New CFIUS Regulations to Impact Foreign Acquisition of U.S. Real Estate and Investment in Technology, Infrastructure, and Personal Data Businesses
The Committee on Foreign Investment in the United States (CFIUS) is an interagency body of the federal government that is tasked with the oversight of inbound foreign investment involving U.S. businesses. For decades, CFIUS has been exercising its statutory authority under the Defense Production Act of 1950 to review and investigate transactions that would result in a foreign party gaining control of a U.S. business and occasionally making recommendations to the president of the United States to block, and even unwind, transactions that are deemed to present unresolvable national security concerns.
On January 17, 2020, the U.S. Department of the Treasury published new regulations (to take effect on February 13, 2020), which dramatically expand the scope of CFIUS’s jurisdiction, for the first time covering: (i) non-controlling investments in U.S. businesses engaged in “critical technology” and “critical infrastructure,” as well as those that handle large amounts of personal data of U.S. citizens (so called “TID” businesses), and (ii) foreign acquisition, by purchase, lease, or concession, of real estate that is located near military installations. The regulations also create a number of mandatory filing obligations under what has historically been a voluntary disclosure system.
The implications of the new regulations will be far reaching, as they now cover a wide range of investment activity that was previously exempt from review. Early stage advanced manufacturing and technology companies that are seeking foreign financing will have to be especially mindful of the rights and privileges they are willing to grant their investors, and natural resources companies operating on public lands in the western U.S. will have to pay close attention to the proximity of their assets to sensitive government facilities.
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