On August 1, 2018, the U.S. Senate passed the Foreign Investment Risk Review Modernization Act (“FIRRMA”) as part of the Defense Authorization Bill (Title XVII). FIRRMA changes and updates the law setting up the Committee on Foreign Investment in the United States (“CFIUS”), which allowed CFIUS to review certain acquisitions by and mergers with foreign persons. The bill modernizes CFIUS, and also largely codifies aggressive practices of CFIUS over the last decades. Among the changes are:
The law expands the statutory jurisdiction of CFIUS to review not only transfers of control but non-controlling transfers or other investments by foreign persons of businesses that are sensitive, such as businesses that control critical infrastructure, critical technologies and personal data (although CFIUS has already been reviewing non-majority transfers), with certain carve outs for example for funds in which foreign persons are invested that meet certain criteria. It also makes clear that CFIUS can review real estate transactions that involve airports or are near military installations, covered transactions that increase the rights of a foreign person and transactions designed to evade CFIUS review.
There is now a short time frame “declaration” process, with (for the first time) mandatory filings where a foreign government has a “substantial interest”. The contents of such a declaration and the definition of “substantial interest” is left to CFIUS rulemaking.
Review periods are extended.
CFIUS can suspend transactions while it reviews them, although the President still has exclusive authority to block transactions permanently.
The bill is expected to be signed into law in the coming days, and the law will be effective immediately, although it is likely to take time for CFIUS to adopt implementing rules. Transactors that may be subject to CFIUS review now, however, should review carefully the new rules.