On 13 January 2020, the U.S. Department of the Treasury (Treasury) issued the long-awaited final regulations (the Regulations) that implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), the statute governing the Committee on Foreign Investment in the United States (CFIUS). The Regulations, which include a final rule relating to real estate transactions and a final rule for all other covered transactions, largely retain the substance of the proposed rules issued in September 2019 (the Proposed Rules) and will be effective 13 February 2020.
Notably, FIRRMA and the Regulations represent the first major overhaul of the CFIUS regime in over a decade. With the issuance of the Regulations, the implementation of FIRRMA is substantially complete, thus ushering in a new era for U.S. foreign investment reviews in which CFIUS's jurisdiction is broader and some transactions trigger a mandatory filing.
Key takeaways from the Regulations include:
Expansion of CFIUS's Jurisdiction to Non-Controlling Investments: The Regulations cement CFIUS's enhanced authority to review foreign non-controlling investments in certain U.S. businesses. CFIUS's jurisdiction will now capture transactions involving foreign non-controlling investments in certain U.S. companies associated with critical technologies, critical infrastructure, and sensitive personal data of U.S. citizens (so-called TID U.S. businesses), if the investments would afford the foreign person (i) access to material nonpublic technical information of the U.S. business, (ii) membership or observer rights on, or the right to nominate an individual to a position on, the board of directors or equivalent governing body of the U.S. business, or (iii) any involvement, other than through the voting of shares, in certain substantive decision-making of the U.S. business. Descriptions of these TID U.S. businesses are set forth below: Critical Technology U.S. Businesses: These are U.S. businesses that "produce, design, test, manufacture, fabricate, or develop" one or more critical technologies. The term "critical technologies" is defined as: (i) defense articles or defense services controlled under the International Traffic in Arms Regulations, (ii) certain items on the Commerce Control List of the Export Administration Regulations, (iii) items subject to nuclear-related controls administered by the Nuclear Regulatory Commission and Department of Energy, (iv) select agents and toxins...