CFIUS Update I – General
U.S. Department of Treasury Releases Final Regulations Reforming National
Security Reviews for Certain Foreign Investment
January 23, 2020
On January 13, 2020, the U.S. Department of Treasury (the “Treasury”) issued two final regulations (Provisions Pertaining to Certain Investments in the United States by Foreign Persons (31 C.F.R. part 800) and Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 C.F.R. part 802), collectively, the “Regulations”) to implement Foreign Investment Risk Review Modernization Act (“FIRRMA”), which, according to the Treasury, “strengthens and modernizes” the national security review of foreign direct investment by Committee on Foreign Investment in the United States (“CFIUS”).
Specifically, the Regulations broaden the scope of investments subject to CFIUS’s review. Under the Regulations, CFIUS will now have jurisdiction over the following two additional types of investments: (i) “covered investments” in “TID U.S. Businesses” and (ii) “covered real estate transactions”.
(i) “Covered investments” in “TID U.S. Businesses” means non-controlling investments into a “TID U.S. Business”, if such investments afford a foreign investor any of the following rights:
Several categories of real estate transactions, such as acquisitions of real estate within “urbanized areas”; acquisitions of a single housing unit; certain transactions by foreign persons involving “commercial office space”; real estate transactions within covered ports involving leases by foreign air carriers or for purposes of engaging in the retail sale of goods or services to the public, etc. are excluded from CFIUS’s jurisdiction.
Notably, the Regulations for the first time specifically exclude certain qualifying investors from Australia, Canada and the U.K. from CFIUS’ newly expanded jurisdiction over covered investments and covered real estate transactions until February 13, 2022, at which time CFIUS will reanalyze and reevaluate.
The Regulations will become effective on February 13, 2020.
[Additional Updates to Come]
Specifically, the Regulations broaden the scope of investments subject to CFIUS’s review. Under the Regulations, CFIUS will now have jurisdiction over the following two additional types of investments: (i) “covered investments” in “TID U.S. Businesses” and (ii) “covered real estate transactions”.
(i) “Covered investments” in “TID U.S. Businesses” means non-controlling investments into a “TID U.S. Business”, if such investments afford a foreign investor any of the following rights:
- access to any “material nonpublic technical information” in the business’ possession;
- membership or observer rights on, or the right to nominate a member to the board of directors of, the TID Business; or
- involvement, other than through voting of shares, in “substantive decision-making” related to the business regarding use, development, acquisition, safekeeping, or release of critical technologies, critical infrastructure or sensitive personal data.
- produce, design, test, manufacture, fabricate, or develop one or more critical technologies;
- own, operate, manufacture, supply, or service critical infrastructure; or
- maintain or collect sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security sensitive personal data.
- the right to physically access the covered real estate;
- the right to exclude others from physically accessing the covered real estate;
- the right to improve or develop the covered real estate; or
- the right to attach fixed or immovable structures or objects to the covered real estate.
- is located within (or will function as part of) most U.S. airports or maritime ports, as specified by the Regulations; or
- is located proximate to specifically designated U.S. military installations and government facilities. This includes real estate located within: (i) “close proximity” (generally less than one mile) to certain military installations and governmental facilities; (ii) the “extended range” (generally less than 100 miles) of other installations and facilities; (iii) designated U.S. counties or other geographic areas listed in the regulations; or (iv) certain U.S. government offshore ranges that are located within the limits of the “territorial sea” of the United States.
Several categories of real estate transactions, such as acquisitions of real estate within “urbanized areas”; acquisitions of a single housing unit; certain transactions by foreign persons involving “commercial office space”; real estate transactions within covered ports involving leases by foreign air carriers or for purposes of engaging in the retail sale of goods or services to the public, etc. are excluded from CFIUS’s jurisdiction.
Notably, the Regulations for the first time specifically exclude certain qualifying investors from Australia, Canada and the U.K. from CFIUS’ newly expanded jurisdiction over covered investments and covered real estate transactions until February 13, 2022, at which time CFIUS will reanalyze and reevaluate.
The Regulations will become effective on February 13, 2020.
[Additional Updates to Come]