CFIUS Issues Proposed Regulations


On April 21, 2008, the Committee on Foreign Investment in the United States (“CFIUS”) issued proposed regulations governing national security reviews of foreign investments in U.S. businesses. These new regulations were issued to implement amendments adopted by the Foreign Investment and National Security Act of 2007 (“FINSA”) to the Exon-Florio Amendment to the Defense Production Act of 1950. FINSA became effective on October 24, 2007, and the proposed regulations address changes to the law legislated by FINSA and codify certain existing CFIUS administrative practices.

FINSA permits the President of the United States to block acquisitions, mergers, or takeovers of U.S. companies or assets by foreign-owned or foreign-controlled entities when, in the President’s view, such transactions threaten the national security of the United States. Parties to a transaction subject to FINSA (referred to in the proposed regulations as a “covered transaction”) may voluntarily

file a notification with CFIUS to give the U.S. Government an opportunity to review the transaction and address any potential national security concerns. CFIUS is an interagency committee chaired by the Secretary of the Treasury and composed of various representatives of the executive branch of the U.S. Government, including the Attorney General and the Secretaries of Homeland Security,

Commerce, Defense, State, and Energy. The Director of National Intelligence and the Secretary of Labor serve as ex officio members of CFIUS.

FINSA provides for a 30-day CFIUS review of a covered transaction to determine the effect of the transaction on national security, and to address any threat posed by such transaction. CFIUS designates a “lead agency” to conduct the review (however, each CFIUS member is involved).

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