The Committee on Foreign Investment in the United States will have a busy year in 2022 and shows no signs of slowing down in 2023. An interagency committee of the U.S. government considers the national security implications of foreign investment in U.S. companies.
Active year
The Biden administration actively guided CFIUS’s activities last year. On 2 August 2022, the Commission issued an annual report analyzing its activities for 2021, following its first year under the expanded jurisdiction conferred by the Foreign Investment Risk Appraisal Modernization Act of 2018. has been issued.
The Biden administration has proactively provided guidance on CFIUS activities in 2022. In August, the Commission issued an annual report analyzing his first year of activity under the expanded jurisdiction granted by the Foreign Investment Risk Screening Modernization Act of 2018.
In September, President Joe Biden issued an executive order directing the commission to consider certain national security risk factors, such as risks to supply chain resilience and security, when reviewing covered transactions. has been issued.
And in October, the Treasury Department, the chair of CFIUS, released the first-ever CFIUS Enforcement and Penalty Guidelines, detailing categories of acts or omissions that may constitute violations leading to penalties, to help commissioners provided important visibility into the Board’s enforcement approach. .
Taken together, these three releases reinforce a continuation of the trends seen over the past few years and suggest increased commission activity in the coming year. Businesses should keep the following in mind as they plan for his 2023:
Unannounced/Non-Declared Transactions
CFIUS subjects unannounced/undeclared transactions to greater scrutiny as the Commission devotes resources to identifying such transactions through various channels.
The Commission is expected to increase enforcement, particularly against parties who have failed to file required filings, failed to comply with the CFIUS mitigation terms, or made inaccurate declarations.
Since there is no statute of limitations for CFIUS to exercise jurisdiction over a transaction, failure to file properly increases the unnecessary risk of penalties and can impact the transaction itself.
high tech and energy
High-tech, life sciences, and green energy technologies, including quantum computing, will continue to be CFIUS’s primary areas of interest, as will critical technologies.
Supported by the Executive Order’s focus on these sectors, CFIUS will continue to focus on trading in these areas. We also continue to prioritize the protection of critical U.S. technologies, including certain emerging and foundational technologies on the U.S. Munitions List and the Commerce Control List.
In its annual report, the commission warned that foreign governments “are very likely to use various collection methods” to obtain such technology.
Transaction analysis
A more holistic analysis of the investment is required to assess the security risk of the transactions in question. Transactions that do not appear to pose a threat on their own, but may represent a trend towards increased foreign investor dominance of a company or sector, will continue to attract CFIUS attention.
Transactions should be considered in the context of the wider industry and should be taken with caution regarding the relationships of foreign investors with third parties.
Most of the deals reviewed continue to involve foreign investors from allies. CFIUS-reviewed deals from China will more than double in 2021, rising to 44.
However, most of the transactions reviewed are expected to continue to involve foreign investors from allies such as Canada, the United Kingdom, Germany, South Korea, Singapore and Japan, pose less national security risk, and are approved by CFIUS. more likely to No mitigation.
filing review
A significant percentage of declarations are cleared, and the percentage of notifications cleared by mitigation remains low and steady. CFIUS shows progress in streamlining the review process.
The proportion of declarations (simplified declarations) has increased, while the proportion of notifications (complete declarations) has eased and stabilized. These trends he expects to continue through 2023.
international security
Overall, CFIUS will continue to play an important role in implementing the President’s National Security Strategy. The National Security Strategy, released in October, prioritizes continued investment in technologies covered by CFIUS, including semiconductors and advanced computing, clean energy technologies, cybersecurity, biotechnology and biomanufacturing. doing.
It also highlights competition from China as the “most important geopolitical challenge” for the United States. To protect these investments from international exploitation, the strategy says the administration will “modernize and strengthen” investment review mechanisms.
With the increased activity of CFIUS showing no signs of abating, U.S. companies and foreign investors should now more than ever keep the Commission’s requirements in mind when considering cross-border transactions. I have.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., publishers of Bloomberg Law and Bloomberg Tax, or their owners.
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Alyssa Clark Associate at Foley Hogue. She advises public and private companies on a wide range of corporate issues.
Luciano Lacco He is an attorney at Foley Hogue Law Firm and Co-Chair of International Trade and National Security Practices. He advises clients on international trade regulations.
Shruti Thewari Partner at Foley Hoag and co-chair of International Trade and National Security Practices and Reproductive Medicine. She defends clients in criminal and regulatory investigations.