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According to the U.S. Department of Commerce, roughly 12 million U.S. workers have jobs that were created through foreign investment. Nevertheless, there is increasing concern over the pace of foreign investment in key sectors of the economy and the risks it may pose to U.S. national security. Since its creation by Executive Order in 1975, the inter-agency Committee on Foreign Investment in the United States (CFIUS) has monitored the national security impact of acquisitions of U.S. businesses by foreign investors. Given statutory footing by the Exon-Florio Amendment to the Defense Product Act – and strengthened in 2007 by the Foreign Investment and National Security Act – CFIUS has now reviewed thousands of transactions. Most pass scrutiny, but many are restructured to address national security concerns – or withdrawn and abandoned when the price of restructuring proves too high, or when the parties are advised that presidential veto is likely. In fact, it was twenty-two years between the first presidential veto in 1990 and the second in 2012. Between 2016 and 2018, however, no fewer than three additional deals have been vetoed, with others – such as Ant Financial’s unsuccessful bid for Moneygram – foundering in the face of CFIUS disapproval.
Much of the concern centers on the increased role of Chinese investment, which reached $46 billion in 2016. Sponsors of reform legislation have argued that China “has found the gaps in existing U.S. mechanisms aimed at preventing dangerous technology transfers, including [the CFIUS] process … and it is now working to exploit those gaps….[T]heir barrage of investments is aimed, at least in part, on eliminating our military edge.” Citing staffing shortages and jurisdictional constraints that limit review to transactions resulting in foreign control of U.S. companies, critics charge that CFIUS is not up to the task of policing the modern marketplace – and needs help. Bills now under serious consideration in the House and Senate would greatly expand CFIUS’s authority, extending review to lease transactions and certain technology transfers, impose filing fees for the first time, and promote the sharing of information with foreign review panels. Still other bills would expand jurisdiction to reach transactions affecting U.S. health care and food safety. At the same time, free trade advocates are seeking to slow the pace of reform, and legislation, when and if enacted, could be much less ambitious. But even without legislation, CFIUS is reportedly exploring ways to sharpen the review process.
Longtime CFIUS practitioners Christopher R. Brewster and Anne W. Salladin from Stroock & Stroock & Lavan LLP will:
- Review pending legislation;
- Discuss common pitfalls that can frustrate reviews; and
- Offer formulas for success.
Program Level: Intermediate
Intended Audience: In-house counsel, outside attorneys, board members, corporate officers, and other allied professionals involved in M&A transactions
Prerequisites: Basic understanding of the CFIUS process
Advanced Preparation: None