Search

 

Cablegate: France to Implement Eu Takeover Directive; Decree

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PARIS 006570

SIPDIS

SENSITIVE

STATE FOR EB/OIA - WES SCHOLZ AND JAMES ROSELL
TREASURY FOR OFFICE OF INTERNATIONAL INVESTMENT - GAY SILLS
STATE PASS USTR

E.O. 12958: N/A
TAGS: EINV ETRD ECON FR EUN
SUBJECT: FRANCE TO IMPLEMENT EU TAKEOVER DIRECTIVE; DECREE
ON "STRATEGIC SECTORS" AT A STANDSTILL

Ref: Paris 5441

NOT FOR INTERNET DISTRIBUTION

SUMMARY
-------
1. (SBU) The Council of Ministers has adopted a draft bill
implementing the EU Takeover Directive, which will allow
targeted French companies to adopt anti-takeover defenses
permitted in a potential bidder's own country. This bill
comes on top of a draft decree to create a list of ten
"sensitive sectors" to be protected from foreign takeover
attempts, which has drawn fire from the EU Commission and is
currently at a standstill. These two separate initiatives
have been in the making for some time and were presented
together as part of Prime Minister Villepin's "economic
patriotism" agenda in July 2005, in response to the critical
domestic reaction to rumors that PepsiCo was attempting to
acquire yoghurt and drink-maker Danone. End Summary.

Upcoming implementation of the EU Takeover Directive
--------------------------------------------- -------
2. (SBU) Adopted on April 21, 2004 after 15 years of failed
attempts, the Takeover Directive was one of the more
controversial pieces of legislation in this sector
introduced by the EU Commission. Then-Internal Market
Commissioner Frits Bolkenstein devised the original
proposal. Bolkestein was also responsible for the much-
maligned (at least in France) Services Directive, which
according to many analysts played a crucial part in the
French vote against the EU Constitution in May 2005. The
Commission's draft Directive was designed to provide common
principles for cross-border takeover bids, boost shareholder
power, and limit the rights of EU countries to protect their
companies from takeovers. However, the compromise text that
France is expected to implement before the end of the year,
following parliamentary approval, is a pale shadow of the
Commission's original text in that it allows for substantial
opt-outs.

3. (SBU) The most general opt-out provision, which France
intends to implement, is the reciprocity clause found in
Article 12, which would allow French target companies to
take defensive measures without shareholder approval (as
required in Art. 9) if the takeover bid comes from a country
that allows such defenses. The French Financial Markets
regulator AMF will have the difficult task of deciding
whether reciprocity exits or not.

4. (SBU) The only hope for modification of the directive,
which should be implemented by member-states by May 2006,
lies with the Commission which is required to review it
every five years. If French Parliament approves the GOF
draft bill before the end of the year, France will succeed
in enforcing an EU directive prior to its implementation
date, an uncommon occurrence.

The GOF decree on "sensitive sectors"
-------------------------------------
5. (SBU) The French Government draft decree designed to
shield from foreign bids domestic industries in ten sectors
it considers strategic, (i.e. defense, biotechnology, space
technology, telecommunications, casinos, encryption IT
security and antidote production) has run into trouble from
the EU Commission determined to avoid the possibility of
"disguised protectionism." EU Internal Market Commissioner
Charlie Mc Creevy told the press on September 19 that he had
made it clear to the French authorities that takeover
defenses could only be for "very specific and limited
stances." He further added that France had kept the
Commission informed of its plans over the past year.

6. (SBU) The attitude of the EU Commission has allegedly
put the French State Council, which approves government
decrees (as they are not submitted to the parliament for
approval), in a difficult position. The Council is holding
the draft bill in the hope that the government will bow to
EU pressure and shorten its list of most vital industries.

Comment
-------
7. (SBU) While both French initiatives were developed
separately and have been in the making for some time, they
have become prime elements in de Villepin's "economic
patriotism" agenda. Capitalizing on French insecurities and
fears of job losses and outsourcing, he is hoping to head
off French labor unrest or at least prevent it from
snowballing. His government's move to introduce flexibility
in the French labor market could spark popular discontent on
October 4, when unions are organizing what they hope will be
a general strike for greater purchasing power. End Comment.
Stapleton

© Scoop Media

 
 
 
World Headlines

 

Climate Change: Record Northern Heat, Fuels Concerns Over US Wildfire Destruction

More than 78,000 acres of forest in the Sierra mountains in California has been lost due to wildfires. Photo: San Francisco Fire Department The northern hemisphere experienced its warmest August ever, the World Meteorological Organization ( WMO ... More>>

UN: Guterres Condemns Killing Of Journalists, Following Beheading Of Mexican Crime Reporter

© UNESCO | International Day to End Impunity for Crimes against Journalists. Following the gruesome death of a Mexican journalist specializing in crime reporting, who was found beheaded on Wednesday, UN chief António Guterres has issued a statement condemning ... More>>

UN: WHO Warns Against Potential Ebola Spread In DR Congo And Beyond

Ebola is spreading in a western province in the Democratic Republic of the Congo (DRC), raising fears that the disease could reach neighbouring Republic of Congo and even the capital, Kinshasa, the World Health Organization (WHO) said on Friday. ... More>>

WWF: Living Planet Report Reveals Average Two-Thirds Decline In Wildlife Populations Since 1970

According to WWF’s Living Planet Report 2020 released today, global populations* of mammals, birds, amphibians, reptiles and fish have suffered an average two-thirds decline in less than half a century. The decline is due in large part to the very ... More>>