PUERTO RICO Law and Practice Contributed by: Dianette Rivera-Melendez, Oreste Ramos, Maria Trelles-Hernandez and Rosangela Sanfilippo, Pietrantoni Mendez & Alvarez LLC
it, the court will proceed, as soon as possible, to the hearing and determination of the case; pending these proceedings and before final decree, the court may make such temporary restraining orders or prohibition as will be deemed just in the premises. The Court of First Instance will have exclusive jurisdic - tion to entertain criminal proceedings for violation of this chapter. Disobedience of an order of the court to enforce the provisions of this chapter is punishable as contempt. A person found guilty of such violation may be punished by a fine not exceeding USD25,000 or imprisonment not exceeding one year, or both, at the court’s discretion. 6.4 Antitrust/Competition Enforcement Puerto Rican law does not impose general restrictions on foreign direct investments other than the restric - tions on the banking, mortgage banking and insurance industries, which apply to both foreign and domestic investors. In addition, transactions that may require an HSR filing may not close until the relevant waiting period expires or terminates. 7. Foreign Investment/National Security 7.1 Applicable Regulator and Process Overview Puerto Rican law does not generally restrict foreign ownership nor impose special restrictions on foreign companies operating in Puerto Rico. However, for - eign companies must be authorised to do business in Puerto Rico. As discussed in 1.2 Regulatory Frame- work for FDI , the CFIUS is authorised to review certain foreign investment transactions in order to determine the effect of the transactions on the national security of the USA, including Puerto Rico. The CFIUS operates pursuant to Section 721 of the Defence Production Act of 1950 (as amended) (50 USC 4565) (Section 721) (the “Exon-Florio Amend - ment”), and the regulations promulgated by the Treas - ury Department (31 CFR Part 800, et seq), Executive Order 11858 (as amended) and Executive Order 14083, as well as pursuant to authority granted to it
by the Foreign Investment Risk Review Modernisation Act of 2018 (FIRRMA). Under the Exon-Florio Amendment, the President has broad authority to investigate and prohibit any merger, acquisition or takeover by or with foreign persons that could result in foreign control of persons engaged in interstate commerce, if the President determines that the merger, acquisition or takeover constitutes a threat to US national security. Congress has indicated that the term “national security” is to be interpreted broad - ly and that the application of the Exon-Florio Amend - ment should not be limited to any particular industry. The President delegated the authority to make inves - tigations pursuant to the Exon-Florio Amendment to the CFIUS. The CFIUS has jurisdiction to review “covered trans - actions”, which are transactions in which a foreign person gains “control” over a US business. “Control” is often interpreted as equity, but the CFIUS’ definition is far broader: “[t]he term control means the power, direct or indirect, whether or not exercised, through the ownership of a majority or a dominant minority of the total outstanding voting interest in an entity, board representation, proxy voting, a special share, contrac- tual arrangements, formal or informal arrangements to act in concert, or other means, to determine, direct, or decide important matters affecting an entity.” There - fore, depending on the ownership structure or other operational control of the contractor, the CFIUS could view the operating agreement as conferring control, thereby subjecting the transaction to the jurisdiction of the CFIUS. Currently, the CFIUS notification process is voluntary for most transactions (ie, transactions that do not involve “critical technology”). Parties choose to notify the CFIUS of their transactions because the President has broad authority to block transactions (or unwind them if they have already closed) if he determines that a transaction threatens US national security, although this is rare. In addition, if the parties do not voluntar - ily file their transaction, the CFIUS can ask the par - ties to file or self-initiate their own review before or after the closing. If the CFIUS clears a transaction, that clearance provides a safe harbour against future CFIUS action related to that transaction. The CFIUS
497 CHAMBERS.COM
Powered by FlippingBook