U.S. Sets New Rules for Foreign Investment Review

April 21, 2008
The rules would formalize the process in determining whether a foreign acquisition would 'impair' national security or give a foreign entity control over 'critical infrastructure.'

U.S. authorities announced new regulations on April 21 aimed at clarifying a controversial review program for foreign investment in U.S. companies. The proposed regulations under the Foreign Investment and National Security Act of 2007 will update the review process for the secretive Committee on Foreign Investment in the United States (CFIUS). "These regulations reflect America's strong and continued commitment to safeguarding U.S. national security in a manner that reinforces the longstanding U.S. policy of welcoming foreign investment," said Assistant Treasury Secretary Clay Lowery. "The proposed regulations increase clarity and make additional improvements based on experience."

The review process, which up to now had been by executive order of the president, affects only a small percentage of foreign investments but has been used to block some controversial acquisitions. Last month, a planned buyout of U.S. technology firm 3Com by a private equity firm and China's Huawei Technologies was scrubbed because of what the companies claimed was opposition by CFIUS. CFIUS is an interagency panel led by the Treasury, which operates in secrecy. It also includes the heads of agencies including Homeland Security, Commerce, Energy, Defense and State, and the attorney general.

The rules would require a high-level official to certify to Congress that any investment plan has "no unresolved national security plans." In some cases, the president must publicly announce a decision. The rules would formalize the process in which the panel determines whether a foreign acquisition would "impair" national security or give a foreign entity control over "critical infrastructure."

The proposal does not set an official threshold on what would be "control" of a company, but allows a review if an investment could give a foreign entity key decision-making power.

Copyright Agence France-Presse, 2008

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