Foreign Investment and National Security Act of 2007
Encyclopedia
Foreign Investment and National Security Act of 2007 is an Act of the United States Congress
.
The Act addresses investments made by foreign entities in the United States. The law strengthens pre-existing laws including the Exon-Florio Amendment
and the Committee on Foreign Investment in the United States.
passed the bill on February 28, 2007 by a vote of 423 to 0.. The United States Senate
passed their version of the bill on June 29, 2007 by unanimous consent. On July 11, 2007, the House passed the Senate's version, by a vote 370-45.
The bill establishes a framework for the review of foreign acquisitions of US assets by the Committee on Foreign Investment in the United States (CFIUS).
CFIUS reform has been in the works since the Dubai Ports World transaction passed through CFIUS without a formal investigation, leaving a surprised and angry Congress determined to avoid a repetition of that scenario. Impetus for reform first began, however, when the China National Offshore Oil Corporation publicly announced an interest in UNOCAL in 2005, and even earlier that same year, when a GAO report revealed the lack of Congressional oversight and the degree to which some CFIUS transactions were escaping formal investigation through withdrawal of applications, among other things.
's on January 23, 2008.
The Act addresses many of the issues that have been the focus of concern since the 2005 report: it establishes transaction-specific and general Congressional notification requirements, creates rules that dictate how applications before CFIUS may be withdrawn, and specifically includes energy supplies among critical US assets requiring special consideration.
More generally, the bill establishes more stringent rules for the review and formal investigation of transactions, especially those involving foreign governments or critical infrastructure assets. It also requires senior-level involvement in various required certifications and reports, limiting the agencies’ delegation authority. In general, then, the bill’s provisions convey the seriousness with which Congress expects the CFIUS agencies to approach future reviews.
• The bill establishes the membership of CFIUS by statute, and creates a defined role for the Director of National Intelligence as an ex-officio member who must evaluate the transaction’s national security implications.
• On each future transaction, one of the member agencies would play a lead role, in addition to Treasury, depending on the transaction’s subject matter. The lead agency would be responsible for negotiating and overseeing mitigation agreements.
• Transactions that involve foreign governments, a threat to national security, or control of critical infrastructure must be subject to a 45-day formal investigation, except that exceptions are possible for foreign government transactions if
the Secretary or Deputy Secretary of Treasury and the lead agency certify that there is no national security threat.
• The bill requires sign-off at the assistant secretary level (or above) that a transaction does not fall into one of these categories and need not go beyond the 30-day review period. Similar sign-off is required at the close of the 45-day investigation period to confirm that the transaction does not threaten national security.
• CFIUS must report to Congress at the end of reviews and formal investigations. The bill also requires annual reports to Congress on the activities of CFIUS.
• The bill provides explicit authority to CFIUS to require mitigation agreements.
• Among the factors CFIUS must consider in its review are the impact of the transaction on critical infrastructure, broadly defined, as well as energy assets and critical technologies. In the case of foreign-government transactions, CFIUS must also consider the relevant country’s compliance with US and multilateral counter-terrorism, non-proliferation, and export control regimes.
• The bill creates specific authority for CFIUS to enforce mitigation agreements.
Further, it explicitly establishes CFIUS’s “evergreen” authority to reopen a transaction that has been approved if there has been an intentional breach, and no other remedies will suffice.
The bill also requires the publication of regulations that will standardize the filing process, as well as the process by which CFIUS communicates results to parties. And it requires CFIUS to publish guidelines concerning the types of transactions that have presented national security considerations, which could be helpful for companies trying to determine whether to make the so-called “voluntary” filing decision, especially now that withdrawals will be more closely regulated.
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
.
The Act addresses investments made by foreign entities in the United States. The law strengthens pre-existing laws including the Exon-Florio Amendment
Exon-Florio Amendment
The Exon–Florio Amendment is a law that was enacted by the United States Congress in 1988 to review foreign investment within the United States. The amendment was passed into law under the Omnibus Trade and Competitiveness Act of 1988 and amended Section 721 of Defense Production Act of 1950...
and the Committee on Foreign Investment in the United States.
Legislative history
The United States House of RepresentativesUnited States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
passed the bill on February 28, 2007 by a vote of 423 to 0.. The United States Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
passed their version of the bill on June 29, 2007 by unanimous consent. On July 11, 2007, the House passed the Senate's version, by a vote 370-45.
The bill establishes a framework for the review of foreign acquisitions of US assets by the Committee on Foreign Investment in the United States (CFIUS).
CFIUS reform has been in the works since the Dubai Ports World transaction passed through CFIUS without a formal investigation, leaving a surprised and angry Congress determined to avoid a repetition of that scenario. Impetus for reform first began, however, when the China National Offshore Oil Corporation publicly announced an interest in UNOCAL in 2005, and even earlier that same year, when a GAO report revealed the lack of Congressional oversight and the degree to which some CFIUS transactions were escaping formal investigation through withdrawal of applications, among other things.
Implementation
The act was implemented by President George W. BushGeorge W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
's on January 23, 2008.
The Act addresses many of the issues that have been the focus of concern since the 2005 report: it establishes transaction-specific and general Congressional notification requirements, creates rules that dictate how applications before CFIUS may be withdrawn, and specifically includes energy supplies among critical US assets requiring special consideration.
More generally, the bill establishes more stringent rules for the review and formal investigation of transactions, especially those involving foreign governments or critical infrastructure assets. It also requires senior-level involvement in various required certifications and reports, limiting the agencies’ delegation authority. In general, then, the bill’s provisions convey the seriousness with which Congress expects the CFIUS agencies to approach future reviews.
Key Provisions
The bill’s key provisions are as follows:• The bill establishes the membership of CFIUS by statute, and creates a defined role for the Director of National Intelligence as an ex-officio member who must evaluate the transaction’s national security implications.
• On each future transaction, one of the member agencies would play a lead role, in addition to Treasury, depending on the transaction’s subject matter. The lead agency would be responsible for negotiating and overseeing mitigation agreements.
• Transactions that involve foreign governments, a threat to national security, or control of critical infrastructure must be subject to a 45-day formal investigation, except that exceptions are possible for foreign government transactions if
the Secretary or Deputy Secretary of Treasury and the lead agency certify that there is no national security threat.
• The bill requires sign-off at the assistant secretary level (or above) that a transaction does not fall into one of these categories and need not go beyond the 30-day review period. Similar sign-off is required at the close of the 45-day investigation period to confirm that the transaction does not threaten national security.
• CFIUS must report to Congress at the end of reviews and formal investigations. The bill also requires annual reports to Congress on the activities of CFIUS.
• The bill provides explicit authority to CFIUS to require mitigation agreements.
• Among the factors CFIUS must consider in its review are the impact of the transaction on critical infrastructure, broadly defined, as well as energy assets and critical technologies. In the case of foreign-government transactions, CFIUS must also consider the relevant country’s compliance with US and multilateral counter-terrorism, non-proliferation, and export control regimes.
• The bill creates specific authority for CFIUS to enforce mitigation agreements.
Further, it explicitly establishes CFIUS’s “evergreen” authority to reopen a transaction that has been approved if there has been an intentional breach, and no other remedies will suffice.
The bill also requires the publication of regulations that will standardize the filing process, as well as the process by which CFIUS communicates results to parties. And it requires CFIUS to publish guidelines concerning the types of transactions that have presented national security considerations, which could be helpful for companies trying to determine whether to make the so-called “voluntary” filing decision, especially now that withdrawals will be more closely regulated.
See also
- Committee on Foreign Investment in the United States
- Omnibus Foreign Trade and Competitiveness ActOmnibus Foreign Trade and Competitiveness ActThe Omnibus Foreign Trade and Competitiveness Act of 1988 is an act passed by the United States Congress and signed into law by President Ronald Reagan.-History:...