M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, July 12, 2007

CFIUS Reform to Become Law

The House of Representatives yesterday passed on a 370-45 vote legislation to revise the national security takeover review process overseen by the Committee on Foreign Investments in the United States (CFIUS).  The House voted to adopt the Senate bill.  Accordingly, The National Security Foreign Investment Reform and Strengthened Transparency Act will now be sent to the President for almost certain signature.  For a summary of the final legislative provisions, see this client memo by Wiley Rein here.

The legislation is Congress's response to the uproar 18 months ago over the acquisition of Peninsular & Oriental Steam by Dubai Ports and the ensuing political brawl and heavy congressional protest which led to Dubai Ports terminating the U.S. component of its acquisition.  The dispute was always puzzling:  Dubai Ports was acquiring an English company with port operations in the United States and Dubai Ports is headquartered in the United Arab Emirates, one of our strongest allies in the Mid-East.  Nonetheless, the controversy has now spawned a change in the CFIUS review process.  And on the whole, the measure is fairly benign, endorsed by most business organizations and will not bring any significant change to the national security process. 

However, the bill does come on the heels of a significant upswing of CFIUS scrutiny of foreign transactions.  According to one news report, CFIUS considered 113 transactions in 2006, up 74 percent from the previous year.  CFIUS conducted seven second-stage investigations in 2006, equaling the number of the previous five years combined.  And while increased national security review can be a very good thing, one hopes that this heightened scrutiny is not just form over substance -- a development which would likely deter foreign investment in the United States.  For more on this see my post The Politics of National Security


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