This year's version of the annual Committee on Foreign Investment in the United States (CFIUS) report, released on August 2, 2022, and covering calendar year 2021, has a Dickensian quality. As usual, it's a dense work. But Treasury's Cliffs Notes—i.e., the accompanying press release—suggests that it's the best of times for CFIUS filers, e.g.,

• "CFIUS cleared an all-time high of nearly 60 percent of cases in either the 30-day assessment period for a declaration or the initial 45-day review period for a notice."
• "CFIUS continued to complete action on a majority of cases without conditions, and of the total number of cases that CFIUS cleared in 2021, only ten percent involved mitigation measures."

History casts some doubt on the claim to relative speed: between 1988 and 2005, CFIUS cleared far more than 95 percent of the 1,593 cases filed in 30 days or less. (See U.S. National Security and Foreign Direct Investment, Edward M. Graham and David M. Marchick, 2006, p. 57).

Nevertheless, the report does support claims that, in comparison to the most recent Ancien Régime, CFIUS has become more efficient. Of particular note, of the 164 filings submitted as "Declarations"—i.e., the streamlined filing that yields a CFIUS response within 30 days—CFIUS informed the parties in 132 cases (80.4 percent) that it had either cleared the transaction or given a "shoulder shrug" (the latter reserving CFIUS's rights to ask for a more robust "Notice" but also allowing the parties to close their transaction). That is, CFIUS insisted on an immediate filing of the more robust Notice—the ‘bad result' when filing a Declaration—in fewer than 20 percent of cases for calendar year 2021. For the 2020 calendar year, CFIUS insisted on a Notice filing for 22 percent of Declarations, and for the 2019 calendar year it was 28 percent.

So, the trend with respect to processing Declarations is indeed positive. This suggests that CFIUS is becoming more proficient in its processing and/or (probably and) that CFIUS counsel are becoming more adept at assessing which transactions should be filed using the streamlined Declaration.

Life for the bourgeoisie (or a small slice thereof) isn't so bad!

But the trend with respect to processing Notices is "going direct the other way," if not "the worst of times." Of the 272 Notices filed in 2021, an astonishing 74 were withdrawn and 63 were re-filed. The report indicates that of the 11 that were not re-filed, 9 died on account of CFIUS and 2 died of natural (commercial) causes.

For the 63 re-filed Notices (23 percent of all filed Notices) it is likely that most followed the standard pattern of "withdrawal/re-filing." For those unfamiliar, the way that works is this. The CFIUS clock approaches Day 90, the end of the statutory deadline for CFIUS to make a decision about a filed Notice, and CFIUS sometimes lacks consensus about whether to clear a case. Or sometimes CFIUS is in the process of negotiating security conditions ("mitigation measures") that CFIUS deems necessary to clear the case. With the clock running out, CFIUS tells the parties: you can withdraw and re-file the notice, which will re-start the clock and give us all more time, or if you don't do that, then CFIUS will recommend that the President block the transaction. In other words, "because we cannot conclude on time, you can choose to withdraw/re-file, or else we can try out this new-fangled guillotine thing that's very popular."

CFIUS seemingly pulled this move in more than 20 percent of filed Notices (versus no more than 11 percent the previous year, when 21 out of 187 notices were withdrawn and re-filed). Those numbers are partially deceptive, since there are several notices that have been withdrawn and refiled repeatedly. For each such case there might have been multiple withdraw-and-refile cycles in 2021, which brings down the number of actual transactions living in this netherworld. Still, it does appear that 10 percent or more of filed transactions, and more than 20 percent of filed notices (some transactions yielding multiple notices) resulted in CFIUS exceeding its statutory deadline.

So, what explains the dichotomy between the simultaneous best and worst of times in CFIUS world? Our guess is that the collection of deals linked to China explains a lot. For much of the last decade—accelerating dramatically in the Trump administration, with no change of course in the Biden administration—CFIUS has been notoriously aggressive and commercially insensitive with respect to any transaction that has a China link. Even if no party is Chinese or China-owned, CFIUS has become increasingly skeptical whenever any foreign investor is subject to significant influence by a Chinese party. Parties with investments in or strong commercial ties with China are facing more searching and skeptical questioning from CFIUS than ever before.

The report states that Notices involving Chinese parties rose from 17 to 44 from 2020 to 2021, an increase that likely is due in significant part to the CFIUS enforcement team's continuing investigation of investments from China. Such cases are inherently more likely to face a long review—including withdraw and refile cycles—because CFIUS is more skeptical of investments that are not voluntarily filed. In addition, that number does not count the broader set of cases involving Chinese links. And there may be bleed into non-China cases—in its hawkish stance in which security risks weigh heavily and economic benefits much less so, running roughshod through statutory deadlines in China cases and a few non-China cases likely doesn't give rise to much concern within CFIUS. Indeed, such a sacrifice might even help CFIUS officials fall asleep at night, believing, "It is a far, far better thing that I do, than I have ever done; it is a far, far better rest I go to than I have ever known."