Foreign Investment Review Amendments Proposed in Treasury Regulations
The Treasury Department has proposed regulations to comprehensively implement the Foreign Investment Risk Review Modernization Act, which broadened the authorities of the Committee on Foreign Investment in the United States to better address national security concerns arising from some types of investments and real estate transactions. Among other things, these regulations would implement CFIUS’s new jurisdiction over (a) certain non-controlling investments into certain U.S. businesses involved in critical technology, critical infrastructure, or sensitive personal data and (b) certain real estate transactions involving foreign persons. Comments on the proposed rule are due no later than Oct. 17, and final regulations must become effective no later than Feb. 13, 2020.
The proposed rule reflects the expansion of CFIUS’s jurisdiction to non-controlling investments that afford a foreign person certain access, rights, or involvement in a U.S. business that (a) produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies (e.g., certain items subject to export controls as well as emerging and foundational technologies controlled under the Export Control Reform Act of 2018), (b) owns, operates, manufactures, supplies, or services critical infrastructure (e.g., telecommunications, energy, utilities, and transportation), or (c) maintains or collects sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security.
According to Treasury, the CFIUS review process remains largely voluntary under the proposed rule; i.e., parties can choose whether or not to file a notice or submit a short-form declaration notifying CFIUS of a covered investment in order to receive a potential safe harbor letter, after which CFIUS will generally not initiate a review. However, filing a declaration is mandatory for specified covered transactions where a foreign government has a substantial interest. In addition, FIRRMA authorizes CFIUS to mandate the filing of a declaration for covered transactions involving certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. CFIUS is currently conducting a pilot program on critical technologies and the proposed rule does not modify that pilot.
The proposed regulations on real estate transactions are generally structured around specific sites—certain airports, maritime ports, military installations, and other U.S. government facilities and properties—and specific geographic areas in and/or around those sites. There is no mandatory filing requirement for such transactions, and parties may file a notice or submit a short-form declaration to potentially qualify for a safe harbor letter.