September 20, 2019

National Security: Proposed Regs Would Significantly Expand CFIUS Jurisdiction

Earlier this week, the Treasury Department issued proposed regulations that would implement the Foreign Investment Risk Review Modernization Act that President Trump signed into law last August. The proposed regulations address transactions that weren’t covered by the FIRRMA pilot program regulations that were put in place last October, and this Ropes & Gray memo says that they are a very big deal:

The draft regulations set forth in the Proposed Rules, if implemented in their current form, would mark a significant expansion of CFIUS’s jurisdiction to review foreign investments in the United States. Among other changes, the Proposed Rules would provide the Committee with the ability to review non-controlling investments by foreign persons in certain categories of U.S. businesses, including those dealing in critical infrastructure and sensitive data, and make certain filings by foreign government-affiliated investors mandatory for the first time.

The Proposed Rules also would alleviate existing CFIUS-related considerations for certain foreign investors, including by codifying exceptions to CFIUS’s jurisdiction, adjusting the procedures used to notify CFIUS of covered transactions, and potentially creating exclusions from the Committee’s jurisdiction for investors associated with certain countries.

The memo reviews the proposed regulations in detail. It notes that the comment period ends on October 17th, and that CFIUS has until February 13, 2020 to issue final rules.

John Jenkins