Cfius Increases Its Scrutiny of Foreign Investment in the United States

• Jurisdiction: United States,Federal
• Citation: Vol. 1 No. 1
• Publication year: 2024

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Geoffrey M. Goodale and Lauren E. Wyszomierski ^*

In this article, the authors discuss the Committee on Foreign Investment in the United States and the kinds of transactions involving foreign investment over which it has jurisdiction to review and key information and data contained in its recent annual report to Congress.

Pursuant to authority granted by statute and executive actions, the Committee on Foreign Investment in the United States (CFIUS or Committee) reviews certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons in order to determine the effect of such transactions on the national security of the United States. In accordance with the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS recently published its annual report to Congress covering calendar year 2022 (Report). Some important takeaways from the Report include:

■ A record number of submissions were filed with CFIUS in 2022,
■ More mitigation requirements were imposed by CFIUS than ever before, and
■ CFIUS enhanced its focus on non-notified transactions to detect and assess national security risks posed by foreign investment, which often required mitigation or other measures to resolve national security risks.

In this article, after providing some necessary background information on CFIUS and the kinds of transactions involving foreign investment over which it has jurisdiction to review, key information and data contained in the Report will be discussed, including the above takeaways, which will demonstrate that entities should expect continued and increased CFIUS scrutiny of transactions.

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Background on CFIUS

CFIUS is an inter-agency committee that was originally established pursuant to Executive Order 11858 of May 7, 1985. The Secretary of the Treasury serves as the chair of CFIUS. In addition to Treasury, other members of CFIUS include the Departments of Commerce, Defense, Energy, Justice, Homeland Security, and State, the United States Trade Representative, and the Office of Science & Technology Policy. Other White House offices may observe and participate, as appropriate, including the Office of Management & Budget, the Council of Economic Advisors, the National Security Council, the National Economic Council, and the Homeland Security Council. Finally, the Director of National Intelligence and the Secretary of Labor are non-voting, ex-officio members of CFIUS with roles as defined by statute and regulation.

CFIUS is authorized to review any transaction that could result in a foreign person obtaining the ability to "control" a U.S. business for potential threats to U.S. national security. ¹ "Control" is defined and interpreted by CFIUS broadly, and can be present even in minority investments. If, based on its review of a transaction, CFIUS concludes that a transaction threatens to impair U.S. national security, it can propose mitigation measures to resolve the national security concerns. If mitigation cannot adequately resolve its concerns, CFIUS can recommend that the President prohibit or unwind a transaction. ²

In 2018, FIRRMA expanded the scope of jurisdiction and powers of CFIUS. ³ Specifically, FIRRMA provided CFIUS with new powers to review transactions involving certain strategically sensitive real estate in the United States and non-controlling investments in U.S. businesses involving certain critical technology, critical infrastructure, or sensitive personal data (TID U.S. businesses). ⁴ In addition, FIRRMA strengthened requirements concerning the use of mitigation agreements. ⁵

In 2020, the Treasury Department issued two FIRRMA-related final rules that expanded CFIUS's jurisdiction to review certain non-controlling investments in TID U.S. businesses and established criteria that would trigger mandatory filing requirements. ⁶ In addition, a new voluntary declaration filing option was created that is shorter and less detailed than the standard voluntary notice option. ⁷

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Expanded CFIUS Jurisdiction: TID U.S. Businesses

In addition to CFIUS's traditional...