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  • Giacomo Breda

A brief lesson of the CFIUS and FIRRMA laws.


CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States (“covered transactions”), to determine the effect of such transactions on the national security of the United States. The definition is taken from the Department of Treasury official website.

It operates under section 721 of the Defense Production Act of 1950, as amended (section 721), and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800 and 31 C.F.R. Part 801, as amended.

The CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States, to determine the effect of such transactions on U.S. national security. An important amended is in the Exon-Florio amendment in 1988. Congress passed the Exon-Florio amendment in response to a rise in foreign (Japanese) acquisitions of U.S. technology companies.

The Exon-Florio amendment granted the President the authority to block foreign acquisitions of companies engaged “in interstate commerce in the United States” that pose a risk to national security. To block a foreign acquisition, the President must conclude that other U.S. laws are inadequate to protect national security, and determine that there is “credible evidence” that the foreign acquirer might take action that threatens to impair U.S. national security.

The composition of the CFIUS has changed over time, but it is currently made up of the heads of the Departments of Treasury, Justice, Homeland Security, Commerce, Defense, State, and Energy, along with representatives from the Office of U.S. Trade and the Office of Science & Technology Policy. Other executive branch offices observe and participate in the CFIUS, including the Office of Management & Budget, the Council of Economic Advisors, the National Security Council, the National Economic Council, and the Homeland Security Council.

The President’s decision to suspend or prohibit a transaction is not subject to judicial review, but that power has been rarely exercised. In the past, President George H.W. Bush block a deal and President Obama blocked two deals involving Chinese acquirers. President Trump has already blocked three deals of which are two involved Chinese firms. The FIRRMA and CFIUS laws can give to President a major power to block investments from foreign investors. Maybe the reason that historically the Presidents have only rarely used their powers to formally block transactions is that the CFIUS typically enters into mitigation agreements with transacting parties to alleviate potential national security concerns. For instance, the parties may agree to allow foreign persons only limited or no access to sensitive documents or information bearing on national security, or agree to allow the U.S. government the right to review and approve certain business decisions. Thus, historically, even if the CFIUS determined that an acquisition threatened to impair national security, the CFIUS and the parties could usually find a way to mitigate that threat and still close the transaction.

The foreign investment risk review modernization act of 2018 (FIRRMA) was signed into law on August 13, 2018. The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to address growing national security concerns over foreign exploitation of certain investment structures which traditionally have fallen outside of CFIUS jurisdiction. Additionally, FIRRMA modernizes CFIUS’s processes to better enable timely and effective reviews of covered transactions.

Main FIRRMA provisions are:

  • Expands the scope of covered transactions

FIRRMA broadens the purview of CFIUS by explicitly adding four new types of covered transactions:

a purchase, lease, or concession by or to a foreign person of real estate located in proximity to sensitive government facilities;

“other investments” in certain U.S. businesses that afford foreign person access to material nonpublic technical information in the possession of the U.S. business, membership on the board of directors, or other decision-making rights, other than through voting of shares;

any change in a foreign investor’s rights resulting in foreign control of a U.S. business or an “other investment” in certain U.S. businesses;

any other transaction, transfer, agreement, or arrangement designed to circumvent CFIUS jurisdiction.

  • Declarations

Provides for an abbreviated filing process through a new “declarations” procedure that could result in shorter review timelines. It also allows CFIUS some discretion to require parties to file with CFIUS before closing a transaction.

  • Expands CFIUS’s timelines

Expands CFIUS’s review period from 30 to 45 days and allows an investigation to be extended for an additional 15-day period under extraordinary circumstances.

  • Mitigation

Strengthens requirements on the use of mitigation agreements, including the addition of compliance plans to inform the use of such agreements.

  • Special hiring authority and funding

Grants special hiring authority for CFIUS and establishes a fund for collection of new CFIUS filing fees.

On August 13, 2018, President Trump signed into law the FIRRMA, which had received overwhelming bipartisan support in both houses of Congress. So, FIRRMA expanded the authority of the CFIUS, to review, and potentially block, foreign investments in U.S. companies that are deemed to pose a threat to national security. In the telecommunications, integrated circuits, and payment systems the most notable news is that on March 12, 2018, President Trump (acting on a recommendation by the CFIUS) prohibited Broadcom’s (Singapore-based) proposed acquisition of Qualcomm (U.S.-based) on national security grounds. A problem can be with the U.S. companies that are seeking international investments and there are faced an increased risk that potential transactions could be blocked with limited legal options to challenge those decisions.


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