The House Subcommittee on Monetary Policy and examined the operations and looked at the challenges faced by the Committee on Foreign Investment in the United States (CFIUS) at a hearing held last week.
CFIUS looks at the proposed foreign investments in the United States and can advise the president to block deals on national security grounds. While foreign investment can be a positive force for the U.S. economy, there is also the possibility that certain investments could weaken the U.S. economy. CFIUS must promote the former and guard against the latter.
However, the statute under which CFIUS operates has not been updated in about 10 years, so some lawmakers said it needs to be modernized.
“The statute under which CFIUS operates has not been updated in a decade, and clearly we should think about modernizing it,” Subcommittee Chairman Andy Barr (R-KY) said. “This hearing is the beginning of the committee’s study of CFIUS and will be followed by further hearings soon. In considering any reforms, the committee will seek to ensure that CFIUS has the tools and resources it needs to examine foreign investment, while at the same time maintaining a welcoming investment climate so that U.S. companies have the capital needed to grow.”
Expert witness Robert Kimmitt, senior international counsel, WilmerHale and former deputy secretary and general counsel, U.S. Department of the Treasury, reiterated the importance of foreign investment to the U.S. economy.
“My former boss, then Treasury Secretary Baker, described foreign investment as America’s economic ‘ace in the hole’ because such investment represented a foreign company’s strong vote of confidence in the U.S. market and American workers,” Kimmitt said.
Alan Estevez from Deloitte Consulting noted that the cases coming before CFIUS are growing in their complexity.
“I firmly believe that certain countries are actually testing the CFIUS process and seeking the gaps to overcome CFIUS. Resources are needed to adequately perform the due diligence on the cases that come before CFIUS in the time frames required by the CFIUS legislation,” Estevez said.
Any attempts to reform CFIUS should be approached carefully and deliberately, Nancy McLernon, president and CEO, Organization for International Investment, said.
“Ensuring fairness, predictability and efficiency in national security reviews must remain tenets of the CFIUS process,” McLemon said.
Kevin Wolf, partner, Akin Gump Strass Hauer & Feld LLP it is vital to weigh the costs of any changes to CFIUS’s scope.
“For example, if there is even a small expansion in the scope of CFIUS’s review authority, then some companies may be less willing to invest in the United States with the actual or perceived extra burden and time involved in closing a transaction, particularly if there is not a significant expansion in staff,” Wolf said. “Will investing in other countries become more desirable as a result of any changes? With every expansion in scope, there will be a corresponding and exponential expansion in burdens and costs generally. More regulations lead to more words, which leads to more analyses of those words in novel fact patterns, leading to more filings, more reviews, more mitigation agreements, and on and on.”