Assessment of National Security Concerns in the Acquisition of U.S. and U.K. Assets

AuthorIoannis Kokkoris
PositionProfessor of Competition Law and Economics, Queen Mary University London
Pages349-378
Assessment of National Security Concerns in the
Acquisition of U.S. and U.K. Assets
Ioannis Kokkoris*
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349
I. THE FRAMEWORK FOR ASSESSING NATIONAL SECURITY CONCERNS IN
M&AS IN THE UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
A. The CFIUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351
B. The CFIUS Enforcement Record . . . . . . . . . . . . . . . . . . . . . . 352
C. Increasing CFIUS Scrutiny of Deals Involving China, Canada,
Japan, and The United Kingdom . . . . . . . . . . . . . . . . . . . . . . 357
D. Increasing Use of Mitigation Measures by CFIUS. . . . . . . . . 360
II. THE BATTLE OF THE ENTITY LISTS: UNITED STATES AND CHINA . . . . . . . 362
A. The U.S. Entity List (U.S. List) . . . . . . . . . . . . . . . . . . . . . 362
B. MOFCOM’s Unreliable Entity List . . . . . . . . . . . . . . . . . . . . 364
III. THE ASSESSMENT OF NATIONAL SECURITY DURING THE BUSH, OBAMA,
AND TRUMP ADMINISTRATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
A. George H. W. Bush Administration . . . . . . . . . . . . . . . . . . . . 367
B. Barack H. Obama Administration . . . . . . . . . . . . . . . . . . . . . 368
C. Donald J. Trump Administration . . . . . . . . . . . . . . . . . . . . . . 369
IV. THE FRAMEWORK FOR CONSIDERING NATIONAL SECURITY CONCERNS IN
M&AS IN THE UNITED KINGDOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
V. THE NEW REGIME NATIONAL SECURITY ASSESSMENT IN THE UNITED
KINGDOM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
VI. ARE THE UNITED STATES AND UNITED KINGDOMS NATIONAL SECURITY
REGIMES WORKING? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374
A. CFIUS in the Limelight and Its Strengthened Role . . . . . . . . 374
B. Assessment of the UK National Security Regime . . . . . . . . . . 376
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
INTRODUCTION
Globalization and free trade principles are being overshadowed by a surge in
regulatory or restrictive foreign investment measures. Foreign direct investments
(FDIs) through merger and acquisitions are subject to the assessment process of
jurisdictions’ competent competition authorities (the Competition and Markets
* Professor of Competition Law and Economics, Queen Mary University London. The author would
like to express his gratitude to Dr Claudia Lemus (Research Fellow, Queen Mary University London)
and Anton Dinev (PhD Candidate Paris Dauphine, and Trainee (Clerk) CJEU) for their excellent
research assistance and contribution to the paper. The author is also grateful to Muhammed Safa Uygur,
Micaela Duffau, and Anik Bhaduri for research assistance. All errors and omissions are attributed to the
author. © 2021, Ioannis Kokkoris.
349
Authority (CMA) in the United Kingdom and the Federal Trade Commission
(FTC) and the Department of Justice (DOJ) in the United States). At the
same time, such transactions can also be subject to national security frameworks
that already exist in some countries (e.g., the United States) or that are being
introduced in others (e.g., the United Kingdom). Such an assessment takes into
account the risk that a transaction can pose to the jurisdiction’s national security.
A number of jurisdictions have introduced or are in the process of introducing
national security frameworks. In general, there are two different structures: a
dualist model and an integrated model. Under the dualist model, there are two
separate bodies that assess transactions that can give rise to national security con-
cerns: the competition authority has exclusive jurisdiction on assessing the
impact of the transaction on competition (e.g., the FTC/DOJ in the United States
and the CMA in the United Kingdom), and a separate agency (e.g., the United
States’ Committee on Foreign Investment in the United States (CFIUS) and the
United Kingdom’s Investment Security Unit (ISU)) assesses the impact of the
transaction on the national security of the country. Alternatively, under an inte-
grated model, the country’s competition authority makes both assessments.
Under both models, as far as the national security assessment is concerned, the
agency or a senior government official will decide the outcome. There is a slight
divergence between the U.S. and the U.K. regimes in this respect, as the CFIUS
can impose remedies to address the national security concerns and thus, not
object to the transaction, while in the United Kingdom, the remedies recom-
mended by the ISU will be adopted by the government.
This article will discuss the framework and the approach the U.S. and U.K.
regimes follow in the assessment of national security concerns in transactions of
domestic assets by foreign acquirers. First, the article will analyze the U.S. re-
gime and discuss the legislative framework and enforcement record of CFIUS
and the prohibition decisions on national security grounds of President Bush,
President Obama, and President Trump. The paper will then turn to the U.K.
national security regime and discuss the new framework for assessing national se-
curity concerns in the United Kingdom. The article will conclude with a few criti-
cal considerations for both the U.S. and U.K. regimes.
I. THE FRAMEWORK FOR ASSESSING NATIONAL SECURITY CONCERNS IN M&AS IN
THE UNITED STATES
U.S. law generally does not restrict foreign ownership of, or investment in,
U.S. companies.
1
However, such transactions could require not only an antitrust
review, but also a review focusing on the impact of such transactions on national
security. Transactions that have national security implications may require spe-
cial notification and approval by the CFIUS. These specific provisions for merger
1. Marvin Goldman, United States: Doing Business In The USA: Regulation Of Foreign Investment,
MONDAQ (Dec. 20, 2006), https://perma.cc/K4NJ-SR3L.
350 JOURNAL OF NATIONAL SECURITY LAW & POLICY [Vol. 12:349

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