February 7, 2017

National Security: CFIUS Review in 2017

Late last year, CFIUS got dealmakers’ attention when it recommended that President Obama block a Chinese investment fund’s pending purchase of a US-based semiconductor business.  As I blogged at the time, the President’s decision to block the deal represented only the third time that an American president had blocked a transaction on national security grounds.

This Winston & Strawn memo reviews CFIUS’ recent actions & offers up some thoughts on the role it may play during the current year.  This excerpt highlights the possibility that CFIUS review may serve as a bargaining chip for the Trump Administration’s trade & investment initiatives:

President Trump has stated an intention to revisit U.S. trade practices. There has been speculation in media sources that CFIUS, although it looks at foreign investment, may be a tool that the administration uses in this regard. This is in part because the President’s national security authority is broad and practically unchallengeable in this circumstance. Potential developments include an enhanced use of mitigation agreements to obtain promises regarding U.S. production and jobs. The process may also become more politicized if the President uses it for leverage in other negotiations.

The memo raises specific issues that ought to be considered in acquisitions involving a foreign buyer – but notes that despite the changing environment, the vast majority of foreign investments in the US will continue to receive approval.

John Jenkins