DealLawyers.com Blog

Last year, I blogged about how proposals to implement national security reviews of outbound investments were bouncing around Congress. While specific legislation wasn’t enacted, the possibility of a requirement for screening of outbound investments is very much alive, and this Dorsey & Whitney blog says that national security reviews of certain outbound investments may be mandated very soon.

How did we get to this point? Well, language in explanatory statements accompanying the Consolidated Appropriations Act passed last December encouraged the Treasury & Commerce to “consider establishing a program to address the national security threats emanating from outbound investments from the United States in certain sectors that are critical for U.S. national security.” The departments were also directed to “submit a report describing such a program including the resources required over the next three years to establish and implement it” not less than 60 days after the enactment of the legislation.

That report appears to have been submitted, and this excerpt from the blog summarizes its conclusions:

Press reports suggest that both Treasury and Commerce delivered the required reports to Congress in early March. These reports detailed a proposal that would establish a mechanism to review outbound investments in to-be identified countries and sectors. Almost certainly any program will focus on investments with connections to China and Russia initially, and likely include sectors such as semiconductors, artificial intelligence, and quantum computing, which are viewed as sensitive sectors essential to U.S. national security.

The U.S. Government has long held the view that Chinese investments in these sectors may raise national security concerns because the investment could potentially be used to advance Chinese military capabilities. The Committee on Foreign Investment in the United States (“CFIUS”) has exercised repeatedly its authority to prohibit in-bound investments in U.S. businesses that operate within these sectors.

The blog says that President Biden may issue an executive order implementing the recommendations contained in these reports as soon as this month, and that companies in any of the identified sectors should be aware of the potential impact of such an order on their future business operations.

– John Jenkins