Category: Legal news

Frédéric Saffroy – Alice Bastien

The strengthening of the European mechanism for screening foreign investments reached an important milestone on 11 December 2025: the European Commission and Parliament agreed to generalize, extend and reinforce it.

The forthcoming Regulation will make the screening of foreign investments mandatory in all Member States, with a harmonized approach to risks to security and public order. While this obligation in practice concerns only Croatia and Cyprus, it primarily establishes a minimal and standardized perimeter of sectors subject to screening: dual-use goods, defense equipment, hyper‑critical technologies (artificial intelligence, quantum technologies, semiconductors), critical raw materials, strategic infrastructures in the energy, transport and digital sectors, electoral infrastructures, as well as certain entities within the financial system. Member States will remain free to extend screening to additional sectors.

The reform also confirms the applicability of screening to indirect and intra‑EU investments where the European investor is controlled by a non‑European actor. This has long been the case in France.

Furthermore, cooperation between national authorities and the Commission will be strengthened through a harmonized procedural framework (two phases, including a first 45‑day phase), enhanced information‑sharing, and the prospect of a single notification portal (which will require investors to coordinate their submissions). Decisions to authorize or prohibit transactions will, however, remain at national level.

Finally, ex‑post reviews may be carried out for up to fifteen months after completion of a transaction.

The new Regulation is expected in the first half of 2026, with probable entry into force in 2027.

The current FDI screening in a nutshell

Foreign investment screening was introduced in France in 1966. The current legislation was strengthened in 2019, and then after the Covid crisis, to protect sensitive sectors of industry and services, and to provide the State with more flexible tools, including authorizations subject to conditions. It already goes beyond the sectors covered by the forthcoming EU Regulation and encompasses indirect transactions, including those carried out abroad between foreign entities where the effect is to transfer control of a sensitive French entity.

Introduced by EU Regulation 2019/452, the European framework for foreign investment screening (“FDI screening”) entered into force in October 2020 and applies to transactions involving a non‑EU foreign investor.

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is part of both German and French law. So, if one of these two laws applies, either because one of these two laws applies (Art. 1 a) CISG) or because the parties agreed to it (Art. 1 b) CISG), then the Convention applies. It replaces national sales law provisions.

The concurrent relationship between the CISG and claims arising from product liability, i.e., the question of whether claims can be asserted under producer liability in addition to the Convention, is one of the “classic” problems of the CISG. There are a number of different decisions by national courts on this issue. Opinions on this question also differ in legal literature.

This problem was the subject of a decision by the French Court of Cassation on May 17, 2023 (Cass. civ. 1ère, 22-16.290), which prompts this newsletter.

Product liability law within the European Union is based on the European Product Liability Directive 85/374, which has been implemented in Germany by means of the ProdHaftG and, with some delay, also in France with Articles 1245-1 to 1245-17 of the Civil Code. While the Product Liability Directive 85/374 and the ProdHaftG only apply to the consumer sector, the French legislature has extended its application to the commercial sector. The CISG, for its part, only applies to B-2-B transactions (Art. 2 a) CISG). Due to these different areas of application, there can be no conflict between product liability law and the CISG in Germany; in Germany, the problem of competing claims only arises with the provisions on tort, §§ 823 BGB ff.

In French law, however, the CISG and the product liability provisions may concur with each other. The concurrence is all the more direct as French law, in accordance with the European Directive, expressly permits contractual claims (Art. 13 Directive 85/374 and Art. 1245 – 17. Code civil).

This can give rise to serious application problems. For example, the CISG contains an obligation to inspect and give notice of defects (Art. 38 (1) and 39 (1) CISG). If the lack of conformity is not notified within a reasonable period of time, the buyer loses his rights (Art. 39 (1) CISG). In any case, no claims can be asserted after two years have elapsed since delivery (Art. 39 (2) CISG).

The situation is quite different under product liability law: there is no obligation to examine and give notice of defects. Claims for damages due to safety defects can be raised up to three years after the damaging event (Art. 1245-16 cc). In addition, there is a limitation period of 10 years after the item was placed on the market (Art. 1245-15 cc). However, under product liability law, damage to the product itself cannot be claimed (Art. 1245 cc in accordance with Art. 9 b) of Directive 85/374).

It is therefore clear that situations may arise under French law where the buyer has lost its rights under the CISG and is now attempting to succeed by means of product liability claims.

The French Court of Cassation ruled on this conflict of claims in its judgment of May 17, 2023. It found that no claims under product liability law can be asserted in addition to the CISG, basing its decision on Art. 7(2) CISG. In casu, the issue concerned Art. 79 CISG, which allows for more extensive grounds for exemption than product liability law. In the opinion of the cour de cassation, the seller can exonerate itself by means of Art. 79 CISG, which is not possible under product liability law. However, the buyer is denied a claim under product liability law.

Remarkably, in a decision handed down just one month earlier on April 19, 2023 (Cass. civ. 1, 22-23.726), the same court of cassation allowed a concurrent claim under product liability law when national sales law applied. In particular, the claim under sales law for compensation for damage to the product supplements the claim under product liability law for consequential damage caused by the defective product.

This case law has important implications for Franco-German legal relations. If French law applies, the CISG applies, which takes precedence over French national sales law. In such a setting no further claims under product liability law can be asserted between the contracting parties.

If, on the other hand, the CISG is excluded when choosing French law, not only does national sales law apply (with its well-known provisions on “vices cachés”), but product liability law also applies.

Depending on whether one represents the interests of the buyer or the seller, this legal situation can be exploited in one way or another.

Nicola Kömpf

Avocate/Rechtsanwältin

Dr. Friedrich Niggemann

Avocat honoraire/Rechtsanwalt

INSOL International’s latest publication explores the role of insolvency practitioners across various jurisdictions, highlighting the differences in appointment processes, reporting obligations, creditor recovery mechanisms, and cross-border challenges. This resource is designed to assist insolvency and asset recovery professionals with key insights, research databases, and essential contacts worldwide.

We are proud to share that Gilles Podeur, partner in our Restructuring department, contributed to the France chapter, providing his expertise on the country’s insolvency framework. His analysis offers valuable perspectives on the legal procedures, challenges, and best practices shaping restructuring and insolvency in France.

An Ordinance transposing EU Directive 2022/2381 of the European Parliament and Council of 23 November 2022 on a better gender balance among directors of listed companies, known as the “Women on Boards” Directive, was published in the Official Journal on 16 October 2024.

It marks a significant step forward in promoting gender equality in decision-making roles. The Directive mandates that by 2026, listed companies in the EU must ensure that women make up at least 40% of non-executive director positions.

This is intended to reduce the gender imbalance that has historically dominated corporate governance.

The transposition of the Directive has been met with varying levels of commitment and success across different EU member states.

Prior to the EU Directive, France was one of the first countries in Europe to introduce binding provisions to promote gender balance within the boards of directors of commercial companies through Law n°2011-103 of 27 January 2011, known as the “Copé-Zimmermann” Law. Under this law, the boards of directors and supervisory boards of listed and unlisted companies with more than 250 employees and net sales or total balance sheet of at least €50 million must include a minimum of 40% of members of each gender.

The Ordinance of 15 November 2024 strengthens the system for listed companies by extending it to members representatives of employees and of employees shareholders.

This means that directors representing employee shareholders, appointed by the general meeting, are included in the same college as all the other directors. In practice, to comply with the new provisions of the Ordinance, companies will have to adjust the election procedure set out in their articles of association. Directors representing employees constitute a separate college and are appointed according to specific procedures. The rules on gender balance are applied to them depending on the appointment process.

By transposing the EU Directive into national law, France reinforced its commitment to achieving gender equality in corporate leadership and aligned its existing laws with EU-wide standards.

It is common for shareholder’s agreements to include provisions under which a shareholder, an employee or a non-employee corporate officer irrevocably undertakes, through a promise to sell, to transfer their shares. Such provisions often give rise to significant litigation, particularly in cases of forced enforcement of sale promises and disputes over the valuation of the shares to be transferred in the event of disagreement between the parties;

Below are several reminders and points of vigilance:

-Even when the transferor or transferee is a natural person, jurisdiction over disputes arising from the transfer of shares is specifically assigned to commercial courts.

-In cases where forced transfer is initiated against an employee on the grounds that the agreement included a promise to transfer shares in the event of termination of their employment contract for « gross or wilful misconduct », the enforcement of such transfer may be suspended if the employee challenges the grounds for their dismissal. Indeed, should the labour court rule thar gross or wilful misconduct was not established, the triggering event for exercising the promise will be deemed to have ceased to exist.

–Bad leaver clauses requiring the forced transfer of an employee’s shares at a discounted price or a significantly reduced value to their dismissal for gross or wilful misconduct are deemed null and void (Paris Court of Appeal, May 12, 2022) as they constitute an unlawful financial penalty.

-The valuation of shares by an expert, either designated by the parties or appointed by the President of the Commercial Court, must be established as of the date closest to the submission of the expert’s report (French Court of Cassation, Commercial Chamber, September 16, 2014).

-The expert may be appointed:

• Pursuant to article 1843-4 of the French Civil Code, which specifically governs the transfer of shares the expert is tasked with determining the value of the shares, with the discretion to select.
• Pursuant to article 1592 of the French Civil Code, which is part of the general framework of contract law, the expert’s mission is to determine the sale price of the shares, subject to the prior agreement of the parties both as to the principle of the expert’s appointment and the valuation method to be applied.
• Depending on the drafting of the relevant clauses, certain provisions may authorise the company to execute the necessary share transfer orders without the consent or cooperation of the shareholder whose shares are being repurchased. Such mechanisms may deprive the shareholder of a means to delay the transfer, even in the event of a dispute regarding the validity of the clause or the valuation of the shares.

Consequently, heightened vigilance is required (i) when drafting shareholder’s agreements, particularly with regard to the conditions governing the enforcement of promises to sell and/or the determination of share valuations or sale prices, and (ii) when initiating the enforcement of a promise to sell shares and engaging in the associated valuation processes, given the potential legal challenges that may then arise.