No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home Compliance

U.S. Election Raises Questions about CFIUS’s Role in Foreign Investments

by Wendy Wysong
November 22, 2016
in Compliance
Changes to come concerning U.S. trade

with contributing authors Nick Turner and Ali Burney

The election of Donald Trump as President of the United States is expected to significantly transform U.S. foreign policy, particularly with respect to trade and economic sanctions. Among the economic tools available to the President for protecting U.S. national security is the Committee on Foreign Investment in the United States (CFIUS). CFIUS, acting under the direction of the President, has the power to suspend, prohibit or seek modifications to proposed investments by foreign persons in U.S. companies and assets which raise specific national security concerns. In recent years, CFIUS has made headlines for its involvement in several high-profile transactions by foreign firms, including notable cases involving Chinese investors.

Looking Forward

As under previous administrations, foreign investors should consider the potential U.S. national security implications of any proposed investment in the United States. This includes direct investment in critical infrastructure and noncritical infrastructure that raises questions of information security, geography, major suppliers or other factors related to U.S. national security.

Thus far, the incoming administration has not made any specific proposals with respect to CFIUS. It is also unclear to what extent the President-elect will follow through with aspects of his campaign rhetoric in regard to foreign trade and investment.  Policy changes are likely to crystallize rapidly during the first few months of the new administration starting on 20 January 2017.

CFIUS Background

Under the Foreign Investment and National Security Act of 2007 (FINSA), the President is authorized to review mergers, acquisitions and takeovers of U.S. companies or assets by any foreign person where the transaction could result in foreign control of a target company or asset which is engaged in interstate commerce (collectively, “covered transactions”). FINSA calls for additional investigation of covered transactions involving foreign government-controlled entities, potential threats to U.S. national security or critical U.S. infrastructure, as defined in the act.

FINSA tasks the Director of National Intelligence with performing an analysis of any threat to U.S. national security posed by any covered transaction. CFIUS’s members include the heads of the Departments of Treasury, Energy, Commerce, Homeland Security, Justice and Defense, as well as the U.S. Trade Representative and the Director of the Office of Science and Technology Policy, among others. Any party to a covered transaction may initiate a review by submitting written notice to CFIUS. However, CFIUS may also unilaterally review any covered transaction, whether proposed or completed, that did not undergo CFIUS review or that previously underwent CFIUS review on the basis of false or misleading information or where a party has breached an agreement with CFIUS pertaining to a transaction.

CFIUS reviews follow a three-step process with deadlines as defined in FINSA. The first step is a 30-day review of any covered transaction, which does not begin until after a formal filing.  The second step is a 45-day investigation of any covered transaction involving a foreign government-controlled entity or which could impair U.S. national security or result in foreign control of critical U.S. infrastructure.

Additionally, parties to a covered transaction typically engage in informal discussions with CFIUS members in advance of submitting a filing for review. These informal discussions provide an opportunity to gauge objections and conduct preliminary negotiations over changes to proposed investments needed to satisfy CFIUS members’ concerns regarding U.S. national security considerations.

The President has 15 days after the conclusion of an investigation to publicly announce a determination. The President may only block a covered transaction where there is credible evidence that the transaction will impair U.S. national security and where other U.S. laws are inadequate to address the perceived risks. These laws include, for example, the Export Administration Regulations and International Traffic in Arms Regulations.

Past Trends

As of 2016, the President has exercised authority to oppose a covered transaction in only one case. That case involved the 2012 acquisition of a wind farm in Oregon by Ralls Corporation, whose owners included Chinese nationals. Although the parties did not submit a filing to CFIUS prior to the acquisition, CFIUS determined, after the acquisition, that the transaction posed a threat to U.S. national security due to the wind farm’s proximity to a U.S. Navy training facility. On 28 September 2012, President Obama issued an executive order calling for Ralls to divest itself of the wind farm. (The U.S. Court of Appeals for the District of Columbia largely upheld the President’s order in July 2014.)

Negative publicity surrounding CFIUS investigations or congressional opposition may, in some cases, be sufficient to result in the termination of a proposed covered transaction. This was the case, for example, with China National Offshore Oil Corporation’s proposed acquisition of Unocal in 2005 and China-based Northwest Nonferrous International Investment Corporation’s proposed acquisition of Firstgold in 2009.  In 2011, Huawei abandoned its proposed acquisition of 3Leaf, a U.S.-based server company following scrutiny from CFIUS. In 2013, in response to CFIUS’s concerns, Japan’s SoftBank and Sprint Nextel reportedly agreed to drop Huawei as a supplier for certain mobile projects in connection with Softbank’s acquisition of Sprint Nextel. In 2016, members of Congress called on CFIUS to review Chongqing Casin Enterprise Group’s proposed takeover of the Chicago Stock Exchange.

Most recently, in November 2016, CFIUS reportedly objected to the acquisition of Germany-based Aixtron SE by a subsidiary of China-based Fujan Grand Chip Investment Fund LP due to U.S. national security concerns. Although CFIUS does not have formal jurisdiction over foreign transactions, the committee has occasionally opined on overseas acquisitions involving suppliers to U.S. defense contractors or sensitive technologies.

Despite these high-profile cases, CFIUS has approved the vast majority of covered transactions it has reviewed, including acquisitions of U.S. firms by Chinese investors. These include, for example, Shuanghui International’s acquisition of Smithfield Foods and Wanxiang Group’s acquisition of A123 Systems, both in 2013.

Conclusion

Looking forward, CFIUS may serve as a focal point for discussions concerning foreign investment controls under the new administration. At this time, we recommend that clients take a wait-and-see approach to this and other issues. As a best practice, clients may choose to designate staff members who are responsible for monitoring and communicating U.S. legal and regulatory updates to internal stakeholders. Clifford Chance will provide updates and analysis to our clients as developments warrant.


Previous Post

Resilient: Keith Wandell on Value-Focused Leadership

Next Post

Federal Regulators Unveil Proposed Cybersecurity Standards for Large Financial Firms

Wendy Wysong

Wendy Wysong

Wendy L. Wysong is a partner at Steptoe & Johnson. She served previously as a litigation partner with Clifford Chance, offering clients advice and representation on compliance and enforcement under the Foreign Corrupt Practices Act, the Arms Export Control Act, International Traffic in Arms Regulations, Export Administration Regulations, and OFAC Economic Sanctions. She was appointed by the State Department as the ITAR Special Compliance Official for Xe Services (formerly Blackwater) in 2010. Wendy combines her experience as a former federal prosecutor with the United States Attorney for the District of Columbia for 16 years with her regulatory background as the former Deputy Assistant Secretary for Export Enforcement at the Bureau of Industry and Security, U.S. Department of Commerce. She managed its enforcement program and was involved in the development and implementation of foreign policy through export controls across the administration, including the Departments of Justice, State, Treasury and Homeland Security, as well as the intelligence community. Wendy received her law degree in 1984 from the University of Virginia School of Law, where she was a member of the University of Virginia Law Review.

Related Posts

parliament

Coming Soon to the UK: Sweeping Corporate Criminal Liability Reforms?

by Peters and Peters
March 28, 2023

UK legislators have proposed major amendments to the Economic Crime and Corporate Transparency Bill currently passing through Parliament. If adopted,...

wind turbines

What Companies Around the Globe Need to Know About EU Sustainability Reporting

by John Peiserich
March 28, 2023

By the beginning of next year, large companies in the EU or that do a substantive amount of business in...

amsterdam

At a Gathering of Compliance Practitioners, No Shortage of Food for Thought

by Mary Shirley
March 28, 2023

Last week, about 300 ethics and compliance professionals descended upon Amsterdam’s Hotel Okura to participate in SCCE’s European Compliance &...

documents

Meeting Accounting Standards in an Uncertain Economy

by Tom Zauli
March 28, 2023

After a Covid-related grace period, new contract accounting standards — ASC 606 — are in effect for both public and...

Next Post
Federal Regulators Unveil Proposed Cybersecurity Standards for Large Financial Firms

Federal Regulators Unveil Proposed Cybersecurity Standards for Large Financial Firms

Compliance Job Interview Q&A

Jump to a Topic

AML Anti-Bribery Anti-Corruption Artificial Intelligence (AI) Automation Banking Board of Directors Board Risk Oversight Business Continuity Planning California Consumer Privacy Act (CCPA) Code of Conduct Communications Management Corporate Culture COVID-19 Cryptocurrency Culture of Ethics Cybercrime Cyber Risk Data Analytics Data Breach Data Governance DOJ Download Due Diligence Enterprise Risk Management (ERM) ESG FCPA Enforcement Actions Financial Crime Financial Crimes Enforcement Network (FinCEN) GDPR HIPAA Know Your Customer (KYC) Machine Learning Monitoring RegTech Reputation Risk Risk Assessment SEC Social Media Risk Supply Chain Technology Third Party Risk Management Tone at the Top Training Whistleblowing
No Result
View All Result

Privacy Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2022 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe

© 2022 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT