Episode 1: U.S. Department of the Treasury Issues Final Regulations on Reforming National Security Reviews of Foreign Investments
2024-09-24 22:37:58
On January 13, 2020, the U.S. Department of the Treasury issued two regulations ("Regulations Pertaining to Certain Investments in the United States by Foreign Persons (31 CFR Part 800)" and "Regulations Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 CFR Part 802)," collectively referred to as the "Regulations") to further implement the "Foreign Investment Risk Review Modernization Act" (hereinafter referred to as "FIRRMA"), thereby "strengthening and modernizing" the national security review of foreign direct investments by the Committee on Foreign Investment in the United States (hereinafter referred to as "CFIUS").
Specifically, the Regulations expand the types of investments subject to CFIUS review. Under the Regulations, CFIUS also has jurisdiction over the following two types of investments: (1) "covered investments" in "TID U.S. Businesses," and (2) "covered real estate transactions."
Covered Investments in TID U.S. Businesses: This refers to non-controlling investments by foreign investors in "TID U.S. Businesses," where the foreign investor gains any of the following rights:
A "TID U.S. Business" refers to any U.S. business that:
Produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies;
Owns, operates, manufactures, supplies, or services critical infrastructure; or
Maintains or collects sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security.
Access to any "material non-public technical information" held by the TID U.S. Business;
Membership or observer rights on the board of directors of the TID U.S. Business, or the right to nominate a board member; or
Participation in "substantive decision-making" regarding the use, development, acquisition, custody, or release of sensitive personal data, critical technologies, or critical infrastructure of the TID U.S. Business, other than through voting rights.
Covered Real Estate Transactions: This refers to foreign investments in the purchase, lease, or other acquisition of specific "covered real estate" in the United States, where the foreign investor obtains at least three of the following four property rights:
"Covered real estate" includes:
Real estate located within (or functionally part of) U.S. airports or seaports as defined in the Regulations; or
Real estate located near specific U.S. military or government facilities, including:
(1) Within "close proximity" (typically less than one mile) to certain military or government facilities;
(2) Within the "extended range" (typically less than 100 miles) of other facilities specified in the Regulations;
(3) Within designated geographic areas explicitly listed in the Regulations; or
(4) Within certain offshore areas of the U.S. government within U.S. territorial waters.Physical access to the covered real estate;
The right to exclude others from the covered real estate;
The right to improve or develop the covered real estate; or
The right to attach fixed or immovable structures or objects to the covered real estate.
Certain transactions involving "covered real estate," such as purchases of real estate in urbanized areas as defined in the Regulations, acquisitions of single housing units, investments in commercial office space as defined in the Regulations, or leases by foreign air carriers for the purpose of providing services or retail goods to the public, are exempt from CFIUS jurisdiction.
Notably, the Regulations, for the first time, exclude certain qualified investors from Australia, Canada, and the United Kingdom from CFIUS jurisdiction over "covered investments" and "covered real estate transactions" until February 13, 2022, at which point CFIUS will reassess and evaluate this exemption.
The Regulations will take effect on February 13, 2020.
[Stay tuned for more updates]