On September 28, 2012, President Obama blocked Ralls Corporation from acquiring ownership of four wind farm companies in Oregon near a U.S. naval weapons systems training facility due to national security concerns. Ralls is a Delaware corporation, but it is owned by Chinese nationals. Ralls also is affiliated with a Chinese manufacturer of wind turbines, Sany Group Co. Ralls, which had already completed the acquisition, has 90 days under the terms of the presidential order to completely divest from the wind farm project.
The President’s decision to block the project was based on the recommendation of the Committee on Foreign Investment in the United States (“CFIUS”), an inter-agency group chaired by the Treasury Department. CFIUS reviews foreign investments in U.S. companies or operations in order to assess whether the transactions pose national security risks. In a statement released by the Treasury Department, CFIUS cited the wind farms’ proximity to restricted airspace as the reason that it recommended a denial of the investment from China.
Few CFIUS reviews reach the Presidential determination stage, as most cases are resolved during the course of the review. The parties often reach alternative solutions, such as mitigation agreements that place limitations on the foreign purchaser. The last time that a president acted on a CFIUS recommendation to block a transaction for national security concerns was in 1990, when George H.W. Bush prevented China National Aero-Technology and Export Corporation from acquiring a U.S. motors and generators manufacturer.
On October 1, 2012, Ralls filed suit in the U.S. District Court for the District of Columbia, alleging that CFIUS’ recommendation and the President’s order led to the unconstitutional deprivation of Ralls’ property. Ralls also claims that the government discriminatorily singled out the company because of its Chinese ownership, noting that 27 Danish wind power generators currently operate in the general vicinity of their wind farm. Ralls faces an uphill battle, however, as presidential orders resulting from the CFIUS process are not subject to judicial review. The Chinese Ministry of Commerce expressed support for the lawsuit during a recent press conference, describing it as an example of Chinese companies protecting their rights against discrimination in the U.S.
