Download Full PDF - Sullivan & Cromwell

More documents

Recommendations

Info

a transaction, and required heightened scrutiny of certain kinds of acquisitions, including those by “foreign government-controlled” entities and those involving U.S. “critical infrastructure.” FINSA also codified CFIUS’s practice of using “mitigation agreements” to resolve national security concerns raised by a transaction. CFIUS now has express authority to condition a transaction on the satisfaction of CFIUS’s national security concerns through a mitigation agreement or other condition. The statute requires that any such agreement or condition be based on a “risk-based analysis of the threat to national security” raised by the covered transaction. 1 THE EXECUTIVE ORDER E.O. 13456 enhances and clarifies several matters of CFIUS-related policy and procedures. The principal provisions of E.O. 13456 are summarized below. U.S. POLICY FAVORS FOREIGN INVESTMENT Consistent with recent public statements by executive branch officials, in particular those in the Treasury Department, E.O. 13456 provides that “[i]t is the policy of the United States to support unequivocally [international] investment [in the United States], consistent with the protection of the national security” because such investment “promotes economic growth, productivity, competitiveness, and job creation.” The statement of policy in E.O. 13456 reaffirms that the value of such investment to the U.S. economy will be considered by CFIUS, along with national security considerations, in the course of any review that it performs. CFIUS COMPOSITION, LEADERSHIP AND ROLES Role and Authority of the Treasury Department FINSA established the Secretary of the Treasury as the chair of CFIUS, and E.O. 13456 further defines the Secretary’s role as chairperson. 2 Consistent with past practice, E.O. 13456 authorizes Treasury to act and communicate with parties to the transaction on behalf of CFIUS. It also delegates to Treasury the authority to issue the new Exon-Florio regulations required by FINSA, although Treasury must “consult” the other members of the Committee. 3 Treasury also is charged with coordinating the preparation of annual reports to Congress required by FINSA. 1 2 3 See our memorandum dated July 26, 2007, entitled “CFIUS Review of Foreign Investment: New Law Formalizes and Makes More Rigorous the National Security Review of Foreign Investment in the United States.” The Secretary of the Treasury may delegate his authority to other members of the Treasury Department; accordingly, we refer to “Treasury” rather than “the Secretary” in the text. These regulations must take effect no later than April 22, 2008. CFIUS Review of Foreign Investment January 31, 2008 -2-
Role and Authority of the Lead Agency FINSA directs Treasury to designate, as appropriate, a “lead agency or agencies” in connection with review by CFIUS of each covered transaction. The lead agency, if so designated, is authorized to act on behalf of CFIUS with respect to the negotiation of mitigation agreements or other conditions that the Committee may determine to be necessary to protect national security, and to monitor and ensure compliance with any such agreements or conditions after the transaction closes. The Executive Order also clarifies that, if a lead agency is not designated in connection with any particular transaction, these powers remain with Treasury. As discussed below, under “Mitigation Agreements and Enforcement”, the lead agency’s discretion to act unilaterally is limited by E.O. 13456; among other things, the lead agency must inform the full Committee and secure its approval prior to negotiating a mitigation agreement, must keep the full Committee “fully informed of its activities” and must notify Treasury of “any material action” it proposes to take on the Committee’s behalf sufficiently in advance to allow adequate time for Treasury to consult the rest of the Committee and provide the Committee’s direction not to take, or to revise, such action. New CFIUS Members In addition to the heads of agencies designated as CFIUS members by FINSA, E.O. 13456 adds two new permanent members: the United States Trade Representative and the Director of the Office of Science and Technology Policy. Also added as observers, and as participants “when appropriate”, are the Director of the Office of Management and Budget, the Chairman of the Council of Economic Advisers, and the Assistants to the President for Homeland Security and Counterterrorism, National Security Affairs and Economic Policy. Additional Duties of the Commerce Department E.O. 13456 directs the Secretary of Commerce to obtain information about foreign investment in the United States, including trends and significant developments, and to analyze and report on that information, to the public as well as the President and other Executive Branch officials. The Commerce Department already collects information on foreign investment through its Bureau of Economic Analysis under the International Investment and Trade in Services Survey Act, 22 U.S.C. 3101 et seq. The extent to which the Commerce Department may need to or may wish to undertake additional efforts to comply with the directive in E.O. 13456 is not clear. Press reports on drafts of the Executive Order indicated that this role originally was intended to be fulfilled by the full Committee. NATIONAL SECURITY REVIEWS AND INVESTIGATIONS; REPORTING Briefly summarized, there are two stages to the CFIUS process. The first step is a national security review, which may be initiated either by the parties’ voluntary filing with CFIUS or, in the absence of such a filing, by the decision of the full Committee or of one of its member agencies. Once initiated, a review CFIUS Review of Foreign Investment January 31, 2008 -3-
Page 1: CFIUS Review of Foreign Investment
Page 5 and 6: E.O. 13456, however, sets out addit

Download Full PDF - Sullivan & Cromwell

Create successful ePaper yourself

Delete template?

Save as template?