On January 3, 2025, President Biden issued an executive order (the “Order”) prohibiting the proposed acquisition of United States Steel Corporation (“U.S. Steel”) by Japan-based Nippon Steel Corporation (“Nippon Steel”) on the basis that the transaction could threaten to impair the national security of the United States (the “Order”). The Committee on Foreign Investment in the United States (“CFIUS”) referred the transaction to the President on December 23, 2024.
The Order explains that the decision is based on “credible evidence” that Nippon Steel “might take action that threatens to impair the national security of the United States” if the Proposed Acquisition were to be completed, and asserts that no other provisions of law (which would include enforceable mitigation measures) could adequately protect national security.
The Order gives the parties 30 days to abandon the transaction and certify to CFIUS that all steps to abandon the transaction have been completed. The Order also authorizes CFIUS to take any measures it deems necessary and appropriate to protect national security until the parties have certified that the transaction has been abandoned.
In a separate statement on January 3, President Biden defended the Order on economic and national security grounds, stating that a “strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains.” The transaction, according to the President, “would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains.”
The Order is the second time President Biden has prohibited a transaction under CFIUS authorities (and only the ninth time in the history of CFIUS that such an order has been issued by the President). The Order also is the first time that a U.S. President has utilized CFIUS authority to prohibit a transaction where the foreign investor is from a country that is a close ally of the United States.
On January 6, 2025, the parties sued President Biden, U.S. Treasury Secretary Janet Yellen, and U.S. Attorney General Merrick Garland in the U.S. Court of Appeals for the District of Columbia, alleging due process violations, violations of statutory procedural requirements, and unlawful political influence. The parties have asked the court to set aside the CFIUS review process and the Order, and are seeking a new CFIUS review of the transaction.