Monday, October 8, 2012

US President Accused of Exceeding Powers in Blocking Investment by Chinese

Last month, US President Obama issued an Executive Order blocking an investment in wind farms by Ralls, a US company owned by two Chinese investors. President Obama acted pursuant to section 721 of the Defense Production Act of 1950, as amended, which created the Committee on Foreign Investment in the United States (CFIUS), to monitor investments in the US that are controlled by foreigners and that have the potential to harm US national security.

Ralls sued in US District Court for the District of Columbia and filed an amended complaint last week alleging that the President had provided no reasons for his finding that the investment in wind farms threatened national security and the President lacked the authority to issue the Executive Order. Ralls claims that the decision process denied it due process of law and that Ralls has been treated differently than other foreign investors in violation of equal protection.

News reports indicate that the concern over the investment arises from the fact that the wind farms are located near a US Navy base in Oregon. The President has given Ralls 90 days to divest.

This decision by President Obama represents the first time in 22 years that a president has acted to block a foreign investment in the US. The last time an investment was blocked was in 1990 when then President Bush blocked an acquisition of the US company MAMCO in Washington State by another Chinese company.

A challenge to the president's authority to act in the area of foreign affairs and national security is always an uphill battle given the courts' traditional deference to the political branches. Thus, the likelihood of success in this lawsuit is in some doubt.


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