John P. Carlin, Nicholas J. Spiliotes, Panagiotis C. Bayz, Charles L. Capito III, and Sophia M. Brill
Yesterday, bipartisan coalitions in both the House and the Senate announced new legislation that would substantially overhaul current law governing the Committee on Foreign Investment in the United States (CFIUS) and the standards by which foreign investments in U.S. businesses are reviewed. The law would dramatically expand CFIUS’ authorities, and would affect a broad range of transactions — particularly in high-technology sectors. Companies could also be required to pay filing fees of up to $300,000 for each transaction.
The proposed legislation comes amid rising concerns by Administration officials and members of Congress about foreign investments in and acquisitions of high-technology industries, particularly by Chinese businesses. It was announced just as President Trump was arriving in China, where topics of discussion are sure to include trade and foreign investment policy.
The proposed Senate bill—which is 79 pages long and is titled “The Foreign Investment Risk Review Modernization Act” — is sponsored by Senators John Cornyn (R-TX) and Dianne Feinstein (D-CA), and has several other co-sponsors from both parties. The House bill was introduced by Rep. Robert Pittenger (R-NC) and also has a bipartisan lineup of co-sponsors. Although the text of the House bill was not available as of this writing, Rep. Pittenger’s website describes it in the same terms as the Senate bill.
Expansion of CFIUS Jurisdiction
The proposed legislation would substantially broaden CFIUS’s focus and strengthen its enforcement capabilities. As such, it could impose new obstacles for foreign investors and U.S. businesses conducting transactions with them. At least some parts, however, codify existing practices. Most significantly, the legislation would devote more focus and enforcement authority to transactions in high-technology sectors. In this regard:
The proposed legislation would also place a heavy emphasis on cybersecurity and information security concerns:
Other measures would strengthen CFIUS’s overall enforcement authorities:
The legislation substantially revises the CFIUS filing and review process. Some of these revisions could potentially benefit businesses:
It is premature at this stage to predict what the bill’s prospects are for becoming law and when. But given the lineup of bipartisan co-sponsors and statements by several Trump administration officials, including Treasury Secretary Steven Mnuchin, that the CFIUS process needs to be strengthened, this legislation will certainly be worth monitoring carefully as the 2017 legislative session begins to draw to a close.
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