President Bush signed Jan. 23 an executive order reforming the federal government’s foreign investment review process in light of the Foreign Investment and National Security Act of 2007. Among other things, FINSA requires the Committee on Foreign Investment in the U.S. to conduct 30-day reviews of covered transactions to determine whether they threaten national security. CFIUS must also conduct 45-day investigations of those transactions that do pose such a threat, including those involving foreign government-owned companies and control of critical infrastructure. Bush and other administration officials emphasized this week that neither FINSA nor the executive order alters the U.S. policy of welcoming foreign investment.
The Jan. 23 executive order includes the following provisions.
CFIUS Membership. The U.S. trade representative and the director of the Office of Science and Technology Policy are added as members of CFIUS. The secretaries of Treasury, Homeland Security, Commerce, Defense, State, Energy and Labor, the attorney general and the director of national intelligence were named as CFIUS members under FINSA, with the treasury secretary acting as chairperson.
The executive order also designates the following officials to observe and, as appropriate, participate in and report to the president concerning CFIUS activities: director of the Office of Management and Budget; chairman of the Council of Economic Advisers; assistant to the president for national security affairs; assistant to the president for economic policy; and assistant to the president for homeland security and counterterrorism.
Authority. The treasury secretary is assigned the functions that FINSA assigned to the president concerning review and consideration after notification, unilateral initiation of review and consideration, and inclusion in annual report and designation. The treasury secretary is also authorized, exclusive of the heads of departments or agencies and after consultation with CFIUS, to act on behalf of the committee and communicate on its behalf with Congress and the public.
The lead agency in a given investigation will have primary responsibility, on behalf of CFIUS, for the specific activity for which the treasury secretary designates it a lead agency. In acting on behalf of CFIUS, the lead agency must keep the committee fully informed of its activities. It must also notify the committee chair of any material action that it proposes to take on behalf of the committee sufficiently in advance to allow adequate time for the chair to consult the committee and provide its direction to the lead agency not to take, or to amend, such action.
Reviews and Investigations. Any CFIUS member may conduct its own inquiry with respect to the potential national security risk posed by a transaction, but communication with the parties to a transaction must occur through or in the presence of the lead agency. If, following such a review, that member advises the CFIUS chair that it believes the transaction threatens to impair U.S. national security and that this threat has not been mitigated, the committee will be required to launch an investigation.
CFIUS must send a report to the president requesting his/her decision with respect to a transaction review or investigation if the committee (a) recommends that the president suspend or prohibit the transaction, (b) is unable to reach a decision on whether to make such a recommendation, or (c) requests that the president make a determination with regard to the transaction.
Risk Mitigation. CFIUS or any lead agency acting on its behalf may seek to mitigate any national security risk posed by a transaction that is not adequately addressed by other provisions of law by entering into a mitigation agreement with the parties to a transaction or by imposing conditions on them. Before proposing risk mitigation measures, CFIUS must be provided with a written statement that (a) identifies the national security risk posed by the transaction based on factors including threat, vulnerabilities and potential consequences and (b) sets forth the measures believed to be reasonably necessary to mitigate that risk. If the proposed measures are approved by CFIUS, they will then be negotiated with the parties to the transaction.
Foreign Investment Information. The secretary of commerce is required to (a) obtain, consolidate and analyze information on foreign investment in the U.S.; (b) monitor and, where necessary, improve procedures for the collection and dissemination of such information; (c) prepare reports, analyses of trends and analyses of significant developments in appropriate categories of foreign investment in the U.S.; and (d) compile and evaluate data on significant transactions involving foreign investment in the U.S.
World Trade/Interactive
