CFIUS AND NATIONAL SECURITY

R&C: Could you provide an overview of the perceived national security threat landscape in the US, as it applies to inbound foreign investment?

Kaniecki: The Committee on Foreign Investment in the United States (CFIUS) assesses inbound foreign investment to determine whether a transaction presents a risk to US national security. CFIUS’s perceived threat landscape currently is largely animated by China, and is viewing all transactions through a China lens. When evaluating a transaction, CFIUS will not only look to whether a transaction party is a Chinese entity or individual, or is otherwise controlled by a Chinese entity or individual, but also whether the transaction parties have significant commercial ties to or other relationships with Chinese parties. For example, if a foreign investor has subsidiaries or operations in China or collaboration or other agreements or relationships with Chinese state-owned entities, CFIUS likely would assess a higher potential threat from the investor as part of its risk-based analysis.

Mancuso: Particularly as it relates to inbound foreign investment, the national security threat landscape is more complex and more challenging than it has been since CFIUS was established in 1975. First, ‘threat’ actors now often take steps to conceal their identities and intentions, as well as the origin of their funds, and have been known to seek to avoid CFIUS scrutiny by engaging in seemingly low-visibility, low-value transactions. However, from a CFIUS perspective, the national security impact of a given transaction bears no obvious or necessary relation to the economic or other size of the transaction. Second, threats arising from inbound foreign investment increasingly relate to a non-obvious, indirect ‘third country’. For example, a foreign investor may be headquartered in a US allied or partner country, but its indirect exposure to a US adversary country, or its participation in other commercial activities that are contrary to US security interests, may be a significant vector of national security risk to the US.

Jan-Mar 2024 Issue

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