National security considerations can be key to the success of a company’s deal or business. Our team has substantial experience assisting companies navigating national security issues relevant to their transactions.
We assist clients in understanding when their investment activity will be subject to the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS). CFIUS is a federal interagency committee authorized to review certain transactions to determine the effect of these transactions on U.S. national security. CFIUS is authorized to review: (1) transactions that would result in a foreign entity controlling a U.S. business, (2) certain non-controlling investments in Technology, Infrastructure, and Data (TID) U.S. businesses, and (3) real estate transactions in covered geographic areas.
A company or person involved in a covered transaction may be required to file a declaration concerning the transaction to CFIUS. In many cases, filing is voluntary. We regularly counsel clients on the advisability of filing a declaration and represent them before CFIUS if a filing is made. CFIUS retains the right to review any covered transaction of which it was not notified and that it did not previously examine at any time – before or after closing. Failing to seek a review could result in the U.S. government stepping in after the transaction is completed and possibly unwinding a deal determined to pose an unacceptable national security risk or imposing certain mitigation measures aimed at alleviating such risk. Requesting a review enables the parties to be prepared and proactive, rather than reactive, and ultimately obtain “safe harbor” for their transaction.
Our team advises parties on the myriad national security concerns that may impact the review and approval of a transaction. We also counsel clients on proactively structuring transactions to address potential national security concerns in the early stages of transaction planning.
Security Clearances and FOCI Analysis
When a foreign investment concerns U.S. companies holding government contracts that involve classified information, the Department of Defense’s Defense Security Service (DSS) conducts a separate, parallel process to mitigate foreign ownership, control or influence (FOCI). DSS’s aim is to ensure that no unauthorized foreign person gains access to classified materials or can adversely affect the company’s performance under classified contracts.
Our national security team represents clients before DSS and other U.S. government agencies, and assists in conducting pre-transaction due diligence, formulating political strategies to address congressional or executive branch inquiries, filing CFIUS notifications and working with the designated agencies during a review, and negotiating mitigation agreements required to address perceived security risks due to foreign ownership, control or influence. We also provide support related to post-closing, ongoing compliance requirements – including drafting and implementing detailed compliance plans – briefing boards of directors and key officers on compliance, and advising on and drafting additional documentation or amendments to allow the U.S. company to continue conducting business under foreign ownership.
Examples of Our Experience
- Representing a U.S. oil and energy company before CFIUS in a transaction involving a Chinese entity seeking a minor share of the company.
- Representing a large European aerospace company and its U.S. subsidiaries before CFIUS and DSS in a multibillion-dollar acquisition/merger of two large aerospace companies, both with a significant presence in the United States and Europe.
- Representing a European company before CFIUS in the acquisition of a U.S. electric motor manufacturer.
- Advising multiple non-U.S. energy investors on the national security risks associated with investment in generation, transmission and pipeline projects to assist the investors in determining whether to make a voluntary notification to CFIUS.
- Representing a Japanese company before CFIUS in the acquisition of a company providing technical services to semiconductor manufacturers.
- Representing a Spanish company in the acquisition of a U.S. security services company.
- Facilitating an informal discussion with administration and congressional officials on behalf of a U.S. company involved in commercial satellite launches to analyze and review a contemplated transaction involving investment by a Russian entity.
- Representing a European government-owned energy developer before CFIUS in multiple sales of renewable energy assets to other European, Canadian and Middle Eastern investors.
- Representing a Chinese pharmaceutical company in the acquisition of a U.S. pharmaceutical developer.
- Counseling a European company on the multibillion-dollar acquisition of a global manufacturing line from another non-U.S. company with significant U.S. operations.
- Representing a U.S. telecommunications equipment provider in the multibillion-dollar sale of its business line to a European company.
- Obtaining CFIUS clearance for the sale to German and Russian entities of a U.S. company holding rights for worldwide commercial marketing and sales of commercial launch vehicles.
- Obtaining CFIUS clearance for the acquisition of a U.S. communications company by a U.S. subsidiary of a Japanese company.
- Advising a U.S. subsidiary of a Japanese company on FOCI mitigation measures, developing compliance programs and coordinating with DSS so the U.S. subsidiary could pursue contracts with the U.S. government that involved classified information.
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Treasury Proposes Regulations to Institute CFIUS Filing Fees; Comments Due April 8 - International Trade Update
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October 19, 2018