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What is the attractiveness of France for foreign companies after the recent law reforms?

France is the seventh most attractive destination in the world for foreign investors, according to the AT Kearney classification (FDI Confidence Index[1]). It gained 10 grades compared to the 2012 ranking. This rise has taken place partly due to the recent reforms undertaken in the fields of labor and contract law.

First of all, foreign investors will be concerned by the changes brought by the reform of the French Labor Code.

In general terms, the reform facilitates the hiring, the dismissals, the individual ones and especially the ones for economic reasons as well as the negotiating with employees.

The first measures of the reform came into effect in September 2017. Amongst these changes is for example a reduction of the time limit for claims in front of labor courts concerning wrongful termination of employment contracts (1 year instead of 2 years).

A further important measure now applicable is the merger of several institutions representing employees (called “IRP”) into one. The “Comité social et économique” (CSE) now replaces 3 former IRPs: the “délégués du personnel” (DP), the “comité d’entreprise” (CE) and the “comité d’hygiène, de sécurité et des conditions de travail” (CHSCT). This will facilitate the communication and negotiation with employees.

Furthermore, small and medium-sized enterprises employing less than 50 persons may now negotiate directly with their staff without involving any representative of the unions of workers.

In addition to this, the employers will be able to make use of a special type of open-ended employment contract called “CDI de projet”. These project-based contracts will automatically end with the accomplishment of the respective mission. This contract type provides an alternative to the use of fixed-term contracts (“CDD”) which are expensive namely due to the payments of mandatory precariousness bonuses.

In addition, henceforth the economic difficulties of multinational groups justifying dismissals in France will not be evaluated at the global, but on the national level only. In other words, a multinational company will be able to dismiss employees in its French subsidiary even if it still makes profits abroad. The French government has also established the possibility of a collective termination of labor agreements by mutual consent, which can be used as a new method of economic lay-off. Finally, the companies will have the possibility to fix certain conditions of friendly leaving of their employees, without having to establish a contract of professional securisation or a follow-up concerning former employees for their return.

These are only some examples among numerous changes brought by this reform to the benefit of employers in France. Implementation decrees that will allow the entering into force of a part of new measures are expected by the beginning of 2018.

The foreign investors may also profit from the modifications of French contract law facilitating the economic activity.

The reform of French contract law, introduced in October 2016 in order to improve international attractiveness of France, ensures:

– An increased contract security,

– A better readability of French law through the recording of court judgments into the codes,

– The simplification and accessibility of the law (for example the removal of the concept of “cause”, one of the French conditions of contract validity often misinterpreted abroad).

However, France does not stop on the achieved and prepares further measures to attract foreign companies, among which a tax reform in 2018 tending to reduce the corporate tax from 33% to 25% by 2022.

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Sofia Smirnova

Student in IEJ Montpellier

Trainee lawyer

Graduate of Professional Master in International Trade Law in Montpellier

 

Ewa Kaluzinska

International Business Lawyer France-Poland-Russia

Partner at D2K Avocats law firm

Member and Chairman of GEIE Lex in IT

 

Gabriele Dressler

International Business Lawyer Germany France Italy

Former Honorary Consul of Germany in France

Member of GEIE Lex in IT

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[1] The 2017 A.T. Kearney Foreign Direct Investment Confidence Index

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