The Committee on Foreign Investment in the United States is a multi-agency regulatory body empowered to review transactions involving a foreign person and a U.S. business that may affect national security. On November 14, 2008, the Department of the Treasury issued its final rule to implement the Foreign Investment and National Security Act of 2007, which provided guidelines for the Committee on Foreign Investment in the United States when reviewing investments by foreign persons in U.S. businesses for national security issues.
If your transaction has implications for national security and your investment vehicle has significant foreign ownership of the party or the other side has significant foreign ownership, they you need to pay attention to CFIUS. There has been little guidance on what level of control and what would be a threat to national security.
Recently, CFIUS delivered its unclassified Annual Report to Congress for the calendar year 2009 and it offers some insight into the breadth and power of this little known agency.
In 2009, 65 CFIUS notices were filed and determined to describe “covered transactions” within their regulatory review.
Of the 65 notices filed, 7 were voluntarily withdrawn from CFIUS consideration the initial review and investigation phases. New notices were filed in 3 transactions and 3 transactions were abandoned. The seventh withdrew the transaction with the declared intent of re-filing a CFIUS notice.
Twenty-five of the covered transactions were subject to investigation, extending the period of delay for the transaction.
In 2009, CFIUS agencies negotiated, and parties adopted, mitigation measures for five different covered transactions. These measures involved acquisitions of U.S. companies in the computer software, telecommunications, and energy sectors. No transaction was blocked.
In a key finding, the CFIUS judged that judge that foreign governments are “extremely likely” to continue to use a range of collection methods to obtain critical U.S. technologies. Sources:
- Committee on Foreign Investment in the United States Annual Report to Congress for Calendar year 2009
- CFIUS Submits Annual Report to Congress by Mario Mancuso, Jay R. Kraemer, and James J. McCullough of Fried Frank
- Implementation of Foreign Investment and National Security Act – prior post on Compliance Building
- Guidance Concerning the National Security Review Conducted by the Committee on Foreign Investment in the United States – prior post on Compliance Building
- Control under FINSA and CFIUS- – prior post on Compliance Building