The Committee on Foreign Investment in the U.S. will be especially active this year, BakerHostetler lawyers predicted in a webinar hosted by the law firm last week. Lawyer Scott Jansen said he believes “there's going to be actual CFIUS enforcement” despite the committee not issuing an enforcement penalty since 2019. “We believe that there is a great chance that there'll be serious penalties in 2023,” Jansen said, adding that he expects CFIUS to continue to prioritize China-related transactions.
The Committee on Foreign Investment in the U.S. should “swiftly” conclude its review of TikTok (see 2212210007) and impose “strict structural restrictions” between the app and its Chinese parent company ByteDance, two senators said in a letter to Treasury Secretary Janet Yellen last week. Sens. Richard Blumenthal, D-Conn., and Jerry Moran, R-Kan., said CFIUS should consider "separating" TikTok and ByteDance, adding that reports of the app’s collection of U.S. private data prove TikTok and ByteDance “cannot be trusted by CFIUS or its tens of millions of users in the United States.”
The U.K. and New Zealand have met certain investment screening requirements and will remain eligible for the Treasury Department’s excepted foreign state and excepted real estate foreign state provisions, the agency said last week. The determination adds both countries to the list of foreign nations that benefit from certain exemptions under the Committee on Foreign Investment in the U.S. review process.
Several former U.S. officials urged lawmakers this week to improve U.S. investment controls, including former National Security Council official Peter Harrell, who said Congress should further bolster the Committee on Foreign Investment in the U.S. to better restrict Chinese investments. Harrell said Congress should address limits on the ability of CFIUS to “review certain high-risk greenfield investments” by Chinese companies. “It's time to look, and for this committee to look, at continuing weaknesses in the CFIUS regime,” Harrell said during a Feb. 7 House Financial Services Committee hearing.
The U.S. Air Force last week said it disagreed with the Committee on Foreign Investment in the U.S. determination last year not to intervene in China-based Fufeng Group's purchase of North Dakota farm land (see 2212150035). Although CFIUS concluded it didn’t have jurisdiction, the deal presented “a significant threat to national security with both near- and long-term risks of significant impacts to our operations in the area,” Andrew Hunter, the Air Force’s assistant secretary for acquisition, technology and logistics, said in a letter to Sen. John Hoeven, R-N.D.
U.K.-based biotechnology company F-star Therapeutics and invoX Pharma, a subsidiary of China-based Sino Biopharmaceutical, are working with the Committee on Foreign Investment in the U.S. on a potential mitigation agreement for their proposed combination. In a Feb. 1 SEC filing, the parties said they voluntarily withdrew and “immediately refiled” a voluntary notice on Jan. 30 at the request of CFIUS to give them more time to “negotiate the terms of a mitigation agreement and continue discussions” with the committee.
A bipartisan bill could add the USDA secretary to the Committee on Foreign Investment in the U.S. and block China, Russia, Iran and North Korea from investing in American agricultural companies. The bill is aimed at “preventing foreign adversaries from taking any ownership or control of the United States’ agricultural land and agricultural businesses,” lawmakers said.
The upcoming U.S. outbound investment review tool probably won’t be used to unwind past deals, and will likely only target investments in specific, sensitive technology areas, said Laura Black, a former Treasury Department official. But she said companies still should prepare for a new outbound investment executive order and be ready for other jurisdictions to implement their own outbound investment controls, including in the EU.
Although the Biden administration appears to be leaning toward a narrower outbound investment screening mechanism than previously expected, that doesn’t mean the tool will remain narrow indefinitely, former U.S. national security officials cautioned this week. They also said they expect implementation to be challenging, particularly as the government tries to define specific technologies outbound reviews should capture.
Foreign companies in the critical minerals sector should expect to see increased investment review scrutiny among the U.S. government and its allies, Holland & Knight said in a January client alert. The firm pointed to the Biden administration’s September executive order outlining priorities for the Committee on Foreign Investment in the U.S. (see 2209150053) -- as well as “enhanced” review policies by Australia and Canada -- as signs that critical mineral supply chains are receiving extra government attention.