The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced “syphius”) reviews M&A transactions that may pose a risk to national security through foreign control of a US business. (See our recent article). CFIUS is composed of members from the Departments of Treasury (chair), Homeland Security, State, Defense and other agencies. It has the power to recommend to the President that a transaction be stopped, and is well known for its reviews of the Dubai Ports World and IBM/Lenovo deals, both of which it approved (though the former was terminated because of strong political opposition). By law, its process is fairly secretive, although it holds itself to tight deadlines for issuing final recommendations.
WHAT HAPPENED:
- As reported February 21, Senators Cornyn (R-TX) and Schumer (D-NY) are separately working on legislation that would strengthen CFIUS’ hand in reviewing proposed acquisitions.
- In the face of skyrocketing investment by Chinese companies in US firms, Senator Cornyn’s bill would require CFIUS to look harder at proposed Chinese acquisitions of US technology companies.
- Reportedly, Senator Schumer’s bill would take a different tack, requiring CFIUS to consider economic implications in addition to national security concerns as part of its review. Currently CFIUS’ mandate is restricted to considering national security issues that may include national defense, technological leadership, critical infrastructure, foreign government influence and export controls compliance.
WHAT THIS MEANS:
- Companies considering sensitive cross-border transactions involving US business should watch any proposed legislation closely.
- The Trump Administration has not yet addressed these specific legislative ideas, but President Trump may be likely to support legislation that furthers his “Buy American, Hire American” theme.
- Currently CFIUS can initiate review of a deal either by voluntary disclosure from the parties or on its own initiative, even post-closing. Thus, any legislation that broadens CFIUS’ mandate or that alters the voluntary nature of self-notifying, could add a significant regulatory burden to cross-border transactions.
- CFIUS’ current investigative timeline of 30 days (initial review) plus 45 days (investigation if concerns exist) looks unlikely to change and will continue to provide some regulatory certainty for parties.