France extends veto power over foreign takeovers

The French government on Thursday changed its policy to increase the state’s influence in foreign buyouts and investment in key sectors, which will allow it to intervene in GE’s controversial bid for French giant Alstom.

France extends

France extends

The new rules will come into effect on Friday and cover the key sectors of energy, transport, water, health and telecoms.

“The choice we have made, along with the prime minister (Manuel Valls), is the choice of economic patriotism,” Economy Minister Arnaud Montebourg told daily newspaper Le Monde.

“These protective measures reassert the state’s power to safeguard our national interests,” he added.

Under the new rules, investments by foreign groups will be submitted to the economy minister for authorisation.

The minister will then examine any implication for France, such as the proposals sustainability, infrastructural implications, the retention of specialised skill sets in France, and whether it is in the overall national interest.

There will be the possibility of an appeal to France’s highest administrative court for companies unhappy with a decision.

Alstom in the spotlight

France is not alone in seeking some protections for its key industries before granting permission for foreign investment to go ahead. The Committee on Foreign Investment in the United States is a federal panel that also reviews the national security implications of investment projects.

French energy and transport giant Alstom has become a key focus for this Socialist administration. When it emerged that talks for Alstom to sell its energy division to General Electric (GE) were at an advanced stage, the French government acted quickly, and with success, to encourage German company Siemens to outline a counter proposal.

A possible Siemens bid is an alternative strongly favoured by Montebourg, although the GE offer is so far the only firm proposal.

Energy Minister Ségolène Royal on Wednesday came out in favour of the General Electric bid in defiance of Montebourg.

“Why do we want to drive foreign investment away?” she asked.

EU warns of ‘protectionism’

The board of Alstom has said that it will decide by the end of May which offer it prefers, although it has already signalled that it favours the GE bid of €12.35 billion ($17.0 billion).

The French government’s policy shift prompted the EU to warn Thursday against resorting to “protectionism”.

“The objective of protecting essential strategic interests is clear when it involves security or public order and that is recognised in EU treaties,” EU Finance Markets Commissioner Michel Barnier said.

“But we also must check if this is applied in a proportionate fashion, otherwise it could amount to protectionism,” said Barnier, who is a French politician.

“We cannot guarantee Europe’s industrial future, its development, with protectionism,” he added.

(Geo Urdu with FRANCE 24, AFP)

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