The Committee on Foreign Investment in the United States (“CFIUS”) is a powerful tool of the executive branch. CFIUS effectively can impose conditions on, block, or even unwind foreign investments in U.S. companies. But the tool has been wielded, thus far, only to safeguard U.S. national security.
Two common questions about CFIUS, in view of the coming Trump administration, are:
- Can President Trump cause CFIUS to reconsider transactions that CFIUS previously has cleared?
- Can President Trump cause CFIUS to consider trade and other economic issues, rather than focusing exclusively on national security, when deciding whether to clear a deal?
As for the first question, applicable law is reasonably clear: CFIUS can reconsider cases that it previously cleared only if (i) the parties to the deal provided inaccurate information to CFIUS or (ii) the parties to the deal materially and intentionally breached obligations that CFIUS required as conditions to clearing the deal.
For those wagering big bucks on CFIUS clearances, this legal answer is no ironclad guarantee that Trump will leave those deals alone. It’s not clear that Trump will care a lot about standard legal interpretations of CFIUS rules. Further, Trump could utilize non-CFIUS authorities, such as the International Emergency Economic Powers Act, to block or condition deals – even those that have cleared CFIUS. The President’s powers are vast, and in the international realm the judiciary and legislature may be hard-pressed to stop a determined President.
It does seem very unlikely, though, that President Trump would take an action so audacious, and one that would be so unsettling to the business community, as blocking or unwinding deals that CFIUS already has cleared. So it seems a good bet that those deals will be undisturbed, even though Trump theoretically could disturb them.
The answer to the second question – whether Trump can cause CFIUS to consider trade and economic issues, in addition to traditional national security issues – is less clear.
The Trump administration could try to effectuate changes to CFIUS’ deliberative process in two ways: (1) by pushing Congress to enact amending legislation broadening CFIUS reviews to include considerations such as “economic security”; and/or (2) by pushing CFIUS, whether via Executive Order or some informal mechanism, to broaden its considerations to include the same types of factors.
There is an argument that it is impermissible for the President to cause CFIUS to consider “economic security,” without amending the legislation, since such considerations were rejected by Congress during the last round of amendments to the CFIUS statutory framework. Again, though, Trump might not care about these legal arguments. If the President sought to force change in CFIUS processes, it’s not clear that a court or anyone else could stop him.
I recently told several people that I thought Trump was unlikely to prioritize changes to the CFIUS process. And then I saw the following Congressional Quarterly reporting (paywall) about a Trump trade “action plan”:
In a Trump administration, CFIUS also would take into consideration whether the home country of a foreign buyer would allow a similar acquisition by a U.S. company. The plan makes specific reference to Chinese companies buying firms in America although the Chinese government restricts foreign purchases of its companies.
And I remembered that my track record predicting Trump-related matters is very bad. At least I’m not alone in that.