DC Circuit Requires Committee on Foreign Investment in the United States to Provide Due Process Protections to Investors

On July 15, 2014, the US Court of Appeals for the District of Columbia (DC Circuit) ruled that if the President, pursuant to his powers under the Exon-Florio Amendment to the Defense Production Act of 1950 (DPA), deprives a foreign acquirer or investor in the United States of its constitutionally protected property interests, the foreign acquirer or investor must be accorded certain due process protections. The case at issue, Ralls Corp. v. CFIUS et al, is the first-ever challenge to the review process conducted by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee within the US federal government that reviews foreign acquisitions and investments in the United States for potential threats to US national security.

In March 2012, Ralls Corp., a US corporation owned by Chinese nationals, purchased four wind farm project companies in Oregon without filing for CFIUS review prior to closing. After the acquisition was concluded, CFIUS determined that Ralls’s acquisition threatened US national security and issued temporary mitigation orders restricting Ralls’s access to and preventing further construction at the wind farm sites. The matter was subsequently submitted to the President of the United States who also concluded that the transaction posed a threat to national security due to the proximity of the wind farm sites to a US Navy weapons training facility. The President thereafter issued a permanent order that prohibited the transaction and required Ralls to divest itself of the project companies...

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