CFIUS & FOCI

The Committee on Foreign Investment in the United States (CFIUS)

Torres Trade Law represents clients before CFIUS, a U.S. interagency committee responsible for regulating certain foreign investments in the United States. What makes us unique is our extensive experience with the export regulatory regimes controlling sensitive technologies as well as the issues that raise national security concerns vital in mitigating our clients’ risks. Our network of attorneys and trade advisors have ample experience in national security issues for key government agencies as well as members of the intelligence community.

We regularly advise clients on CFIUS matters, including whether a transaction should be reported to CFIUS, advising on the structure of a foreign investment, assisting in preparing CFIUS submissions, and representing clients in the CFIUS review process.

Foreign Ownership, Control, or Influence (FOCI)

We advise companies on FOCI mitigation, develop FOCI mitigation plans, and provide guidance on how transactions might be structured to best anticipate FOCI concerns.

For example, if a U.S. defense contractor with access to classified information receives funding, investment capital, or substantial revenue from a foreign source, the National Industrial Security Program can be triggered, and we can assist your company in complying with U.S. regulations.
 

Recent representative matters:

  • Assisted multiple companies with issues related to CFIUS mandatory filing determinations as implemented by the Foreign Investment Risk Review Modernization Act (FIRRMA).
  • Assisted a U.S.-based government contractor in connection with its acquisition by a Japanese company and related CFIUS issues, including CFIUS mitigation plan compliance and meetings with CFIUS Department of Defense monitors.
  • Preparation of CFIUS short-form declaration on behalf of global operations management consulting firm and coordination with client on legal strategy and preparation of declaration.
  • Assessed risks in deals with respect to CFIUS concerns.
  • Advised U.S. target company regarding FOCI mitigation plan concerns, including assistance with respect to the rights of mitigated, company owners vis-a-vis the foreign parent.
  • Prepared and assisted in management of Special Security Agreement and Technology Control Plan for foreign-owned U.S. company with facility security clearance.

Recent Articles:

Recent News and Speaking Engagements:

  • Olga Torres will present at ACI's 6th National Forum on FOCI on The Increasing Overlap of FOCI and CFIUS: Evolving Considerations Affecting Filings, Reviews, Mitigation Agreements – and Your Strategy for Managing Concurrent Processes (Sep. 20-21, 2023)
  • Derrick Kyle and Donald Pearce presented A Primer on the Committee on Foreign Investment in the United States (CFIUS): Are You Ready for Increased Enforcement?, International Law Section of the State Bar of Texas 32 Annual International Law Institute in Dallas, Texas (Apr. 20, 2023)
  • Derrick Kyle presented on Effective Solutions to “Bridge the Gap” for Investors to the United States (discussing CFIUS matters), SelectUSA in Toronto, Ontario (Nov. 9, 2022)
  • Torres Trade Law sponsored the 6th National CFIUS Conference in Washington D.C. (July, 2020).
  • Olga Torres to present on CFIUS issues at the International Bar of Texas Annual conference in Toronto, Canada (new date coming soon; postponed due to COVID-19).
  • Olga Torres presented on CFIUS issues at the InnoTech Austin Conference (October 2, 2018).

CFIUS Conference Sponsorships

Torres Trade Law is a proud sponsor of the 7th National Conference on CFIUS, the 4th National Forum on FOCI, and the 2nd European Forum on FDI Reviews and CFIUS. All three conferences will be held virtually.

The 7th National Conference on CFIUS will be held on April 20-21, 2021, this informative event discussing ensuring deal success amidst expanded scrutiny of foreign investments in technology, infrastructure, data and real estate. Engage in meaningful dialogue with leaders in National Security, International Trade, Foreign Investment and Export Controls. For more information register here and save 10% using the code: P10-999-TORL21.

The 2nd European Forum on FDI Reviews and CFIUS will be held on May 19-20, 2021. This conference will discuss the past year, as there has been significant regulatory change to many national security regimes. The European Commission’s new foreign direct investment screening regulation is now in effect and many Member States are enacting or revising their own regulations. Potential M & A deals are receiving heightened scrutiny from various regulators. With these profound changes in the EU and the global expansion of CFIUS, this timely virtual program will provide you with an in-depth overview of the process to securing the necessary approvals. For more information register here.

ACI’s 4th National Forum on FOCI will bring together key stakeholders from government, industry and private practice who are involved in some of the most significant matters to date. Companies under Foreign Ownership, Control or Influence need to stay alert on many fronts. Given the different requirements of DCSA, DOE and DHS, companies under FOCI must be fully apprised of the implications, as well as the effect on their eligibility for access to classified information. These ramifications become even more complex when a National Interest Determination (NID) comes into play. What’s more, the intersection of FOCI mitigation with the CFIUS approval process requires a well thought-out strategy toward maximizing the chances of a favorable outcome – a process that has become even more complex given the recent passing of the anticipated CFIUS Reform (FIRRMA). The 4th National Forum on FOCI will be held on September 15, 2021 register here for more information.

CFIUS FAQs:

1. What is CFIUS?

The Committee on Foreign Investment in the United States (“CFIUS”) is a United States federal interagency body that reviews certain foreign investments in U.S. businesses and certain real estate transactions by foreign persons for national security implications; and advises the President on such transactions. The Committee is chaired by the U.S. Secretary of the Treasury and composed of nine members from the federal executive branch, two ex officio members, and other members as appointed by the President.

2. Where does CFIUS derive its authority?

CFIUS operates pursuant to section 721 of Title VII of the Defense Production Act of 1950, commonly known as the Exon-Florio amendment; and as implemented by Executive Order 11858, as amended. The Exon-Florio amendment gives the President authority to suspend or prohibit certain foreign investment transactions. In 2007, section 721 was substantially revised by the Foreign Investment and National Security Act of 2007 (“FINSA”). And in 2018, section 721 was again significantly revised by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which became effective August 13, 2018. The implementing regulations are found at chapter VIII of title 31 of the Code of Federal Regulations.

3. Why should I care about CFIUS?

U.S. businesses engaged in certain transactions involving foreign investors may be within CFIUS’s jurisdiction. If so, for transactions which CFIUS believes raise national security concerns, CFIUS can impose limitations on a foreign investment as condition of receiving CFIUS clearance. Additionally, CFIUS can recommend to the President of the United States to unwind or block the transaction. Importantly, CFIUS retains jurisdiction indefinitely to review any transaction, before or after completion. Pursuant to FIRRMA, mandatory filings are required for certain transactions and failure to file can result in severe penalties of up to $250,000 or the value of the transaction, whichever is greater. Additionally, the underlying transaction can be undone or blocked.

4. What is the scope of CFIUS’s jurisdiction?

In general, the following transactions fall under CFIUS jurisdiction:

  • Control Transactions: Any merger, acquisition, or takeover transaction that could result in control over any U.S. business by any foreign person;
  • “Covered Investments”: Certain non-passive “covered investments” in certain unaffiliated U.S. businesses that are involved in critical technologies, critical infrastructure, or the maintenance or collection of sensitive personal data of U.S. citizens (“TID U.S. Business”).
  • Covered Real Estate Transactions: Certain real estate transactions in close proximity to sensitive government facilities and ports.
  • Change in rights: Any transaction that changes a foreign person’s rights in a U.S. business.
  • Evasive Transactions: Any transaction intended to evade or circumvent CFIUS jurisdiction.

5. What triggers a mandatory filing?

Mandatory filing requirements are triggered for two types of transactions (certain exceptions may apply):

  1. When a critical technology TID U.S. business is involved (specific criteria applies); or
  2. When a foreign government has a substantial interest in a TID U.S. business.

6. What qualifies as a national security concern?

When assessing national security implications arising from a covered transaction/investment CFIUS may consider a broad range of factors, and such factors are not disclosed by the Committee. Some general factors when assessing national security risks that CFIUS will most likely consider include:

  • Whether the target U.S. business has any contracts with the U.S. Government (USG), including contracts for national security responsibilities and classified contracts. This would also include prime or sub-contractors to USG agencies or state and local authorities.
  • Whether the target is a sole or single source supplier.
  • Whether the target’s business (goods or services) could affect the security of USG agencies or create vulnerability to sabotage or espionage.
  • Whether the target U.S. business is involved with critical technologies or products (e.g., commodities, software, or technology) controlled under U.S. export control laws.
  • Whether the transaction would result in foreign control over physical or virtual "critical infrastructure.”
  • Whether the target U.S. business has any offices or facilities in locations near sensitive government facilities (e.g., military bases, national laboratories, etc.).
  • Whether the target U.S. business stores or has access to detailed personal/consumer information, including credit card, social security numbers, etc.
  • The foreign investor’s nationality and extent of foreign government ownership (e.g., China and Russia investors present a higher risk).
  • Foreign investor’s record and intentions such as records of the country of the investor regarding nonproliferation and other national security matters. Or if the foreign person could terminate contracts between U.S. businesses and USG agencies; reduce or eliminate research and development facilities; change product quality; shut down or move outside the U.S. facilities that are within the U.S.; consolidate or sell product lines or technology; eliminate domestic supply, to name a few.

7. How can Torres Trade Law help?

If your transaction potentially involves a foreign buyer/investor, contact the attorneys at Torres Trade Law. We can help identify CFIUS-related risks, assist in determining whether parties should notify CFIUS of a pending or proposed transaction, advise on the structure of a foreign investment, assist in preparing CFIUS submissions, and represent clients in the CFIUS review process. We have extensive experience with export control laws and regulations, and the export control regimes play a significant role in the CFIUS analysis.

 

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