Corporations Should Keep an Eye on CFIUS Reform
After promising in early March to act quickly in issuing legislation, the Senate Banking, Housing and Urban Affairs Committee, in mid-May finally considered legislation which would reform the manner in which the multi-agency Committee
on Foreign Investment (CFIUS) reviews proposed foreign direct investment transactions in U.S. companies which may threaten national security.
The House unanimously passed its version of CFIUS reform legislation (H.R. 556) on February 28, 2007. The Senate has lagged in taking up the issue but on May 16 the committee held a quick markup hearing of the “Foreign Investment and National Security Act of 2007.” While the bill still has not been formally introduced, Troutman Sanders LLP has obtained a copy of the draft legislation. The Senate version of the bill tracks many key provisions of H.R. 556. Senator Dodd acknowledged that the committee used the House bill as a “baseline” given that numerous business groups have voiced support for that bill’s less restrictive provisions. This development is significant as these same business groups opposed last year’s Senate CFIUS bill which they argued would have politicized the process by requiring Congressional notification prior to any final determination. The new Senate bill would provide written notification to Congress only after the review is completed, and would impose the same confidentiality requirements on Congress that exist for the agencies involved in the CFIUS review process.
The Senate bill follows H.R. 556 in setting 30-day and 45-day timelines for CFIUS to review proposed transactions. For most transactions, CFIUS would have 30 days to review the transaction for any potential effects on national security. CFIUS would have 45 days to review transactions which involved foreign government-owned companies and control of any critical infrastructure. The Senate bill differs from the House version by providing for an exception for the 45-day timeline if the President can readily determine that the transaction involving a foreign government-owned entity would not impair national security.
Among other provisions, the Senate legislation would strengthen the role of the Director of National Intelligence, and mandate the designation of a lead agency for each covered transaction in addition to the Department of Treasury. This companion agency would be charged with negotiating any conditions (and the enforcement thereof) that the U.S. might impose on an entity investing in and/or acquiring control over any U.S. company.
Chairman Dodd stated that the bill “provides for careful inspection of certain types of investments that may adversely affect national security, and does so through timely and clear procedures so as to not discourage investors.” He did acknowledge that additional work was necessary on the Senate bill prior to bringing it to the floor for full Senate consideration in July. Pending any significant Senate amendment, House and Senate leaders indicated that a “smooth conference” committee process is expected for final passage of a CFIUS. The White House has not yet taken a position on the Senate bill; and, while supportive of the House-passed version, the Administration earlier this year did note several concerns.
For additional information on the CFIUS review, please contact:
Charles A. Hunnicutt, Esq. 202-274-2957 charles.hunnicutt@troutmansanders.com
C. Jonathan Benner, Esq. 202-274-2880 jonathan.benner@troutmansanders.com
Patricia N. Snyder, Esq. 202-274-2899 patricia.snyder@troutmansanders.com
Scott E. Diamond 202-274-2969 scott.diamond@troutmansanders.com