The French Ministry for Economy has blocked under FDI rules U.S.-based leading provider of fluid motion and control products and services Flowserve Corporation’s (“Flowserve”) USD 245 million proposed acquisition of Velan Inc (“Velan”), a Canada-based leading provider of industrial steel valves.[1]  

Velan has indicated having offered a remedy package to the French authorities to alleviate concerns, consisting in the carving out of Velan’s French subsidiaries, Segault and Velan SAS, which manufacture and supply valves for Naval Group (nuclear submarines) and Electricité de France (EDF) nuclear power plants[2].

While the prohibition decision is not public, French authorities were reportedly concerned about the potential for the United States to impose export controls to Velan’s subsidiaries in France and to request the provision of sensitive information relating to military equipment and nuclear energy under the Patriot Act.[3]  

The Covid-19 pandemic and war in Ukraine have ushered in an era of tougher scrutiny of FDI in the EU, with the coming into force of Regulation (EU) No 2019/452 (“FDI Regulation”). In parallel, France has extended the list of sectors where acquisitions of French-law entities by non-EU/EEA entities are subject to mandatory notification under FDI rules.  Article R151-3 of the French Financial and Monetary Code includes “sensitive activities” such as the defence and energy sectors, activities related to dual use goods, or activities which involve contractual links with the Ministry of Defence. 

This is only the second time France formally blocks a transaction using its FDI powers, following the prohibition of French photo-sensor imaging technology company, Photonis, by U.S.-based Teledyne in December 2020[4], while parties often prefer to abandon a deal rather than suffer an outright prohibition.

The Flowserve/Velan prohibition also goes to show that French authorities will not shy away from blocking transactions even if the local nexus is limited to subsidiaries established in France. 

In 2022, 131 investments were authorized after a notification to the French authorities under FDI screening rules, out of which 70 were authorized with conditions.[5]  In defence-related transactions specifically, 76% of authorizations were subject to condition in 2022.[6]

[1]           “Flowserve Announces French Regulatory Rejection of Velan Transaction”, Press Release, October, 5, 2023, available at:

[2]           “Flowserve intends to terminate the Arrangement Agreement as Regulatory Approval from France will not be obtained”, Press Release, October 5, 2023, available at:  See also “France issues rare deal block using FDI powers”, GCR, October 10, 2023, available at:

[3]           Ibid.

[4]           “The Minister of Economy to Veto the Acquisition of Photonis by Teledyne”, Cleary Gottlieb, March 31, 2020, available at:

[5]           “Foreign Investment Screening in France. Annual Report 2022”, French Treasury, available at:

[6]           Ibid.