CFIUS Flexes Its Muscles

The Committee on Foreign Investment in the United States (CFIUS or the Committee) has increasingly sought to expand its authority. That effort has accelerated markedly this year.

The muscle-flexing means that the Committee—which reviews foreign investments for national security implications—creates more risk for foreign investors and their US counterparties. This risk can be managed, but first it has to be recognized.

We have been involved in a number of cases that demonstrate this risk. Those cases have reflected the Committee's growing inclinations to:

Compel notices for previously non-filed transactions Find national security risk based on proximity to sensitive defense installations Issue substantive orders Assert authority with respect to matters other than foreign control Non-Filed Transactions

CFIUS has been looking broadly at transactions for which the parties did not file a notice seeking clearance from the Committee.

If a non-filed transaction touches on national security—from the perspective of the Committee or any Committee member—there is a good chance CFIUS will offer the parties an opportunity to file a notice. And to paraphrase Don Corleone, this is an offer that should not be refused: CFIUS has authority to initiate a review of a transaction on its own if the parties do not file "voluntarily," and a notice filed by the parties will invariably put the transaction in a better light than a refusal. There is no time limit on the Committee's authority to review non-filed transactions; transactions that closed years ago still can be reviewed. We are familiar with one recent case in which CFIUS compelled a filing for a transaction that closed three years previously.

While CFIUS has examined non-filed transactions for many years, it has become much more aggressive on this front. CFIUS searches the press and other sources for transactions that touch on national security, and the number of non-filed transactions for which CFIUS has requested filings has risen. Whereas CFIUS requests for parties to file a notice used to be relatively rare, they now regularly occur every year.

This development creates several risks. First, when CFIUS requests a filing, the parties are starting off on the wrong foot. These transactions receive additional scrutiny—both because CFIUS already has decided that the transaction may raise national security concerns and because CFIUS generally is suspicious that the parties deliberately sought to avoid review...