Under current French regulations, production companies directly or indirectly controlled by companies outside the European Union could not access the French film production subsidies, even if the film in question was a French film. Since the subsidies are financed in part by an automatic tax at the box office of all films released in France in an amount equal to 11% of the ticket price, and by an automatic 2% levy on the sales price of videos and DVD’s, films produced by non-European companies, an, in particular, American production companies, were contributing to the subsidies, without having access to the benefit of the subsidies.

Warner created a subsidiary in France, 2003 Productions, in which Warner owned approximately 32% of the shares, and the remainder held by French national employees of Warner in France. Warner applied to the French cinema authority, the CNC, to qualify the production by 2003 Productions of a French film for CNC subsidies.

The issue was whether the subsidiary set up by Warner in France, 2003 Productions could access CNC subsidies for the film, "Un long Dimanche de fiançailles" by Jean-Pierre Jeunet, that was considered 100% of French Nationality based on the CNC point criteria for determining whether a film was of French or European Nationality.

After several months of negotiation with the founders of 2003 Productions, the CNC has announced that the company’s corporate structure has been modified in a satisfactory manner so that Warner (US) does not exercise "control" over 2003 Productions, and thus does not run afoul of the restriction that production companies directly or indirectly controlled by companies outside the European Union could not access the film production subsidies. The decision may be challenged by third parties, and, in particular, French professional producer’s associations, but the CNC has agreed to the principle.

Essentially 2003 Productions had been set up with two classes of shares. Class A shares were held by the employees and Class B shares were held by Warner Bros. France (100% subsidiary of Warner (US)). Despite the fact that the Class B shares represented only 32%, they had a veto over many of the important decisions such as investments and production selections. The bylaws have been modified to delete these supermajority rules, and most decisions are now subject to a simple majority vote. In addition, even if an employee leaves the company, the employee may still remain a shareholder of 2003 Productions. Finally, 2003 Productions undertook in its request to the CNC to only Produce French language films.

The Managing Director of the CNC, David Kessler, in several interviews, has raised the issue whether it would be an advantage to the French film industry, which currently needs to increase film financing, to permit access to these subsidies by companies controlled by non-EU groups, such as American studios. Such access would be conditioned on producing French language/French productions. Warner has demonstrated that there is an opportunity in doing so in its 2003 Production project.

Would other American studios be interested? It should be noted that in the past, when the subsidies were available to French subsidiaries of American studios, films by such directors as Louis Malle and Francois Truffaut were, in part, produced by these French/American companies.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.