For many years, the Committee on Foreign Investment in the U.S. (or “CFIUS”) has had jurisdiction to review mergers and acquisitions resulting in a non-U.S. person or entity gaining control of a U.S. business whose activities relate to U.S. national security. CFIUS is comprised of representatives from several U.S. government agencies.
On August 13, 2018 the U.S. enacted a new law (the Foreign Investment Risk Review Modernization Act, or “FIRRMA”) to expandthe jurisdiction of CFIUS. The stated purpose of FIRRMA is to strengthen the U.S. government’s ability to protect U.S. national security interests while maintaining a policy of welcoming foreign investment in the U.S.
Prior to FIRRMA, CFIUS only reviewed mergers and acquisitions. FIRRMA expands the jurisdiction of CFUIS to include other kinds of investments, including: (a) non-controlling investments in U.S. businesses involved in critical infrastructure, critical technology, or sensitive personal data; (b) real estate investments involving properties near military or national security facilities; and (c) changes in existing investments that could result in the investor acquiring control of, or certain non-controlling interests in a U.S. business involved in critical infrastructure, critical technology, or sensitive personal data.
CFIUS’s expanded jurisdiction does not reach all investments that result in non-controlling interests of U.S. businesses with national security concerns. It only extends to transactions that result in a foreign person or entity (1) potentially gaining access to material non-public technical data relating to U.S. national security interests; or (2) gaining the right to be involved in substantive decisions made by a U.S. business involved in critical infrastructure, critical technology, or sensitivepersonal data.
Many of the terms used in FIRRMA (and in thisnote) will require definition and clarification in regulations that have not yet been issued. For example, FIRRMA does not define “sensitive personal data.”
For this reason, the expansion of CFIUS’s jurisdiction does not go into effect immediately. It goes into effect on the earlier of February 13, 2020, or thirty days after the US Treasury Secretary (who is thechairman of CFIUS) announces that regulations and resources necessary to enforce the new requirements of FIRRMA are in place.