Two posts at the new "International Economic Law and Policy Blog" examine legal aspects of the Dubai Ports World controversy.
Paul Stephan explores different interpretations of the Exon-Florio requirement for a 45 day additional review, if "the acquisition of an enterprise engaged in US commerce by an entity controlled by a foreign government 'could affect the National Security of the United States' ": Still More on Port Management.
A technical issue in this dispute is whether the "mandatory investigation" rule of 50 U.S.C. app. sec. 2170(b), a 1992 amendment to the original Exon-Florio statute, applies. It requires a 45 day inquiry whenever the acquisition of an enterprise engaged in US commerce by an entity controlled by a foreign government "could affect the National Security of the United States." The question is what "could" means. The critics of the transaction argue in effect that it means "conceivable". The administration apparently believes a more substantial standard applies.
What is this more substantial standard.
Elana Schor reports on administration testimony from last week ("Bush administration defends ports deal on Capitol Hill ", The Hill, Feb 23):
Sens. Hillary Rodham Clinton (D-N.Y.) and Robert Byrd (D-W.Va.), however, charged that the White House's failure to pursue a second, 45-day CFIUS investigation violated the congressional statute codifying the process. Byrd wrote an amendment to the 1988 statute, also called Exon-Florio, calling for an automatic second review if an acquiring business is controlled by a foreign government and if the deal affects interstate commerce that could have an impact national security....
Dubai Ports World, of course, is controlled by the government of the United Arab Emirates:
Robert Kimmitt, the deputy secretary of the treasury who typically spearheads CFIUS investigations, disputed Byrd's reading of his own amendment, characterizing the extra review as discretionary rather than automatic in cases of government-owned businesses. CFIUS's unanimous approval of the deal, Kimmitt explained, signified a consensus that the $6.8 billion ports deal would not adversely affect national security.
"CFIUS has evolved over time to keep pace with changes to the concept of national security," Kimmitt said, citing the increased involvement of the Office of the Director of National Intelligence (DNI), a Bush-created agency led by John Negroponte, in evaluating foreign deals.
That's a little on "could" but not a lot.
In an earlier post (GATS and Port Management), Stephan asked,
"Senator Clinton apparently has introduced legislation that would bar firms owned by foreign states from managing US ports. The bill is aimed at the takeover of P & O, a company that currently manages six US ports, by Dubai Ports World, which belongs to the United Arab Emirates. The purported policy motivating this legislation is the risk to national security posed by foreign ownership.
Several questions arise. Can this legislation be squared with US obligations under the General Agreement on Trade in Services?..."
Simon Lester responded (in the comments):
On the WTO side, it seems like an easy case for the U.S. under GATS XIV bis:
Nothing in this agreement shall be construed . . . (b) to prevent any member from taking any action which it considers necessary for the protection of its essential security interests:
. . .
(iii) taken in time of war or other emergency in international relations;
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