CFIUS Foreign Investment Reviews & FOCI Mitigation

As a first step to implementing the wide-ranging Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) that was enacted in August 2018, the US Department of the Treasury on October 10, 2018 issued an interim rule to launch a “pilot program” to expand the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to review certain “critical technology” transactions.  Treasury also issued temporary regulations that make limited changes to the existing CFIUS regulations, mostly to implement changes that became effective immediately upon passage of FIRRMA.

Pilot Program Interim Rule

A number of the provisions of FIRRMA that expand CFIUS’s jurisdiction do not become effective until Treasury passes implementing regulations or February 2020, whichever comes first.  Treasury is not expected to finalize the relevant implementing regulations for several months.  However, FIRRMA also authorized Treasury to create temporary “pilot programs” to allow for faster implementation of parts of the legislation that did not become effective immediately upon enactment.
Continue Reading Treasury Creates CFIUS Pilot Program and Releases Interim Regulations as Initial Step Toward Implementing FIRRMA Reforms

Following months of hearings and other deliberations, Congress passed, and President Trump signed into law on August 13, 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). FIRRMA is the first update to the Committee on Foreign Investment in the United States (CFIUS) in over a decade and will significantly expand the jurisdiction

Earlier this week, negotiators from the House and Senate reached agreement on what will very likely be the final text of the Foreign Investment Risk Review Modernization Act (FIRRMA), which will be part of the National Defense Authorization Act for Fiscal Year 2019 (NDAA). FIRRMA seeks to overhaul the Committee on Foreign Investment in the

The ambitious CFIUS reform bill introduced in November 2017, the Foreign Investment Risk Review Modernization Act (FIRRMA), has recently received significant congressional attention and appears likely to become law this year, with some revisions from the version introduced last year. On June 18, 2018, the Senate passed its version of FIRRMA as Title XVII of

Very far, under existing US law. The authority already available to the President under the International Emergency Economic Powers Act (IEEPA) is vast, and could be applied to Chinese investments with the (relatively) simple declaration of a national emergency related to such investments.  Reports have already been swirling about a plan by the Trump Administration to use IEEPA to impose tighter restrictions on Chinese investment in sensitive sectors of the US economy, or to implement by executive order parts of the CFIUS reform legislation under consideration by Congress.  But IEEPA could be used far more broadly than that.

Although rumors of new trade and investment restrictions against China have been in circulation for several months, the President’s March 22 order in response to the “Section 301 investigation” on Chinese trade practices has brought those rumors into sharper focus.  In his order, President Trump directed the Secretary of the Treasury to develop options “under any available statutory authority” that could be used “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.” 
Continue Reading How Far Can the US Take Trade and Investment Restrictions on China?

Key committees in the Senate and House have concluded initial hearings on the bill to reform the Committee on Foreign Investment in the United States (CFIUS), the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA). FIRRMA was introduced in the Senate and House by Senator Cornyn and Representative Pittenger with bipartisan cosponsors on November

During a November 8 press conference announcing the introduction of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) while President Trump met with President Xi Jinping in China, co-sponsor and Senate Majority Whip John Cornyn (R-TX) summed up the impetus for the bipartisan, bicameral bill in five words:

“China is eating our lunch.”

In the decade since Congress last passed reforms governing the Committee on Foreign Investment in the United States (“CFIUS”) and its procedures for conducting national security reviews of inbound foreign investments, Chinese investment in the United States – especially in the technology sector – has exploded.  Although FIRMMA doesn’t mention China by name, many of its provisions appear designed to address aspects of China-related deals that cause heartburn for national security hawks.
Continue Reading Congress Scrutinizes Foreign Investment, Fires Warning Shots at China and Silicon Valley

The Trump administration is making significant changes to longstanding trade policies. Among the flashpoints is the Committee on Foreign Investment in the United States (“CFIUS”), responsible for national security reviews of certain inbound foreign investments.  Since President Trump assumed office, the Committee has taken an increasingly critical eye to many transactions, scuttling an increasing number of deals and recommending that the president take action to block the Lattice Semiconductor/Canyon Bridge deal.

Given this period of significant change in the CFIUS process, the Committee’s annual report has been much anticipated. While the report only offers data through the end of 2015, it nonetheless provides interesting insights on the trends and developments that led up to the present period.

Delayed Publication of the Report

This year’s annual report has been significantly delayed in its release. In years past, the report, which the Committee must submit to Congress on a yearly basis, has been released in February.  This year’s delay likely is due to a significant increase in cases occupying CFIUS’s resources and a significant lack of political appointees at the Department of Treasury and other relevant agencies.  
Continue Reading CFIUS Releases Long-Awaited 2015 Annual Report

The European Commission issued on September 13th 2017 a Proposal for a Regulation establishing a framework on the screening of foreign direct investments (FDI) into the EU. The objective of this proposal is two-fold: pushing third countries to open their domestic markets to EU investments, and protecting EU assets against foreign takeovers detrimental to the essential interests of the EU or of its Member States.  The Commission proposes to achieve this by introducing information and coordination mechanisms between the Member States’ FDI screening schemes, and giving new powers to the Commission itself to screen some FDI with EU impact. The EU Member States’ ability to screen FDI would be harmonized, and would have to be based on grounds of security and public order.

Coordination of Member States and new powers to the Commission

The proposal sets up a mechanism whereby the Member States’ authorities are required to exchange information about FDI and adopt opinions within set deadlines. A Member State will be able to provide comments on any FDI occurring in another Member State.

The proposal also gives powers to the European Commission to screen FDI that are likely to affect listed projects or programmes of Union interest on the grounds of security or public order. The result of the Commission’s screening will be consigned in opinions that will not be binding but that Member States will be required to take into due consideration.  The proposed EU non-binding consultative process would be different than US reviews of inbound FDI via the Committee on Foreign Investment in the United States.  The US process occurs at the federal level without the input of the state in which the entity receiving the investment is located, and if the Committee does not clear the transaction to proceed, the parties will most likely abandon the transaction.
Continue Reading European Commission Proposes EU-Wide Scheme for Screening Foreign Investments in the EU

As many CFIUS-watchers were expecting, the President has just blocked the Lattice Semiconductor/Canyon Bridge deal.  CFIUS recommended that the President take this action because of national security concerns, and no President has refused to follow such a blocking recommendation by CFIUS.

In most cases, where CFIUS has made such a recommendation, the parties have abandoned the deal rather than waiting for the President to act.  This is only the fourth time that parties to a deal have forced presidential action:  at the recommendation of CFIUS, President George HW Bush ordered a divestment in 1990, President Obama ordered a divestment in 2012 and blocked a deal in 2016, and President Trump now has blocked this Lattice Semiconductor/Canyon Bridge deal.  All cases have involved Chinese companies.  (Steptoe has previously written on the 2012 and 2016 actions.)
Continue Reading Open Investment? Trump Blocks Lattice Semiconductor/Canyon Bridge Deal, Following CFIUS Recommendation