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As we close out a wild year for international trade regulation,[1] after hearing much talk about outbound investment review mechanisms, we may see a final dramatic change before the ball drops. Since the summer, we have talked here about potential outbound investment reviews (reverse CFIUS? SUIFC?). And while there have been reports of potential action by both Congress and the Biden Administration on outbound investment, it is all the more possible to see executive action before a new Congress takes seat.

What is the Need?

If CFIUS is a protection against foreign persons obtaining access to critical technology, infrastructure, sensitive personal data, or other items of national security interest, then what is reverse CFIUS? Surely if U.S. persons are going to send out critical technology or items of national security, there are export controls to contain that threat. So what exactly does outbound investment protection protect against?

Well, U.S. capital is always looking for places to land, to seed growth, and to realize returns. Theoretically, the money itself, and perhaps the investors, are agnostic as to where that money seeds growth and realizes returns. As a result, investors may be drawn to projects that are promising but that (evidently or not), may serve the interest of a foreign adversary to develop a technology, defense, surveillance, aerospace, or other advantage relative to the United States. The U.S. government has taken an interest in restricting or redirecting such investments.

Whether and how the government will impose such restrictions is becoming a bit clearer as a couple of different government actions take shape.

Who Will Initiate: Congress or the Administration?

Proposed Legislation

In July of this year, we wrote about the potential for an outbound investment review process, which has been called[2] a reverse Committee on Foreign Investment in the U.S. (CFIUS). At that time, lawmakers had issued a new draft of the National Critical Capabilities Defense Act of 2022 (NCCDA).

Under the proposed Act, the Committee on National Critical Capabilities (CNCC) would require notification and review outbound investment transactions in countries of concern or entities that are headquartered in those countries or concerning national critical capabilities.

Those countries of concern would likely be China and Russia.

The investment transactions affecting national critical capabilities could include components of weapons and intelligence systems, medical supplies and medicine, manufacturing equipment, infrastructure construction articles, supply chains for such items, and even certain related services.

To identify additional items, supply chains, and services that could be targeted, the CNCC would focus on the following industries:

  1. Energy
  2. Medical
  3. Communications
  4. Defense
  5. Transportation
  6. Aerospace, including space launch
  7. Robotics
  8. Artificial intelligence
  9. Semiconductors
  10. Shipbuilding
  11. Water, including water purification

Congress has continued to debate the outbound investment review mechanism generally, including the specifics of the NCCDA. More recently, lawmakers also proposed the mechanism as a new amendment to the National Defense Authorization Act (NDAA). However, even though the concept of outbound investment review has bipartisan support in Congress, that amendment was ultimately not included this this year’s NDAA.

Potential Executive Order

While Congress continues to consider legislation mandating an outbound investment review process, the Biden administration has been urgently working on its own version, which would likely be initiated via presidential executive order (EO). The impetus to get it done might be the desire to act before the start of a new Congress, so that President Biden’s national security policy priorities can be established on the President’s terms. As of this month, the Biden administration’s New Year’s resolution appears to be to issue an Executive Order before Congress can pass an outbound investment review bill such as the NCCDA. Such an Executive Order may be issued under the authority provided by the International Emergency Economic Powers Act (IEEPA). The key to ensuring the EO will achieve its intended goals is for the action to be tailored to target discrete, high-priority technologies, but that could have impact on broader sectors. For example, artificial intelligence (AI) is likely to be on any list of targeted areas.

What are the Takeaways?

An outbound investment notification and review process now appears to be more a matter of “when” implementation will occur rather than “if” a process will be imposed. In particular, we are hearing that any outbound investments in AI may be subject to a review process in the near future. It is not clear how national security concerns will balance against a compliance burden for industry and resource strains on the government, but we expect we will know shortly, perhaps before the new year.


[1] Obviously, also a wild year generally, but it is beyond the scope of this, and perhaps any other, article to take stock of all that has happened in 2022, with the possible exception of Dave Barry’s year in review.

[2] Well, at least has been so called by us. But hey, we also came up with CFIUK, so we’re pretty good with snappy titles. We’re still workshopping SUIFC.