Foreign investments

New CFIUS Executive Order Adds National Security Factors to Foreign Investment Evaluation – Terrorism, Homeland Security and Defense

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September 22, 2022 On September 15, 2022, President Biden signed Executive Order (EO) 14083 expanding the list of national security factors that the Committee on Foreign Investment in the United States (CFIUS) should consider when reviewing foreign investments in the USA.

A White House fact sheet summarizing the provisions of EO 14083 is available here.

Background

Section 721(f) of the Defense Production Act (DPA), codified at 50 USC § 4565(f), sets out ten factors that CFIUS may consider when reviewing a foreign investment transaction in the States United States, and authorizes the President and CFIUS to determine other factors, as appropriate, generally or in connection with a specific review or investigation.

New factors

EO 14083 expands the list of Section 721(f) factors to include five additional factors that CFIUS must consider, as appropriate:

  • The effect of a given transaction on the resilience of critical U.S. supply chains that may have national security implications, including those outside the defense industrial base.

  • The effect of a given transaction on United States technological leadership in areas affecting United States national security, including, but not limited to, microelectronics, artificial intelligence, biotechnology, and biofabrication, quantum computing, advanced clean energy and climate adaptation technologies.

  • Industry investment trends that may affect the impact of a given transaction on U.S. national security.

  • Cybersecurity risks that threaten to harm national security.

  • Risks to Sensitive Data of US Individuals.

EO 14083 is the first order of its kind to provide CFIUS guidance in addition to DPA and CFIUS regulations. Notably, EO 14083 makes no change to the scope of CFIUS jurisdiction or other legal processes. Concretely, the decree seems to give legal effect to factors already informally considered by CFIUS. We therefore anticipate that EO 14083 is unlikely to have a significant impact on cases submitted to CFIUS.

Nevertheless, since other countries adopt foreign direct investment regimes similar to those of the United States, EO 14083 may also aim to describe the specific expectations of the United States government when considering whether these countries should qualify. for the privileged status of an “excepted foreign state”. within the meaning of CFIUS regulations (i.e. a country that has “implemented and effectively uses a robust process to analyze the national security risks of foreign investment and to facilitate coordination with United on Investment Security Issues”).

EO 14083 outlines the need for those engaged in foreign investment in the United States to keep abreast of evolving CFIUS practices and its linkages to other domestic foreign direct investment regimes.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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