In the United States, an interagency U.S. government committee, the Committee on Foreign Investment in the United States ("CFIUS"), reviews foreign investments in U.S. companies for potential U.S. national security implications. CFIUS is chaired by the U.S. Department of the Treasury and includes, among other members, the Departments of Homeland Security, Defense, Justice, Energy, State, and Commerce. CFIUS’s mandate has expanded over time, most recently pursuant to the Foreign Investment Risk Review Modernization Act ("FIRRMA"), which became law in 2018.

CFIUS has jurisdiction to review three categories of transactions: (1) “covered control transactions” in which a foreign investor acquires control over a US business; (2) “covered investments” in which a foreign investor acquires less than a controlling interest in certain US businesses in some circumstances; and (3) certain real estate transactions involving foreign persons.

CFIUS can require the parties to a covered transaction to implement measures to mitigate potential national security concerns, and (in the most serious cases) can recommend that the U.S. President suspend or prohibit a transaction from going forward, or order an after-the-fact divestment or unwinding of a transaction. 

CFIUS’s statutory mandate is limited to reviewing the effect of transactions subject to CFIUS jurisdiction on U.S. national security. CFIUS may exercise substantial discretion, however, in deciding which transactions may raise US national security concerns, and it takes a broad approach to this issue. CFIUS identifies U.S. national security risk related to a particular transaction as a function of the threat posed by the foreign acquirer and the vulnerability of the U.S. assets being acquired. Thus, CFIUS is most likely to have an interest in reviewing transactions where the foreign party is seen as a national security threat (because of concerns related to espionage or theft of U.S. intellectual property, for example) or the U.S. asset being acquired is particularly vulnerable (for example, a U.S. company that has access to sensitive technology or U.S. government contracts, or otherwise plays a role in the U.S. economy that is relevant to U.S. national security). 

Under CFIUS’s regulations, any investor who is a “foreign person” is considered a foreign investor. Foreign persons include (1) Any foreign national, foreign government, or foreign entity; or (2) Any entity over which control is exercised or exercisable by a foreign national, foreign government, or foreign entity. Covered transactions involving foreign persons from any country potentially are subject to CFIUS review, with limited exceptions for non-controlling transactions made by certain investors from Australia, Canada, New Zealand, and the United Kingdom.

Covered transactions in all sectors are subject to potential review by CFIUS.

There are no monetary thresholds that apply.

The CFIUS process is typically a voluntary filing process. When parties to transactions subject to CFIUS’s jurisdiction believe that CFIUS may identify U.S. national security concerns with their transaction, the parties may opt to file a voluntary notice to the Committee outlining the transaction, answering certain questions, and explaining why CFIUS should allow the transaction to proceed. CFIUS approval serves as a “safe harbor” against further U.S. government national security review of a transaction in most circumstances. If parties elect not to file for CFIUS’s review of a transaction within CFIUS’s jurisdiction, CFIUS can request the parties file a notice of the transaction or review the transaction on its own initiative, even after a transaction has been completed.

As a result of FIRRMA two relatively limited categories of “covered investments” now trigger mandatory CFIUS filing requirements: (1) certain transactions involving U.S. companies that produce, design, test, manufacture, fabricate, or develop one or more “critical technologies” (as defined in CFIUS’s regulations); and (2) certain transactions involving foreign governments. For all other covered transactions, filing remains voluntary.

CFIUS’s approval is not required prior to closing on a transaction subject to CFIUS review. If a transaction is subject to mandatory CFIUS filing procedures, the parties must file with CFIUS at least 30 calendar days prior to closing on the transaction. In many cases, parties to transactions subject to CFIUS review elect not to close before receiving approval, to avoid a situation in which CFIUS may require changes to a transaction after closing.

CFIUS has continued to operate during the pandemic. CFIUS has an online filing process, and any meetings between parties to a transaction and CFIUS typically have taken place remotely during the pandemic. 

CFIUS actively reviews foreign investments in the United States. In the calendar year 2022, the Committee reviewed 440 total filings (including both short-form declarations and full-length notices). CFIUS adopted mitigation measures with respect to 41 covered transactions. In another 12 cases, the parties abandoned the transaction after being informed that CFIUS intended to recommend the president block the transaction or after failing to agree on acceptable mitigation measures.

CFIUS may review any transactions within its jurisdiction, as described above, including transactions that have already closed, and regardless of whether the parties to the transaction have sought CFIUS’s review. If CFIUS determines that a transaction within its jurisdiction raises U.S. national security concerns, CFIUS may require the parties to the transaction to take measures to mitigate those concerns. If CFIUS concludes that its national security concerns with respect to a transaction cannot be mitigated, CFIUS can recommend that the U.S. President suspend or prohibit the transaction. CFIUS has been very active in reviewing transactions, including “non-notified” transactions where parties have not filed for CFIUS review.

CFIUS made significant regulatory changes in 2020 in order to implement its expanded authority and jurisdiction under FIRRMA. Any further regulatory developments in the next six months are likely to be moderate changes to the regulations enacted by CFIUS in 2020.