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The Committee on Foreign Investment in the United States, (CFIUS ) is an interagency committee that is chaired by the Secretary of the Treasury. CFIUS is tasked with regulating foreign investments involving U.S. businesses and the interaction of those investments with national security concerns. Therefore, any time you are involved (whether from the company side or investor side) in an foreign investment in a US business, CFIUS may have jurisdiction to review and investigate the transaction. Therefore, in some cases, it is best to simply assume CFIUS jurisdiction and to manage the transaction accordingly.
The international business transactions lawyers at Sequoia Legal can advise you concerning initial risk assessment, filing options, formal and practical time constraints, prevailing national security and foreign policy concerns, cybersecurity, data and infrastructure protection, regulatory compliance, mitigation and other critical matters.
The Committee on Foreign Investment in the United States (CFIUS) is a quasi-governmental agency with representatives from the Department of Defense, the State Department, the Commerce Department, and the Department of Homeland Security.
President Ford created it in 1975 to prevent sanctioned nations from obtaining US technology or intellectual property, either directly or indirectly, through investments in US companies.
CFIUS reviews transactions involving investment in or acquisition of US companies by foreign individuals or entities. It has authority to block any transaction that deems a national security threat or imposes conditions on any such transactions.
CFIUS has blocked foreign investment in US companies on many occasions. It has grown dramatically more active over the past decade. In 2018, for example, it conducted 158 investigations of foreign investments into US companies.
The Exon-Florio Amendment to the Defense Production Act allows the President to block or modify transactions that might result in foreign control of a US company, even through dominant minority ownership. On 2018, the U.S. Treasury Department issued initial regulations to implement the Foreign Investment Risk Review Modernization Act ( FIRRMA), which expands the jurisdiction of CFIUS. Prior to FIRRMA, CFIUS review of transactions was typically on a voluntary basis, where the parties to the transaction voluntarily submitted to CFIUS review and approval. After FIRRMA, certain transactions are subject to mandatory CFIUS review and failure to obtain CFIUS review for such transactions can result in significant penalties.
On October 15, 2020, The U.S Treasury Department issued a final rule (the "October Rule") that significantly modified the requirements surrounding CFIUS mandatory filings for transactions involving foreign investments in “TID US businesses” dealing in “critical technologies”. “TID US businesses” are sensitive US businesses dealing in critical technologies, critical infrastructure and sensitive personal data. CFIUS mandatory disclosures now rely entirely on whether a U.S. export authorization would be required to export the "critical technology" to certain foreign persons involved in the transaction, regardless of whether an actual export of the technology has or is intended to occur. Thus, the October Rule directly ties the mandatory filing requirement for critical technology transactions to established US export control regulations, including the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR) and Department of Energy and Nuclear Regulatory Commission authorizations related to atomic energy and nuclear equipment and material.
CFIUS regulations are complex and require a comprehensive understanding of not only the CFIUS regulations themselves, but also the related exports control regulations mentioned above, including the EAR and ITAR. Sequoia Legal can help you determine whether reporting is voluntary or mandatory under a given set of circumstances, We can also help you determine whether it would be in your best interests to submit a voluntary declaration of a merger, acquisition, or other foreign investment that might result in de facto foreign control of a US company.
If you file a declaration, whether mandatory or voluntary, be aware that every sentence of such a declaration has consequences. We can help you prepare a declaration in a manner that will reduce your legal risks and provide maximum protection of your interests.
Our CFIUS attorneys can help you with the following matters, among others:
Our goal is to offer you comprehensive assistance through every stage of your transaction and its aftermath.
Global boundaries are rapidly dissolving, and at Sequoia Legal, we represent major transnational industries and clients from all over the world.
Our clients are based in China, Russia, the United Arab Emirates, Qatar, Saudi Arabia, and Germany, as well as many other nations. We also represent US companies and persons receiving investments from foreign investors.
Our clients frequently rely on our guidance on major investments involving cutting-edge technology and complex compliance issues. Our clients have trusted us with the most complex and high-stakes transactions involving CFIUS reviews in the following industries:
Our clients choose us for three major reasons.
Our attorneys enjoy the benefits of long years of experience in the CFIUS review process concerning foreign direct investments that might pose a security risk to the United States. We understand their priorities, their methods, and above all, their thinking.
National security and regulatory compliance are two incredibly fast-moving areas of law. Our CFIUS lawyers invest the time that it takes to remain current in a rapidly evolving legal environment. We enjoy a successful track record of defending our clients against overbearing government interference.
The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) dramatically changed the game when it comes to CFIUS reviews. Our attorneys have kept up with these and other changes, and we are able to anticipate further changes down the road.
FIRRMA is the Foreign Investment Risk Review Modernization Act. It is a federal law that drastically expanded the jurisdiction of CFIUS and, to some extent, modified CFIUS processes.
FIRRMA created pilot programs to implement its provisions, to the extent that these provisions were not yet effective at the time the law was enacted. It also implemented a short-form filing and review process, and it expanded mandatory filing requirements to include certain transactions involving foreign governments and critical technology.
TID businesses include critical technology, critical infrastructure, and sensitive personal data. All of these are subject to CFIUS authority (and, in many cases, intense scrutiny).
The new CFIUS Pilot Program expanded the scope of transactions subject to CFIUS review to include even non-controlling real estate transactions and investments into US companies by foreign entities. It also made certain declarations mandatory that were previously voluntary.
CFIUS reviews are among the most daunting legal matters any business will ever face, rivaling even SEC regulations and antitrust law in their nuanced complexity. Fear not. The CFIUS lawyers At Sequoia Legal stand ready to help you make it through the CFIUS regulatory maze. Call (303) 476-2851 or contact us online to schedule a consultation.
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