CFIUS Foreign Investment Reviews & FOCI Mitigation

On September 15, 2020, the Committee on Foreign Investment in the United States (CFIUS), the inter-agency U.S. government body responsible for reviewing certain forms of inbound investment for national security risks, published a final rule, effective October 15, making important changes to the rules defining “critical technology” transactions subject to mandatory filing requirements.

CFIUS has traditionally allowed, but not required, parties to “covered transactions” to submit a filing to CFIUS to seek approval of their transaction.  However, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) authorized CFIUS to mandate filings for certain types of transactions.  Transactions subject to mandatory filings under FIRRMA fall into two categories: certain investments involving “critical technology” and certain investments involving foreign governments.  (See our prior International Law Advisory on FIRRMA’s implementing regulations here).

The final rule changes the circumstances in which a “critical technology” investment will trigger a mandatory filing requirement.  The rule ends the use of North American Industry Classification System (NAICS) codes to identify specific industries subject to mandatory “critical technology” filings, in favor of a filing requirement based on U.S. export controls.  A mandatory “critical technology” filing requirement is triggered under the final rule when a “U.S. regulatory authorization” would be required for the export, reexport, or transfer (in country) of the U.S. target company’s goods or technologies to the foreign investor or certain other foreign persons involved in the transaction.  The final rule also makes modest clarifications to the second category of transactions involving foreign government interests.  (See our prior blog post on the proposed version of the rule here).


Continue Reading New CFIUS “Critical Technology” Mandatory Filing Rules Increase Importance of Export Controls Analysis

In July 2020, the Committee on Foreign Investment in the United States (“CFIUS”) released its Annual Report to Congress for Calendar Year (“CY”) 2019.  The Annual Report, which fulfills certain statutory reporting requirements, provides information on covered transactions filed with CFIUS during 2019.  Among other things, the 2019 Annual Report provides some initial data and other insights into CFIUS’s administration of the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded the jurisdiction of CFIUS and included new reporting requirements.

Continue Reading Analysis of Annual Report of CFIUS to Congress for Calendar Year 2019

A newly published proposed rule would make two important modifications to the mandatory filing requirements of the Committee on Foreign Investment in the United States (CFIUS), the US government interagency committee responsible for reviewing inbound foreign direct investments for national security risks. The proposed rule would change the scope of the mandatory filing requirement for covered transactions involving US critical technology companies, and would clarify how “substantial interest” is calculated for certain transactions involving foreign government investors.

Continue Reading Proposed CFIUS Rule Would Change and Clarify CFIUS Mandatory Filing Requirements

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On February 13, 2020, the final rules implementing changes to the Committee on Foreign Investment in the United States’ (CFIUS) jurisdiction and review process, as required under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), take effect.

CFIUS, the inter-agency body

Click here for the Chinese translation of this post.

On January 13, 2020, the Committee on Foreign Investment in the United States (CFIUS) published final rules implementing changes to the committee’s jurisdiction and review process as required under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The regulations become effective on February 13, 2020.

Under the new rules, CFIUS, which is the inter-agency body charged with reviewing certain inbound foreign investment in the United States for national security-related concerns, will be able to review a variety of new transaction types. Among other changes, the rules allow CFIUS to review so-called “non-controlling” investments in US businesses engaged specific activities related to critical technologies, critical infrastructure, and sensitive personal data of US citizens. The rules also extend CFIUS’s jurisdiction to certain transactions involving real estate located within or functioning as part of an air or maritime port and real estate in close proximity to sensitive US government facilities.


Continue Reading CFIUS Publishes Final Rules, Implements Sweeping Changes to US Foreign Investment Reviews

The US Department of the Treasury (“Treasury”) published two proposed rules on September 24, 2019 that would significantly expand the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) to review inbound U.S. foreign investment for national security risks.  The proposed rules, which have been in the works for months, would implement

On April 15, Steptoe associate Peter Jeydel commented about recent CFIUS developments on Steptoe’s Cyberlaw Podcast, including the forced divestment of a Russian investor out of Cofense, a US cybersecurity company, and an unprecedented $1M fine for failure to implement a mitigation agreement.

To listen to Pete’s comments, please press play above.

In recent weeks, Reuters and other media outlets have reported that Beijing Kunlun Tech Co., Ltd. (Kunlun), the owner of the popular gay dating app Grindr, was seeking to sell the app due to concerns raised by the Committee on Foreign Investment in the United States (CFIUS). CFIUS is the interagency US government committee with authority to review foreign acquisitions of, and certain investments in, US companies that present US national security concerns.

According to these reports, CFIUS initiated a review of Kunlun’s acquisition of the US-based Grindr based on the sensitive nature of the personal data the app collects on US citizen users. The Grindr case has generated headlines due to the odd paring of a dating app owned by a Chinese gaming company and US national security. In our view, the case confirms the continued validity of several recent trends in US government policy and procedures for reviewing foreign investments in the United States.
Continue Reading When Dating Becomes a National Security Concern: CFIUS Forces Sale of Chinese Owned Dating App

On November 20, 2018, the European Parliament, the Council and the Commission reached a political agreement on the proposed EU framework for the screening of foreign direct investments (FDIs).

The proposal, which was put forward by the Commission in September 2017, aims to protect key strategic industries and assets in Europe while maintaining the EU’s

Yesterday the US Department of Commerce’s Bureau of Industry and Security (BIS) took its first step towards a potentially significant expansion of US export controls by publishing a Federal Register notice soliciting public comments on how the US government should regulate the export of “emerging technologies.” Under the Export Controls Reform Act of 2018 (ECRA), “emerging and foundational technologies” will be subject to additional export controls and will trigger heightened foreign investment reviews for US companies that produce or develop these technologies.  Commerce has requested public comments on the “criteria for defining and identifying emerging technologies” by December 19, 2018.  Commerce will begin a separate comment process regarding “foundational technologies” at a later date.

Export Controls

BIS regulates the export of “dual-use” and less sensitive military items through the Commerce Control List (CCL) and the Export Administration Regulations (EAR). Section 1758 of the ECRA, enacted in August 2018 as a part of the National Defense Authorization Act for Fiscal Year 2019, requires BIS to establish “appropriate controls” for the export, re-export, or in-country transfer of “emerging and foundational technologies” that “are essential to the national security of the United States” but are not yet subject to US export controls.  While Commerce will have the discretion to set the level of export controls for any identified emerging and foundational technologies, at a minimum it must require a license for the export of these technologies to countries subject to a US arms embargo. (Section 126.1 of the International Traffic in Arms Regulations (ITAR) identifies several countries, including China, currently subject to an arms embargo by the United States.)
Continue Reading Administration Moves Toward Strengthening Export Controls and Investment Restrictions on “Emerging Technologies”