France

Originally published: Mar-22-2006

Government

France is a parliamentary democracy with an elected President who nominates the Prime Minister, presides over the Council of Ministers, proclaims laws, and guarantees the independence of the judiciary. There are three branches of government: Executive -- president (chief of state), prime minister (head of government); Legislative -- bicameral Parliament (577-member National Assembly, 319-member Senate); and Judicial -- Court of Cassation (civil and criminal law), Council of State (administrative court), Constitutional Council (constitutional law).

The country comprises 22 administrative regions containing 96 departments (metropolitan France), four overseas departments (Guadeloupe, Martinique, French Guiana, and Reunion), five overseas territories (New Caledonia, French Polynesia, Wallis and Futuna Islands, and French Southern and Antarctic Territories), and two special status territories (Mayotte and St. Pierre and Miquelon).

Population

The estimated population in January 2005 was 62.4 million. The population is divided into the following ethnic groups: 92% French, 3% North African, 2% German, 1% Breton, 2% other (including Provençal, Catalan & Basque). The official language is French. However, there is growing use of English and German in business, particularly in large cities. Other languages spoken include Flemish, Alsacian, Breton, Basque, Catalan, Provençal and Corsican.

Legal System

Unlike the United States and other common law jurisdictions, France derives its legal system from the civil law tradition. Thus, much greater emphasis is placed on codified law, rather than on case law and precedent. The impact of the Civil Code separated France and most of continental Europe from the Common Law legal system used at the time in England and in the newly independent United States of America.

This emphasis on civil law translates into less reliance on case law, no straight precedent rule, and no need for contracts which provide for every single occurrence. This means that a standard agreement might well be ten or twenty pages long instead of one or two hundred pages or more, as those commonly used in the U.S.

The judicial system is independent. Property and contractual rights are enforced by the French civil code. Judgments of foreign courts are accepted and enforced by courts in France once they have been “declared executor” by a French judge. However, in some civil and bankruptcy cases, foreign judgments are recognized and enforced by French courts without these executor proceedings.

Economy

Currency: Euro (EUR) -- On January 1, 1999, the European Monetary Union introduced the euro as a common currency to be used by financial institutions of member countries. On January 1, 2002, the euro became the sole currency for everyday transactions within the member countries.

EUR per USD: 0.82008 (3/20/06)

Economic Indicators

(e) estimate (f) forecast

Comparative Economic Indicators (2003 est.)

Source: Economist Intelligence Unit

Leading Markets (2004): Germany (15%), Spain (10%), UK (9.3%), Italy (9.3%), Belgium (7.7%)

Leading Exports: automobiles and automobile parts, aircraft, pharmaceuticals, electronic components, wine, electric components

Leading Suppliers (2004): Germany (17.4%), Italy (9%), Spain (7.4%), Belgium (7.3%), UK (6.5%)

Leading Imports: crude oil, automobiles and automobile parts, pharmaceuticals, natural gas, aircraft parts, electronics

Top Industries: aircraft, electronics, transportation, textiles, clothing, food processing, chemicals, machinery steel

Agricultural Products: wheat, cereals, sugar beets, potatoes, wine grapes, beef, dairy products, fish

General Economic Situation

France is the fifth largest Western industrialized economy with substantial agricultural resources, a large industrial base and a highly skilled work force. It is the fourth largest exporter of goods and third largest exporter of services in the world. The country is also the most popular tourist destination, attracting 75.1 million visitors in 2004. It is also the European Union’s largest agricultural power and the second largest agricultural world power (behind the United States).

Economic growth, however, has been unremarkable in recent years, and has strained France’s public finances. For the fourth consecutive year, France’s budget deficit will exceed the limits of the EU Growth and Stability Pact.

The primary aim of government economic policy has been to promote investment and domestic growth in a stable fiscal and monetary environment. Creating jobs and reducing the high unemployment rate has been a top priority, with limited success. Although the unemployment rate was reduced from 12% to 8.7% in 2001, the country has seen an increase in unemployment over the last several years.

Despite significant reform and privatization, the government continues to control a large share of economic activity. Government spending, at 54.7% of GDP in 2003, is among the highest in the G-7. Regulation of labor and product markets is pervasive. The government continues to own shares in corporations in a range of sectors including banking, energy production and distribution, automobiles, transportation, and telecommunications.

Business Climate

The French economy is exceptionally diversified and attractive to foreign business thanks to its geographical location central to the entire EU marketplace, and the size of its domestic market.

Custom Duties: As a member of the European Union, France has no customs barriers with other EU members. The duties for non-EU countries are relatively low, especially for manufactured goods where 4.2% is the average duty. However, there are high duties and quotas on textiles, clothing and the food processing industry sectors.

Patents and Brands: The Agreement of Paris and the Treaty of Washington protect the rights of intellectual property in France.

Exchange Controls: Since 1990, exchange controls have been almost completely abandoned. Foreign exchange is not registered and convertibility is not restricted.

Conversion and Transfer Policies: In principle, there are no administrative restrictions on foreign investment in France. All inward and outward payments, however, must be made through approved banking intermediaries by bank transfers. There is no restriction on repatriation of capital, or transfers of profits, interest, royalties, or service fees. Foreign-controlled French businesses are required to have a resident French bank account.

Dispute Resolution: There have been few major disputes involving established U.S. firms in recent years. Government decisions in investment cases can be appealed to administrative tribunals and ultimately to the Council of State (Conseil d’Etat). The rights of U.S. investors are also protected by the US-French bilateral convention.

The average duration of a trial is between 9 months and 2 years. Appeals can add another 2 years to the litigation process. French decisions can generally be enforced outside the country. Foreign decisions can also be enforced in France. France is a party to several international conventions including the 1968 Brussels Convention on Recognition and Enforcement of Judgments in Civil and Commercial Matters, and the 1958 New York Convention on the Recognition and Enforcement of Foreign Artibral Awards.

Regulatory Transparency: The French government has made considerable progress in recent years improving the transparency and accessibility of its regulatory system. Of most concern to foreign companies has been standards setting. French standards differ from those in the United States and may require rigorous testing and approval procedures before certain goods can be sold in France.

Corruption: France has laws, regulations and penalties that effectively combat acts of corruption. The French judiciary is responsible for prosecution and is active in doing so.

Business Practices

French business behavior emphasizes courtesy and a certain formality. Although many business people in France speak English, a considerable advantage can be gained by communicating in French. Titles should be used in correspondence and in-person meetings as business contacts are not normally addressed on a first name basis. Respecting appointment schedules is important, along with prompt correspondence. Do not schedule business meetings in July and August (summer vacations) or on workdays adjacent to public holidays.

As a country renowned for its fashion industry, it is not surprising that style of dress is very important in the business world. For men, office and corporate wear consists of a suit and tie. Fashionable, semi-conservative wear is considered appropriate for women.

French companies are interested in long-term partnerships and, once business relations have been established, they require ongoing maintenance preferably through regular visits.

Credit and Collections

• Collection Experience: Good-Fair
• Exchange Delays: 2 months
• Preferred Credit Terms: Sight draft
• Minimum Credit Terms: Open account

Payment by check is still the norm in France. Bills of exchange are much less frequently used. There is a growing number of companies utilizing bank transfers, partly via SWIFT.

It should be noted that attorneys in France will take contingent fees for amicable collections. However, by law, they are required to charge hourly for legal action. Court costs are comparable to those in the United States.

Risk Assessments

Coface Country Risk Rating: A1 - The steady political and economic environment has positive effects on an already good payment record of companies. Very weak default probability.

Ducroire Delcredere Political Risk Rating: 1 (low risk)
Ducroire Delcredere Commercial Risk Rating: A (low risk)

Sources for further information on doing business in France

Doing Business – Invest in France Agency: Information on setting up a business, expatriate staff, financial assistance, employment and taxation regulations.

France – The Federation of International Trade Associations: Excellent web site with relatively up-to-date information on market access, economic indicators, country risk, doing business in France, etc. Includes extensive links to other relevant web sites.

France Profile – Austrade: Web site of the Australian Trade Commission has extensive information on trade, the economy, political climate and doing business in France.

Guide to Doing Business in France, by Gide Loyrette Nouel: 61-page guide, dated 2005, with general information on the country, government and judiciary system as well as investment incentives, exchange controls, import/export regulations, etc. etc. Note this is in PDF format.

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including France. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," September 2005.