Department of Treasury Announces Inquiry Regarding the Rules Governing Direct Foreign Investment in the United States

FOR IMMEDIATE RELEASE

For media inquiries please call Marc Witengier 314.552.6564

Under United States law, the President can limit transactions that permit foreign entities to own or control key assets in the United States. The statute originally permitted review of the foreign acquisition of assets that could affect the "security" of the United States, but this term has been broadly interpreted. Administrative review of mergers have affected the ability of Chinese companies to purchase oil assets in the United States, Dubai interests in certain port facilities, and have influenced mergers in the telephone and computer industries. The newly enacted Foreign Investment and National Security Act of 2007 ("FINSA") arguably gives statutory acknowledgment to this oversight function and may even expand the role of the Federal Government's oversight of foreign acquisition of U.S. assets. In part, FINSA creates a process in which the President and his delegee, the Committee on Foreign Investment in the United States (“CFIUS”), conducts national security reviews of foreign mergers, acquisitions, and takeovers of domestic firms. FINSA also clarified that the term “national security” includes issues relating to “homeland security,” including its application to “critical infrastructure.”

In a Federal Register notice dated October 11, 2007, the Department of the Treasury announced that it will be holding a public meeting and soliciting comments to inform the regulatory development regarding FINSA. Per the notice, the public meeting will be held from 2-4 pm on October 23, 2007. Written comments are due by December 7, 2007.

The Treasury Department, while accepting any comments from the private sector relating to CFIUS or FINSA, is particularly interested in a few topics:

• Procedural issues in the review process;
• Definitional issues including the definition of:
  • “control,”
  • “foreign person,”
  • “person engaged in interstate commerce in the United States,”
  • “critical infrastructure,”
  • “critical technology;”
• Mitigation agreements, including enforcement of the same and civil penalties or other remedies for breach;
• Confidentiality issues;
• CFIUS’ information collection process from filers; and
• Emerging international investment trends and their relationship to CFIUS.

For additional information, please contact Robert Shapiro at 202-585-6926.