Committee on Foreign Investment in the United States (CFIUS)
Foreign investment in the United States falls under the purview of the US Government’s Committee on Foreign Investment in the United States (CFIUS), which reviews and investigates transactions to determine whether they pose risks to US national security. In 2018, Congress strengthened CFIUS’ authority by enacting the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which represented the most sweeping overhaul of the operations and jurisdiction of CFIUS in its 44-year history.
The US Treasury Department gave immediate effect to FIRRMA through regulations issued in October 2018 that implemented certain parts of FIRRMA and established a pilot program on critical technologies that, effective November 10, 2018, expanded the scope of transactions subject to CFIUS review and mandated the submission of short-form “declarations” to CFIUS under certain circumstances.
On September 17, 2019, the Treasury Department released the long-awaited comprehensive draft regulations to implement FIRRMA, which will significantly expand the jurisdiction of CFIUS to cover a much wider range of transactions, likely resulting in a dramatic spike in CFIUS reviews in 2020 and beyond. The new regulations take effect no later than February 13, 2020.
David Hanke, who was the primary staff architect of FIRRMA and the chief strategist behind its 2018 enactment while working in the Senate, has now joined Arent Fox’s National Security Group. With Dave on the Arent Fox team, our clients will benefit from his keen insights as to CFIUS risk analysis and other processes, his skilled preparation of CFIUS submissions, and his most-capable representation of them in dealings with CFIUS.
The Arent Fox team represents US companies that receive foreign investments and foreign companies and investment funds that make investments in US companies. Currently, we are assisting a number of foreign investment funds to restructure themselves for investment in the United States in accordance with CFIUS guidance for investment funds that is set forth in the new Treasury Department regulations.
Foreign Ownership, Control, or Influence (FOCI)
In addition, when a foreign investment is in a US company that performs classified work for the US Government, Arent Fox is very experienced at implementing and advising on measures to mitigate foreign ownership, control, or influence (FOCI) in accordance with the government’s National Industrial Security Program Operating Manual (NISPOM). Our team works closely with the Defense Security Service (DSS) and other cognizant security agencies to identify potential FOCI – and to implement mitigation measures.
Our team has represented many companies in developing and implementing proxy agreements, special security agreements (SSAs), security control agreements (SCAs), and other FOCI-mitigation measures. Often, clients invite our lawyers to continue the representation long after the transaction is completed – to assist with and oversee the company’s implementation of FOCI-mitigation processes and related contracting practices.