  The GOF confirmed in 2006 its intent to 
increase total R&D spending to 3 percent of GDP by 
2010 (consistent with the EUQs QLisbon agendaQ 
goals), with two percent coming from the private 
sector.  The French government relies on increased 
tax credits and incentives for the development of new 
investment structures to boost industrial research. 
 
 
PARIS 00000232  006.2 OF 020 
 
 
The GOF completed in 2006 an ambitious effort to 
reform its R&D strategy, organization, evaluation, 
and funding.  The new system attempts to inculcate 
competition for government-funded research and 
embrace the university system.  The Research and 
Innovation Bill, adopted in April 2006, reinforces 
science-industry relations and promotes greater 
strategic direction.  The new legislation provides 
for a High Council for Science and Technology, a 
National Research Agency, numerous Qcompetitiveness 
clusters,Q and an Industrial Innovation Agency. 
Private enterprise will benefit from more flexible 
working arrangements with government scientists, as 
well as by receiving R&D tax incentives.  The GOF 
also supports partnerships between public research 
agencies and universities within the framework of 
QResearch and Higher Education Hubs,Q and QAdvanced 
Research Thematic Foundations,Q two new types of 
cooperation. 
 
The GOF sponsors R&D and technology development 
programs at three different levels: 
 
¶1.  International/European programs (e.g. ESA, CERN, 
EUREKA, EU Framework program); 
 
¶2.   Technology development programs in the private 
sector (approx. 45 percent of R&D expenditures are 
funded by the French government), with specific 
programs to encourage transfer of research and to aid 
small and medium firms; and 
 
¶3.   National research programs (mostly administered 
by the Research Ministry), with specific emphasis 
given to health and biotech (fight against cancer, 
research on aging and handicaps, focus on new 
epidemics, genomics/genetics); resource management 
(including food resources, food safety, water 
management), sustainable development and the fight 
against greenhouse gases (research on new sources of 
energy, clean vehicles, energy storage and use of 
hydrogen, nuclear systems and nuclear fusion); 
information and communication technologies; 
nanotechnologies; and space. 
 
The public budget for Higher Education and R&D is 
21.6 billion euros in 2007, 3.44 percent above 2006 
levels.  The 2007 Higher Education and Research 
budget by research theme is as follows: 
 
Life sciences: 21 percent 
Social and Human sciences: 15 percent 
Space/Defense: 14 percent 
Math, Physics, Chemistry: 12 percent 
Environment: 12 percent 
Information and Communication Technologies: 9 percent 
Energy: 6 percent 
Industrial Production and Technologies: 9 percent 
R&D for Developing Countries: 2 percent 
 
For access to R&D subsidies, the French government 
provides national treatment to foreign companies 
registered in France. 
 
Visas, Work Requirements 
 
The government of France requires that foreign 
citizens complete extensive procedures 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 commercant - foreign trader's card) before 
establishing residence in France.  Information can be 
obtained from French consulates in the United States. 
The web address is [http://www.info-france- 
usa.org/intheus/consulates.asp].  For more 
information on the foreign trader's card, please 
consult the Invest in France agency Web site at: 
 
PARIS 00000232  007.2 OF 020 
 
 
[http://www.investinfrance.org/France/Living/ 
Expatriate/?p=formalities&=en]. For more information 
on other types of visas and applicable fees, contact 
your local Consulate General of France.  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.  A 
number of legislative changes to these regulations 
are under consideration. 
 
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 little effective foreign exchange control 
regulation.  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. 
 
As part of the international effort to combat money 
laundering and the financing of terrorism, France's 
banking regulations have undergone several changes, 
which affect the handling of checks, as recommended 
by the Financial Action Task Force.  Additional 
changes are expected.  France sometimes uses its 
powers under national law to freeze assets of 
terrorists, operating within EU structures. 
 
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 executor" by a French judge through 
"executor" 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 executor proceedings. 
 
France is a member of the World Bank's International 
Center for the Settlement of Investment Disputes 
 
PARIS 00000232  008.2 OF 020 
 
 
(ICSID Q [http://www.worldbank.org/icsid]).  In 
addition, in most of its bilateral investment 
treaties (BIT's) France has agreed to accept binding 
arbitration to resolve investor-state disputes. 
However, most of France's BIT partners are developing 
countries whose investors have few investments in 
France. (See below). 
 
A5. Performance Requirements and Incentives 
 
Investment Incentives 
 
France offers a range of financial incentives to 
foreign investors.  The following information 
reflects incentives as they existed at time of this 
writing. The government has a broad range of 
investment and competitiveness measures in the 
legislative pipeline. 
 
France's domestic planning and investment promotion 
agency, DATAR (Delegation a l'Amenagement du 
Territoire et a l'Action Regionale) was renamed DIACT 
(Delegation Interministerielle a lQAmenagement et la 
Competitivite des Territoires) in December 2005.  It 
has a broad mandate, including increasing the 
QattractivenessQ of France for foreign investors and 
assisting potential investors.  In addition, 
financial subsidies and tax incentives are offered at 
the local, regional and national government level to 
attract investment to France'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 AFII "Invest 
in France Mission" headed by an ambassador-at-large, 
who is based at the Ministry of the Economy, and 
backed up by DIACT.  DIACT 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 DIACT) and 
administrative and legal requirements. DIACT's 
overseas offices were re-named "Invest in France 
Agencies" (IFA -- IFANA in North America) in 2001. 
There are three DATAR/IFANA offices in the United 
States: 
 
Northern and Eastern States 
 
IFANA New York 
810 Seventh Avenue, Suite 3800 
New York, NY 10019 
Tel: (212) 757-9340 
Fax: (212) 245-1568 
 
Western and Southern States 
 
IFANA San Francisco 
88 Kearny Street, Suite 700 
San Francisco, 
CA 94108 
Tel: (415) 781 0986 
Fax: (415) 781 0987 
 
Midwestern States 
 
IFANA Chicago 
205 North Michigan Avenue, Suite 3750 
Chicago, IL 60611 
Tel: (312) 628-1054 
Fax: (312) 628-1033 
 
AFIIQs internet address is 
[http://www.InvestinFrance.org]. DATARQs site, 
 
[http://www.datar.gouv.fr/] or 
 
[http://www.DIACT.gouv.fr]. 
 
 
PARIS 00000232  009.2 OF 020 
 
 
The primary investment incentive offered through 
DIACT is the Prime d'Amenagement du Territoire (PAT). 
DATAR has revised downward the PAT program at the 
European Commission's request.  Nonetheless, PAT 
incentives remain generous for investment in 
disadvantaged zones (parts of north and central 
France, and Corsica).  The government defined a new 
list of eligible zones for the 2007-2013 period.  The 
current PAT system requires job creation from 
investors (see Performance Requirements), but its 
subsidies can be generous.  PAT may also be collected 
by firms that maintain employment when the investment 
is significant.  The system is even more flexible for 
small and medium sized companies. New rules will be 
issued when the European Commission gives its 
approval.  Other investment incentives may also be 
available.  Potential investors should consult DIACT 
and AFII to determine the full range of 
possibilities, including: 
 
-- Research and development project grants, notably 
for businesses located in competitiveness clusters 
 
-- 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. 
 
 
Besides DIACT/IFA at the national level, several 
French cities and regions have developed their own 
investment promotion agencies that advise potential 
investors, offer administrative assistance, and 
oversee investment incentives.  The February 2002 
Local Democracy Law ("Democratie de proximite" 
(http://www.legifrance.gouv.fr]) gives regional 
councils ("Conseils Regionaux") full powers to 
establish (without decree or national convention) 
schemes for direct aid to companies (subsidies, 
reduced interest rates on loans, and advances). Each 
"Conseil Regional" has it own website, which can be 
found with any internet search engine using "conseil 
regional" and the name of the appropriate region. 
 
All incentives are covered under regulations set by 
the European Commission. 
 
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 DIACT grants, the 
French government usually requires that firms, 
whether owned by EU or non-EU residents, create a 
minimum of 15 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 
 
PARIS 00000232  010.2 OF 020 
 
 
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), and tobacco manufacturing and 
distribution (Altaldis Q former Seita).  The 
electricity and gas Companies (EDF/GDF) no longer 
have monopolies on production, distribution and sale 
of electricity and gas.  Market opening in Europe has 
surpassed 37 percent (by volume) of the electricity 
market and 70 percent of the gas market -- meaning 
that that proportion of consumers are free to choose 
another supplier, although few have.  In July 2004, 
the option to switch suppliers was opened to all 
commercial customers.  After a critical piece of 
energy sector reform legislation passed that same 
month, the first public sales of shares for EDF and 
GDF began in 2005, leading effectively to a partial 
privatization of the two companies. 
 
A7. Protection of Property Rights 
 
On August 1, 2006, France passed new legislation on 
digital copyright(Law on Authors' Rights and Related 
Rights in the Information Society) designed to 
implement a 2001 EU Copyright Directive as well as 
the WTO TRIPS agreement on Intellectual Property. 
However, due to the numerous amendments added during 
the legislative process, this new copyright law goes 
far beyond its original intent.  The law strongly 
penalizes illegal downloading with a prison sentence 
of up to five years in prison and 500,000 euro fine. 
However, the new law also mandates interoperability 
of digital rights management (DRM) systems by 
requiring sellers of online digital content and 
manufacturers of digital entertainment devices to 
provide information about proprietary DRM 
technologies to competitors if this information is 
needed to guarantee interoperability.  To enforce 
that interoperability, the new law establishes a new 
Regulatory Authority which has the power to demand 
proprietary information from companies.  The U.S. 
Government has repeatedly expressed concern over this 
provision, which could undermine IPR protection and 
diminish incentives for innovation. 
 
Nevertheless, France is a traditionally strong 
defender of intellectual property rights and has 
highly developed protection for intellectual 
property.  Under the French system, patents and 
trademarks protect industrial property, 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 an 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. Where EU-wide standards do not 
exist, specific French standards apply.  The United 
States and the EU have negotiated mutual recognition 
agreements covering the testing and certification of 
 
PARIS 00000232  011.2 OF 020 
 
 
certain specified regulated products.  Information 
about these agreements and efforts to extend them can 
be found at the website of the Trans-Atlantic 
Business Dialogue, [http://www.tabd.com/].  The 
National Institute of Standards and Technology, 
[http://www.nist.gov/], is represented at the 
International Bureau of Weights and Measures, 
[http://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 allows 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.  France continues to 
modernize its marketplace, introducing tax-advantaged 
retirement funds in 2004.  Facing the prospect of 
increasingly tough competition with other European 
marketplaces following the introduction of the Euro, 
French financial markets are continually updating and 
adapting their products, procedures and services. 
 
France is actively involved in the effort to create a 
system of internationally accepted accounting 
standards (to learn more, go to 
[http://www.iasb.org.uk/] or search the SEC's website 
at [http://www.sec.gov/].  Most EU listed companies 
were required to use international accounting 
standards from 2005.  French market and banking 
regulators enhanced and developed cooperation with 
their foreign counterparts.  Some aspects of French 
legal, regulatory and accounting systems may not be 
as transparent as U.S. systems, but they are 
consistent with international norms. 
 
Commercial banks offer all classic financing 
instruments, including short, medium, and long-term 
loans, short-and medium-term credit facilities, and 
secured and non-secured overdrafts.  Commercial banks 
also assist in public offerings of shares and 
corporate debt, mergers, acquisitions and takeovers. 
Banks offer hedging services against interest rate 
and currency fluctuations.  France has 161 foreign 
banks including 57 non-EU banks (some with sizable 
branch networks) with total assets accounting for 
around 10% of total bank assets at the end of 2005. 
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 Euronext stock exchange.  Euronext N.V., a 
holding company incorporated under Dutch law, was 
formed on 22 September 2000 when the exchanges of 
Amsterdam, Brussels and Paris merged. The Euronext 
group expanded at the beginning of 2002 with the 
acquisition of LIFFE (London International Financial 
Futures and Options Exchange) and the merger with the 
Portuguese exchange BVLP (Bolsa de Valores de Lisboa 
e Porto).  As of December 2006, Euronext listed 1,210 
companies (of which 300 are foreign excluding 
countries members of Euronext), with a total 
 
PARIS 00000232  012.2 OF 020 
 
 
capitalization of USD 2.8 billion.  In February 2005, 
Euronext Paris merged the three separate markets of 
the Paris exchange, the cash market (QMarche au 
ComptantQ), the regulated market (QSecond MarcheQ) 
and the QNouveau MarcheQ (growth segment) on which 
new companies, especially smaller ones with an 
emphasis on growth and technology, can raise start-up 
capital.  The new market list (QEurolistQ) was split 
in three segments based on the capitalization of 
companies (150 million euros, 150 million to 1 
billion euros, and more than 1 billion euros).  The 
changes are aimed at improving liquidity and 
visibility of small- and medium-sized companies.   A 
financial futures market, the "Marche a 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 as well as with the 
Chicago Mercantile Exchange.  Options are traded on 
the "Marche des Options Nigociables de ParisQ (MONEP) 
exchange, operated by Euronext.  Finally, though not 
nearly as developed as in the United States or the 
United Kingdom, venture capital markets (QMarche 
LibreQ and QMarche de gre a greQ) have become 
increasingly important ways for start-up firms to 
raise capital.  In 2005, Euronext created a market, 
QAlternext,Q to offer companies a new unregulated 
market (based on the legal definition of the European 
investment services directive) with more consumer 
protection than the QMarche Libre,Q which will 
continue to operate. Euronext is in the process of 
merging with the New York Stock Exchange.  The deal 
should be settled in the first quarter of 2007.  The 
merger will increase international exposure to the 
European exchange and reduce trading fees, which 
should attract more investors. 
 
Foreigners hold more than 45% of the capital of 
publicly traded French companies. For a foreign 
company incorporated in an OECD country to be listed 
on the Euronext stock exchange, it must be sponsored 
by a French bank or broker.  It must also prepare a 
French language prospectus to get a permit from 
"Autorite des Marches Financiers - AMF,Q the French 
equivalent of the SEC. Foreign companies are 
authorized to provide statements in English and a 
short summary in French.  Since July 1, 2005, France 
has applied European regulation 809-2004 that details 
the content of prospectuses.   An application to the 
AMF must include a summary in French or any other 
language commonly used in financial issues that 
describes "essential information related to the 
content and modalities of operations" as well as to 
the "organization, financial situation and 
development of the activity of the company".  Details 
may be found on the AMF web site [http://www.amf- 
france.org], which merged with the COB web site 
[http://www.cob.fr]. 
 
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.  More information is available on the Paris 
Stock Exchange website, [http://www.euronext.com]. 
 
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 
 
Although French laws regarding takeovers do not 
discriminate against foreign investors, a hostile 
 
PARIS 00000232  013.2 OF 020 
 
 
takeover in France by a foreign investor could face 
public and even official scrutiny. Provisions of the 
company takeover law are designed to limit hostile 
takeovers of publicly traded companies. For example, 
with the new regulation, passed by the Parliament on 
December 15, 2005, stockholders are required to 
notify company management and AMF when they have 
decided to prepare a takeover.  France extended its 
public offering rules by imposing some additional 
obligations on investors taking control of a company 
listed on a French market depending on the level of 
voting rights in the targeted company and the nature 
of the proposed acquisition. 
 
In transposing the European takeover directive, 
France has tried to reconcile its objectives of 
reestablishing its credentials as an investor- 
friendly country, while allowing companies to defend 
themselves against Qpredators.Q  French companies may 
suspend implementation of a takeover if they are 
targeted by a foreign company that does not apply 
reciprocal rules.  The government also introduced an 
amendment allowing a U.S.-style Qpoison pillQ 
takeover defense, including granting existing 
shareholders and employees the right to increase 
their leverage by buying more shares through stock 
purchase warrants (Qbons de souscription dQactions - 
BSAQ) at a discount in case of an unwanted takeover. 
New provisions include a reform of AMF supervisory 
procedures.  Procedures cover declaration of 
conformity, offer price, declaration of a bid in 
relation to takeover rumors and nomination of an 
independent appraiser when conflicts of interests 
exist [http://www.amf- 
france.org/documents/general/7341_1.pdf]. 
 
A10. Political Violence 
 
Occasionally anti-American sentiments, particularly 
by those who see themselves as threatened by U.S. 
policies, result in demonstrations against U.S. 
investments.  That said, such incidents are rare. 
France is one of the world's leading democracies and 
a founding member of the EU; there is little danger 
of insurrection, belligerent neighbors, or widespread 
civil disturbances.  Perceived discrimination and a 
lack of economic opportunity contributed to 
disturbances that affected poorer largely Muslim 
suburbs of FranceQs largest cities in late 2005 and 
early 2006.  Most observers believe the unrest was 
fanned by small groups of youths looking for trouble, 
and incidents of violence have largely dissipated. 
Moreover, since the terrorist attacks of September 
11, 2001, there have been relatively fewer anti- 
American demonstrations in France as compared to 
prior years. 
 
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. 
 
French magistrates have for the first time in 
December 2006 launched a probe against officials from 
French oil company Total for the bribery of foreign 
civil servants, a criminal offence in France since 
2000, when the GOF ratified the OECD Anti-Bribery 
Convention and enacted implementing legislation to 
enforce its provisions.  The OECD Anti-Bribery 
Conventions are enforced via amendments to the 
Criminal code, which have been integrated into 
Articles 435-3 and 435-4 of a new chapter on 
international corruption (Chapter V, Title III, Book 
IV).  Article 435-3 incriminates the offer or promise 
of a bribe, but not the actual payment of a bribe, 
which is explicitly mentioned in the convention. 
 
PARIS 00000232  014 OF 020 
 
 
Furthermore, there is a difference in the treatment 
of victims of bribery, depending on whether the 
bribery is domestic, EU or foreign.  In cases of 
bribery of GOF/EU officials, any victim may initiate 
prosecution.  In cases involving the bribery of other 
foreign government officials, criminal proceedings 
may be initiated only by the public prosecutor on the 
basis of a complaint from a Government official in 
the country where the bribery took place. 
 
The OECD Anti-Bribery convention is further enforced 
via amendments to the Tax Code and to the Code of 
Criminal Procedure.  Article 39-2 of the French Tax 
Code puts an end to the tax deductibility of bribes 
as of the entry into force in France of the 
Convention (September 29, 2000).  Finally, Article 
706-1 of the amended Code of Criminal Procedure 
provides that acts criminalized by the OECD 
Convention will be prosecuted in the Economic and 
Financial Unit of the Paris Court of Justice. 
 
France has also begun ratification of the Council of 
EuropeQs civil and criminal conventions on 
corruption.  The procedure should be completed by the 
end of February 2007. 
 
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 
[http://www.Transparency.org].  According to 
Transparency InternationalQs French Chapter, the 
sectors most affected by corrupt practices tend to be 
public works and the defense industry. 
 
¶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 forcQ 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, and in obtaining and 
maintaining patent and trademarks. (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) ; 
 
-- 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.; 
 
-- 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 or production of 
fissionable materials, arms or any materials that are 
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 81 
countries: Albania, Algeria, Argentina, Armenia, 
 
PARIS 00000232  015 OF 020 
 
 
Azerbaijan, Bangladesh, Bolivia, Bulgaria, Chile, 
China, the Democratic Republic of the Congo, Costa 
Rica, Croatia, Cuba, Czech Republic, Ecuador, Egypt, 
El Salvador, Equatorial Guinea, Estonia, Ethiopia, 
Georgia, Guatemala, Haiti, Hong Kong, Honduras, 
Hungary, India, Indonesia, Iran, Israel, Jamaica, 
Jordan, Kazakhstan, Korea (South), Kuwait, Kyrgyz 
Republic, Laos, Latvia, Lebanon, Liberia, Lithuania, 
Macedonia, Malaysia, Malta, Mauritius, Moldavia, 
Mexico, Mongolia, Morocco, Nepal, Nicaragua, Nigeria, 
Oman, Pakistan, Panama, Paraguay, Peru, Philippines, 
Poland, the Dominican Republic, Qatar, Romania, 
Russia, Singapore, Slovakia, Slovenia, South Africa, 
Sri Lanka, Sudan, Syria, Trinidad and Tobago, 
Tajikistan, Tunisia, Turkmenistan, Ukraine, United 
Arab Emirates, Uruguay, Uzbekistan, Vietnam, Yemen, 
and the former Federal Republic of Yugoslavia. 
 
Bilateral Investment Treaties signed with the 
following 12 countries have not yet been ratified: 
Bahrain, Bosnia, Brazil, Belarus, Ghana, Libya, 
Madagascar, Mozambique, Namibia, Uganda, Zambia and 
Zimbabwe. 
 
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 is prompt and adequate; 
 
-- Free transfers; 
 
-- 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). Further information can be found 
at [http://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 relatively 
competitive unit-wage costs compared with those of 
other industrialized countries. 
 
The labor code sets minimum standards for working 
conditions including the workweek, layoffs, overtime, 
vacation and personal leave.  In October 2006, the 
GOF drafted a bill on "Social Dialogue" which, if 
approved by Parliament, would call for mandatory 
preliminary negotiations between French employee and 
employers' unions prior to any modification of the 
Labor Code.  The bill could be adopted by the end of 
February 2007. 
 
France recently adopted an employeesQ shareholding 
law (QLoi sur la ParticipationQ), which involves some 
changes in the labor code.  The law encourages the 
purchase of shares by employees, employeesQ savings 
accounts, and better representation of employees as 
shareholders. Employees in large companies who are 
laid off for economic reasons may benefit from 
Qmobility leaveQ which involves training, short-term 
contracts, or transfer to another company within a 
pole of competitiveness.  A new Qtransport allowanceQ 
will benefit employees who commute using public or 
private 
transportation.([http://www.legifrance.gouv.f r] Q 
search the 31 December 2006 French Official Journal Q 
law 2006-1770 of 30 December 2006). 
 
 
PARIS 00000232  016 OF 020 
 
 
Other labor standards are contained in collective 
agreements, which are usually negotiated by sector on 
a national or regional basis by the various trade 
union federations and employers' associations. French 
absenteeism is modest by European standards, and in 
the private sector peaceful labor relations generally 
prevail. 
 
While the rate of unionization in France has steadily 
declined to a little more than 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 
workweek. Management is required to meet with 
employee delegates at least montQy. 
 
--  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 QCour de 
Cassation,Q 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. 
 
Most of the candidates for the 2007 Presidential 
elections have called for a modification of the 35- 
hour workweek, so further change in this area is 
likely. 
 
¶E. Foreign Free Trade Zones/Ports and Competitiveness 
Clusters 
 
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 in 
return for commitments in favor of employment. 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: [http://www.douane.gouv.fr] use search to 
find information about Qzones franchesQ)].  France 
has designated 85 trade zones, including 14 new zones 
in 2006. 
 
In addition, the French government has renewed the 
tax exemption program for five years, until December 
31, 2011, in the existing urban "enterprise zones" 
(Zones Franches Urbaines).  Since January 2004, all 
such zones benefited from tax exemptions on corporate 
tax, payroll taxes, professional tax and real estate 
 
PARIS 00000232  017 OF 020 
 
 
tax.  Related information is notably available at the 
City Government web site [http://www.ville.gouv.fr]. 
 
More information on enterprise and investment zones 
is available from various sources: [http://www.zones- 
franches.org] [http://www.InvestinFrance.org] 
[http://www.diact.gouv.fr] [http://www.oseo.fr] for 
assistance to small and medium sized companies. 
 
In March 2006, the government approved 66 
competitiveness clusters including 10 for projects 
with international ties and 6 with related missions. 
Poles are designed to reinforce innovation and 
encourage innovative businesses to remain in France. 
They will benefit from income and social tax 
exemptions [http://www.competitivite.gouv.fr]. 
Clusters involved in research and innovation will 
also benefit from financial support from the state- 
owned investment bank Caisse des Depots. 
 
¶F. Foreign Investment Statistics 
 
Foreign investment represents a significant 
percentage of production in many sectors.  Rapid 
growth in the new technologies sector has given way 
to renewed growth in traditional sectors: 
automobiles, metalworking, aerospace, capital goods, 
consultancy and services.  France has remained one of 
the main destinations of foreign direct investment 
(FDI).  Foreign investment inflows more than doubled 
in 2005 to 3.0 percent of GDP (versus 1.2 percent in 
2004).  Based on preliminary information the U.S. 
remained one the largest sources of FDI in France. 
Using Bank of France balance of payments data based 
on the historical book value of investment, U.S. 
firms accounted for 19.5 percent in 2004 (versus more 
than 20% in previous years) of the stock of foreign 
investment. 
 
Using the book value instead of the market value of 
investments tends to underestimate the value of U.S. 
investment in France. This is because investments by 
U.S. companies tend 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 may ultimately be controlled by U.S. 
citizens.  The December 30, 2005 decree 2005-1739 on 
financial relations with foreign countries defines 
foreign investment operations that have to be 
notified to the Bank of France for the establishment 
of the balance of payments and FranceQs external 
position.  Firms with questions should contact the 
Bank of France at the following address: 
 
Banque de France 
Service de la Balance des Paiements 
31, rue Croix-des-Petits Champs 
Tel:  01.42.92.42.92 
 
Correcting for statistical biases, and including the 
value of U.S. holdings of French stocks, the market 
value of the stock of U.S. investment in France may 
be as much as five times the USD 60.9 billion book 
value for 2005 reported in U.S. Department of 
Commerce data ([http://bea.gov] search in 
International). About 2,000 affiliates of U.S. firms 
are established in France.  Around 603,000 jobs 
result from U.S.-originated investments. 
 
Today, foreign-controlled firms play a significant 
role in France's economy, accounting for 15 percent 
of capital expenditures, 30 percent of exports, and 
17 percent of value added. 
 
An updated list of U.S. investors may be found on 
[http://www.investinfrance.org/NorthAmerica/ 
YourProject/Database/?l=en] 
 
 
PARIS 00000232  018 OF 020 
 
 
Lists of foreign investors by industry can be found 
in local periodicals such as Expansion ("Les 1000 de 
l'Expansion": 
[http://www.lexpansion.com/PID/7800.html]).  The 
Expansion link provides useful information on the 
first 1000 companies and financial institutions 
established in France. 
 
 
Stock by country of origin (Book value) (USD 
billions) 
 
                        2003  2004  2005 
 
EU (25)                  348   422  n.a. 
 
EU (12)                  291   321  n.a. 
of which 
 
Netherlands               82    94  n.a 
Germany                   58    72  n.a. 
Belgium                   58    67  n.a. 
Luxemburg                 32    41  n.a. 
Italy                     15    20  n.a. 
 
Other EU (15)             82    94  n.a. 
Of which 
UK                        74    88  n.a. 
Sweden                     6     7  n.a. 
 
New EU                     0     0  n.a. 
 
Other Industrialized 
countries                109  130  n.a. 
Of which 
USA                       64    72  n.a. 
Switzerland               27    36  n.a. 
Canada                     5     6  n.a. 
Japan                      9    11  n.a. 
 
Other countries           17    16  n.a. 
 
Total                    475   569  n.a. 
 
Total as percent of GDP  25.2  27.4 n.a. 
(Exchange rate:) 
USD 1.00 equals Euro     0.88  0.80 
 
Source: Bank of France 
 
Stock of Foreign Investment in France (Market value) 
(USD billions) 
 
                         2003  2004   2005 
 
Total                     623   774    922 
 
Total as percent of GDP  42.7  41.1   47.5 
(Exchange rate:) 
USD 1.00 equals Euro     0.88   0.80  0.80 
 
Source:  Bank of France 
 
Stock by Industrial Sector of Origin (Book value)(USD 
billions) 
 
                         2003  2004  2005 
 
Real estate              255    309  n.a. 
Financial Intermediation  74     86  n.a. 
Of which holdings         31     34  n.a. 
Manufacturing             86    105  n.a. 
Of which 
-Automobiles               9     10  n.a. 
-Chemical industry        25     30  n.a. 
Other                     60     69  n.a. 
Total                    475    569  n.a. 
(Exchange rate:) 
 USD 1.00 equals Euro   0.88   0.80 
 
Source:  Bank of France 
 
PARIS 00000232  019 OF 020 
 
 
 
Flows by country of origin (Market value) (USD 
billions) 
 
                         2003   2004   2005 
 
EU (25)                    31     30     46 
 
EU (12)                    26     19     38 
of which 
Germany                     2      5      7 
Belgium                    10      3      6 
Italy                       0      2      1 
Netherlands                 4      0      7 
 
Other EU (15)               5     10      8 
of which 
UK                          4      8      8 
Denmark                     0      1      0 
Sweden                      0      0      0 
 
New EU members (1)          0      0      0 
 
Other Industrialized 
Countries                  10      9     15 
Of which 
USA                         3      6     12 
Canada                      5     -0     -1 
Japan                       1      0      0 
Switzerland                 1      1      2 
 
Other countries             2     -7      3 
 
Total                      43     32     64 
 
Total as percent of GDP   2.2    1.5    3.0 
(Exchange rate:) 
USD 1.00 equals Euro     0.88    0.80   0.80 
 
Source:  Bank of France 
(1) Cyprus, Estonia, Hungary, Latvia, Lithuania, 
Malta, Poland, Czechoslovakia, Slovakia, and 
Slovenia. 
 
 
Stock by country of destination (Book value) (USD 
billions) 
 
                        2003    2004  2005 
 
EU (25)                  383     477  n.a. 
 
EU (12)                  269     336  n.a. 
of which 
 
Germany                   48      68  n.a. 
Belgium                   72      81  n.a. 
Italy                     24      28  n.a. 
Netherlands               70      88  n.a. 
 
Other EU (15)            103     124  n.a. 
Of which 
UK                        95     115  n.a. 
Sweden                     6       6  n.a 
 
New EU                    11      16  n.a. 
 
Other industrialized 
countries                217     228  n.a. 
of which 
USA                      141     149  n.a. 
Canada                    27      22  n.a. 
Japan                     15      17  n.a. 
Switzerland               26      29  n.a. 
 
 
Other countries           52      56  n.a. 
 
Total                    652     761  n.a 
 
Total as percent of GDP  34.6    36.7 n.a. 
 
PARIS 00000232  020 OF 020 
 
 
(Exchange rate:) 
USD 1.00 equals Euro     0.88    0.80 
 
Source:  Bank of France 
 
Stock of French FDI Abroad (Market value) (USD 
billions) 
 
                         2003    2004    2005 
 
Total                   1,080   1,262   1,577 
 
Total as a % of GDP       65.2    62.4    73.9 
 
Stock by Industrial Sector Destination (Book 
value)(USD billions) 
 
                        2003  2004  2005 
 
Real estate              289    319  n.a. 
Financial Intermediation 146    153  n.a. 
Of which holdings         43     45  n.a. 
Manufacturing            104    125  n.a. 
Of which 
-Automobiles              25     29  n.a. 
-Chemical industry        16     35  n.a. 
Other                    141    205  n.a. 
Total                    652    761  n.a. 
(Exchange rate:) 
 USD 1.00 equals Euro   0.88   0.80 
 
Source:  Bank of France 
 
Flows by country of destination (Market value) (USD 
billions) 
 
                          2003  2004  2005 
 
EU (25)                     37    50    86 
 
EU (12)                     23    36    64 
of which 
Germany                      6    10     0 
Belgium                      6     6    17 
Italy                        3     2    14 
Netherlands                 11     6     2 
 
Other EU (15)               13    10    19 
Of which 
UK                          12     9    14 
Denmark                      0     0     5 
Sweden                       0     1     0 
 
New EU members (1)           1     4     2 
 
Other Industrialized 
Countries                   16     4    23 
Of which 
USA                          6     2     1 
Canada                       1    -5     1 
Japan                        3     2     7 
Switzerland                  5     2     6 
 
Other countries              1     3     6 
 
Total                       53    57   116 
 
Total as a percent of GDP  2.8   2.7   5.4 
(Exchange rate:) 
USD 1.00 equals      Euro  0.88  0.80  0.80 
 
Source:  Bank of France 
(1)  Cyprus, Estonia, Hungary, Latvia, Lithuania, 
Malta, Poland, Czech Republic, Slovakia, and 
Slovenia. 
 
STAPLETON#