This year's reforms to the CFIUS process (the process the U.S. uses to review foreign investments for their security implications) extend reviews to new industry sectors and new types of transactions, and increase both the level of scrutiny and the number of scrutinizing partners - conclude George Foote and Joshua Zive of Bracewell and Giuliani: United States: The Foreign Investment And National Security Act Of 2007: Improved Transparency And Slower Deal Making (October 30):
The Act formally defines "national security" to include "homeland security." It establishes procedures to review foreign acquisition of "critical infrastructure" and "critical technologies," defined as "systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems or assets would have a debilitating impact on national security."
These new definitions increase the number of industry sectors that are treated as critical to national security. In addition to defense and technology companies, any business operating in a sector that is important to the U.S. economy — including transportation companies, energy and power companies, ports and airports, banks, food suppliers and telecommunications providers — may be subject to national security analysis.
The range of "covered transactions" open to scrutiny has expanded. Under FINSA, any merger, acquisition or takeover that could result in foreign control of an entity engaged in U.S. interstate commerce may be reviewed for national security concerns, and CFIUS must review any transaction in which the acquirer is a foreign government or an entity controlled by a foreign government....
FINSA also will subject transactions to more scrutiny by more parties. Although CFIUS filings remain largely voluntary, the Act provides the President and the executive branch with increased authority to initiate investigations into covered transactions, including transactions that have been reviewed previously.
The likelihood of an investigation following a CFIUS review has increased along with the increased number of parties to CFIUS deliberations. For example, the Secretaries of Labor and Energy have been added to the committee, the Director of National Intelligence is a non-voting member, and a new assistant secretary has been added to the Treasury Department to handle CFIUS duties.
The results of investigations must be provided to Congress for consideration. This notice requirement opens the process to public scrutiny and invites the application of influence by domestic private and political parties — including labor unions, activist groups and business suitors competing for the acquisition target. Such politicized conflicts and controversies could delay or derail transaction approvals.
Foreign governments may perceive a CFIUS action that blocks a transaction to be a non-tariff trade barrier to potential investments in the U.S. or an effort to implement informal protectionist policies. Diplomatic involvement in a transaction could create more political controversy that could affect the pricing and the approval of the transaction.
The Treasury Department will consider any report relating to a transaction described in this Advisory to constitute a report of a suspicious transaction relevant to a possible violation of law or regulation.
Posted by: r4 karte | February 12, 2010 at 10:11 PM