On September 15, President Biden signed the first-ever Executive Order (E.O.) on CFIUS – the Committee on Foreign Investment in the United States. While the E.O. does not substantively change CFIUS’s jurisdiction or the legal process, the Biden Administration provides some explicit guidance on certain national security priorities and factors for CFIUS to consider when evaluating transactions – focusing in on protecting U.S. technological advantage, supply chain resiliency, and sensitive data from U.S. adversaries. No doubt, the E.O. will impact certain cross-border transactions and investments as CFIUS develops strategies to incorporate the E.O. into practice and align national security priorities with other national security tools.
Brian Weimer is a corporate partner in the firm's Washington, D.C. office and Leader of the firm's Communications Practice Group.
The Takeaway: Severe restrictions on ByteDance’s Sale of TikTok should be a warning to media and tech companies with foreign ownership, particularly Chinese investment, to know your risks and mitigate them before the government comes knocking.…
Continue Reading UPDATE: National Security Meets Teenage Dance Battles: U.S. Increases Pressure on ByteDance Sale of TikTok
On August 6, 2020, Trump issued two separate executive orders that will severely restrict TikTok and WeChat’s business in the United States. For weeks, the media has reported on Trump’s desire to “ban” TikTok with speculation about the legal authority to do so. We break down the impact of the Orders below.
Continue Reading National Security Meets Teenage Dance Battles: Trump Issues Executive Orders Impacting TikTok and WeChat Business in the U.S.
- Technology Infrastructure and Data. CFIUS will focus its review on investments in critical Technology, critical Infrastructure, and sensitive personal Data (“TID Businesses”).
- Critical technologies is defined to include certain items subject to export controls along with emerging and foundational technologies under the Export Control Reform Act of 2018.
- CFIUS provides a very helpful list of critical infrastructure and functions to help assess whether any business is a TID Business. We reproduce most of this list at the end of this blog article. (Sneak preview: telecom, utilities, energy, and transportation dominate the list.)
- The proposed regulations provide much-needed guidance on what constitutes sensitive personal data and also seek to limit the reach of the definition so it does not cast too wide a net over transactions in which CFIUS really should have no national security concern.
- Exceptions for Certain Countries. Investors from certain countries may be excepted from CFIUS jurisdiction when making non-controlling investments.
- New Set of Rules for Real Estate. In a companion piece, CFIUS proposed for the first time a detailed set of rules related to investments in real estate. We will cover this in a separate blog article to be published in the near future.
- Expansion of Short-Form Declaration Use. The proposed rules provide parties the choice to use a short-form declaration for any transaction under CFIUS jurisdiction in lieu of a long-form notice.
- Comments Due by October 17, 2019. Members of the public may submit comments on the proposed regulations any time between now and October 17, 2019. Final regulations must be adopted by CFIUS and become effective no later than February 13, 2020.
- On October 10, 2018, the Committee on Foreign Investment in the United States put into effect the first mandatory filing requirement ever imposed by CFIUS. The Department of Treasury’s summary of the Pilot Program is available here.
- Effective November 10, 2018, CFIUS will require reviews of critical technology investments – including certain non-controlling investments – from any country.
- A failure to file notice or a new short form declaration to CFIUS may result in a civil monetary penalty up to the value of the transaction.
- The requirements will not apply to any transaction that is completed prior to November 10, 2018 or any transaction for which the material terms were established prior to October 11, 2018.
On August 13, 2018, President Trump signed FIRRMA into law. FIRRMA is a transformational expansion of the authority of the Committee on Foreign Investment in the United States (CFIUS) to review certain transactions that previously eluded the Committee’s jurisdiction (discussed in our blog, here). Congress left many critical aspects of the FIRRMA framework to be addressed through regulations promulgated by the Department of Treasury. Although we do not expect final rules to be forthcoming until late 2019 or early 2020, Congress empowered the Department of Treasury to “test-drive” parts of FIRRMA through Pilot Programs. Those programs can be implemented simply, taking effect 30 days after publication of the program requirements in the Federal Register. The adoption and implementation of the Pilot Program for critical technologies represents the Department of Treasury’s first attempt to implement substantive parts of FIRRMA prior to issuing formal regulations.
Continue Reading FIRRMA Takes Form as CFIUS Enacts a New Pilot Program Targeting “Critical Technologies”
On September 4, 2018, the Federal Communications Commission issued a new rule requiring foreign media outlets to submit reports to the FCC disclosing their relationships with foreign principals. The notice was issued pursuant to the 2019 National Defense Authorization Act.…
Continue Reading FCC’s Foreign Media Reporting Requirements: Extension of FARA or New Domain?
- CFIUS takes an unprecedented step to fend off a potential foreign acquisition
- The threat that China will eclipse the U.S. in telecommunications infrastructure and technology is central to U.S. national security
- Five key takeaways from the most recent CFIUS action
Since late 2017, Singapore-based semiconductor company Broadcom has been pursuing a $117 billion hostile takeover bid for Qualcomm, its U.S.-based rival whose chips are omnipresent in U.S. telecommunications infrastructure, including consumer devices like smartphones and tablets. As part of its hostile bid, Broadcom nominated its own slate of six directors who were to be voted on at Qualcomm’s annual stockholders meeting, originally scheduled for March 6th. However, earlier this week the Committee on Foreign Investment in the United States (CFIUS) announced that it “issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days. This measure will afford CFIUS the ability to investigate fully Broadcom’s proposed acquisition of Qualcomm.”…
Continue Reading Chips on Their Shoulders: CFIUS Intervenes in Broadcom’s Hostile Takeover Bid for Qualcomm
Historic changes in relations between the United States and Cuba (that touch nerves in Hip-Hop and on Capitol Hill) and new U.S. sanctions against Venezuela may provide increased opportunities for U.S. business generally, and electronic communications technologies and infrastructure providers in particular. This week’s Cuba and Venezuela headlines, combined with recent and historic shifts in telecommunications and broadcasting markets in Mexico, on which we reported here, herald historic changes in Latin American electronic communications and infrastructure markets.…
In a stunning ruling issued on July 15, 2014, the U.S. Court of Appeals for the D.C. Circuit held that review by the Committee on Foreign Investment in the United States (“CFIUS”) and the subsequent unwinding of the investment deprived the foreign investor of due process under the 5th Amendment to the U.S. Constitution. Ralls Corp. v. Comm. on Foreign Investment in the United States, No. 12-cv-01513 (D.C. Cir. Jul. 15, 2014) (a copy of the opinion is here). If upheld, the ruling may require fundamental changes in how CFIUS conducts its reviews and may enhance foreign investors’ ability to influence or challenge the outcome of a review.
Continue Reading Shedding Light on CFIUS: Appeals Court Holds That CFIUS Review Lacks Constitutional Due Process