October 17, 2017

National Security: Takeaways from the CFIUS Annual Report

CFIUS recently released its “Annual Report to Congress for 2015.”  That’s not a typo – the report was issued much later than in prior years. The report provides an overview of the notices that CFIUS received during the calendar year covered by the report, & includes statistical data on those transactions.

This Latham memo addresses the key takeaways from the report.  They include:

– The delayed release of the Report likely reflects the increased resource constraints under which CFIUS has been operating
– The number of voluntary notices filed with CFIUS has increased in the past few years, with significant increases in 2016 and expected in 2017
– Chinese investment continues to generate the largest number of transactions subject to CFIUS review
– CFIUS has been increasingly more likely to extend initial 30-day “reviews” into longer “investigations”
– Parties withdrew filings at a rate similar to previous years, but re-filed a much higher percentage of those notices
– CFIUS rejected one filed notice based on the parties’ failure to provide information consistent with that available to CFIUS
– Certain foreign governments are engaging in coordinated strategies and espionage aimed at obtaining “critical technologies” from US companies
– 2015 saw a sustained increase in notices involving manufacturing businesses – particularly businesses in the semiconductor industry
– CFIUS continues to use traditional mitigation techniques to address national security concerns, and to adopt new ones as well

The memo also notes that the Report identifies new factors that might give rise to national security concerns – including US businesses that “hold substantial pools of potentially sensitive data about US persons and business” in sectors of national security importance. CFIUS also identified as a factor those US businesses “in a field with significant national security implications in which there are few alternative suppliers or in which a loss in U.S. technological competitiveness would be detrimental to national security.”

John Jenkins