Legislation reforming the way the U.S. vets foreign direct investment for national security concerns became effective in late October (The Foreign Investment and National Security Act of 2007: Improved Transparency and Slower Deal Making).
George Foote and Joshua Zive of Bracewell and Giuliani have identified a few trends in the way the Committee on Foreign Investment in the U.S. (CFIUS) carries out reviews in the new legal environment (United States: Heightened Scrutiny Of Foreign Transactions In The U.S. Continues While FINSA Regulations Are Developed, March 6):
First, since new CFIUS regulations have yet to be promulgated, applying the existing regulations to transactions under FINSA is often a complex and difficult process. Our experience with recent filings shows that old, yet still binding, regulatory definitions are much narrower than the breadth of the FINSA statutory language, forcing businesses and their counsel to make difficult judgments about whether and how to file voluntary CFIUS notices.
Second, the uncertainty and heightened scrutiny surrounding foreign investment in the US has led to the filing of a greater number of voluntary notices with CFIUS. In turn, the greater number of cases being reviewed by CFIUS has reduced opportunities for informal vetting of transactions with CFIUS officials.
Third, President Bush's executive order of January 23, 2008, calls for an even more intense review of foreign investment in the U.S. by, among other things, clarifying the role of the director of national intelligence in reviewing transactions and requiring investigations if any CFIUS member believes that a transaction puts national security at risk.
So,
All of these developments have made it even more important that formal notices are complete, accurate and well-drafted.
There are more CFIUS-related posts here: CFIUS.
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