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Focus on Regulation

CFIUS Annual Report – Review Process Appears Increasingly Stringent

The recently published annual report to Congress of the Committee on Foreign Investment in the United States (CFIUS), a U.S. Government interagency committee that conducts national security reviews of foreign acquisitions, suggests that the Committee’s reviews are becoming increasingly stringent.  Sweeping conclusions cannot be drawn from a report that covers only the Committee’s work in 2013, but the report does include some useful insights.  Here are a few of the highlights:

  • Higher percentage of CFIUS cases proceeding to a second-stage investigation – The percentage of cases that CFIUS could not resolve in its initial 30-day review period increased to nearly 50% in 2013 (up from 39% in 2012), meaning that companies – for planning purposes – likely will have to assume CFIUS’s formal review will last 75 days (30 days for the first stage; 45 days for the second stage).
  • More mitigation – The percentage of cases that involved CFIUS imposing conditions to mitigate national security concerns rose from 7% in 2012 to 11% in 2013. The annual report also mentioned one new broad mitigation measure – “Providing the [U.S. Government] with the right to review certain business decisions and object if they raise national security concerns” – that appears similar to the mitigation that CFIUS imposed on SoftBank Corp.’s 2013 acquisition of a controlling interest in Sprint Nextel Corporation.
  • Higher percentage of CFIUS notices withdrawn but not refiled – Seven of the eight CFIUS notices withdrawn in 2013 were not refiled with the Committee. One possible explanation for some of these withdrawn-but-not-refiled cases is that they raised significant national security issues that ultimately scuttled the deals. 2012 saw a spike in the number of CFIUS cases withdrawn – 22 – but more than half of those were refiled.
  • China again tops the list – For the second consecutive year, companies from China submitted more filings to CFIUS than any other country, with nearly a quarter of the filings involving Chinese buyers.