The European Commission has voiced concerns after the French government issued a decree last week giving it the power to veto takeovers in sectors seen as “strategic” for France, including the Alstom deal currently being negotiated with General Electric. EurActiv France reports.
The “Alstom decree”, passed last by France’s Prime Minister, Manuel Valls, gives the government the right to veto foreign investment in French companies.
The decision comes during negotiations to sell part of Alstom, the French-headquartered company which holds interests in the electricity generation and rail transport markets.
The original decree, adopted in 2005, covered activities related to two sectors: defence and security. However it was revised on 14 May to cover three extra strategic sectors: energy, transport and water.
In a statement, the French Ministry of Economy and Finance said the new law would ensure French interests are preserved in matters related to public order, security and defence.
From now on, foreign investments in sectors like gas, electricity, transport, water supply, electronic communications and public health, will require prior authorisation from the French Economy Ministry currently headed by Arnaud Montebourg.
The government’s move takes place as Alstom has entered negotiations to sell part of its activities to US conglomerate General Electric. This has caused outrage in the French government, which is openly opposed to the deal and has sought a European partner for Alstom to replace GE. The German company Siemens has shown some interest which the Montebourg considers the lesser of two evils.
Brussels on the look-out
Under the new decree, the French government has effectively become a party in the negotiations. But the European Commission is confused by France’s recent actions.
“The goal of protecting strategic interests of each member state, notably related to public order and security, is legitimate and clearly written in the EU treaties,” said Michel Barnier, the European Commissioner in charge of the internal market.
“It is within this framework that tens of European countries (the UK and others) took steps on the matter,” Barnier said.
In Brussels however, the French initiative is seen as rushed and ill-timed. “The experience I had at the start of my mandate during an earlier attempt by France […] is that it took a long time to verify with national authorities conformity to similar initiatives,” the commissioner continued.
In the case of the “Alstom decree”, the Commission was only informed one day before the French government published the law in the official journal and did not receive a copy of it beforehand.
According to Brussels, the risk relates to the evaluation of what constitutes a threat to public order or security as well as on the wide range of sectors covered – water, telecommunication, transport, energy and health.
The scope is “so vast that all attempts to buy French companies will be scrutinised by national authorities, which clearly amounts to protectionism,” warned Michel Barnier.
Arnaud Montebourg brushed aside those warnings, saying the new decree was in conformity with European law.
“The decree conforms to European law and France’s international commitments. Similar measures exist in almost every large European country. Brussels does not do enough to protect the assets of European countries”, Montebourg said in an interview in Le Monde newspaper.
“The new measures will be applied selectively and proportionately, taking into account each situation,” stated the French Ministry of Finance in a press release, seeking to reassure the Commission.
"Contrary to information that is going around, other states only use this measure in exceptional circumstances and when there are obvious military stakes, such as oil wells on American soil. Real economic patriotism is creating an environment promoting the development of French companies so that they become strong and conquer, and therefore no longer prey!" said the political movement Nous Citoyens.
"By increasing the scope of the decree and giving the French state a veto right in the selling of a French company, the government has made a decision that is useful, necessary and brave. Decreeing that whole sections of the economy are important to public interests is a choice that I completely support and therefore I hope that it will translate into the choice of those who want to invest in French companies", said the French Socialist Party member, Pouria Amirshahi.
"This new tool will reinforce current measures that give the state the right to monitor foreign investment in key sectors of the economy that the state wants to preserve.[...] It concerns the strength of the French state to defend against the undesirable dissection of our strategic companies. By giving the state the extra power to impose conditions on company take-overs in major sectors, the decree bolsters a strategic and active state which can effectively use intervention without increasing public spending", stated the socialist party's Juliette Méadel, National Secretary for Industrial Policy, and Patrice Prat, National Secretary for Innovation.
Alstom, a large French multinational conglomerate which holds interests in the power generation and transport sectors, has had financial difficulties since it entered the Paris stock exchange in 1998. It has since experiences liquidity crises, and was saved by the French state in 2004.
General Electric, US conglomerate, is currently engaged in negotiations to buy the electricity branch of the French company, a move seen favourably by Alstom but met with deep suspicion in Paris.
The The French government has expressed concerns for the future of the company, which employs 18,000 people in France, and wants to prevent a foreign takeover of its national 'champion'.
By passing the “Alstom decree”, the state has effectively forced itself to the negotiation table.
Prompted by the government, Siemens, a German conglomerate, joined the fray and also expressed interest. It is expected to make a detailed offer soon.
- End May: Deadline for Alstom to reply to GE's offer