PUERTO RICO Law and Practice Contributed by: Dianette Rivera-Melendez, Oreste Ramos, Maria Trelles-Hernandez and Rosangela Sanfilippo, Pietrantoni Mendez & Alvarez LLC
framework provides a timetable for reviewing and clearing transactions, which can take up to 90 days to complete. Under the FIRRMA, which was the first major CFIUS reform in a decade, parties are required to notify the CFIUS of certain transactions. Two Final Rules issued by the CFIUS implementing most of the provisions of the FIRRMA came into effect on 13 February 2020: • one rule expands the CFIUS’ jurisdiction to review certain non-controlling foreign investments in US businesses involving critical technology, critical infrastructure and sensitive personal data (“TID businesses”) (the “US Business Rule”); and • the other rule expands the CFIUS’ jurisdiction to review certain foreign investments in US real estate (the “Real Estate Rule”). These rules will impact foreign investment – including foreign investments made indirectly via US investors – in the US energy, infrastructure, telecom/IT, finan - cial services, technology, healthcare and pharmaceu - ticals, and real estate sectors. Under the US Business Rule, non-controlling foreign investment in US businesses that produce, design, test, manufacture, fabricate or develop critical tech - nology will be subject to the CFIUS voluntary filing jurisdiction if a foreign person also acquires informa - tion access, board nomination or decision-making rights as a result of the investment. The US Business Rule authorises the CFIUS to review covered invest - ments in US businesses involved in a sensitive subset of critical infrastructure, defined as “covered invest - ment critical infrastructure”. In particular, a covered investment will be subject to the CFIUS voluntary filing jurisdiction if the investment is in a US business that owns, operates, manufactures, supplies or services (each a critical infrastructure “function”) specific types of critical infrastructure. In addition, CFIUS filings will be required for certain investments in TID businesses involving foreign gov - ernment investors. The CFIUS requires a mandatory filing when a foreign person obtains a “substantial interest” in a US business and a foreign government in turn holds a “substantial interest” in the foreign
person – ie, if a foreign person’s investment in a TID business gives that foreign person a 25% or greater direct or indirect voting interest in the TID business, and a foreign government, in turn, holds a 49% direct or indirect interest in the foreign person making the investment. 7.2 Criteria for National Security Review The criteria and analyses relating to the CFIUS approv - al process in Puerto Rico do not vary from those that apply more broadly in the USA. For more information, see 7.1 Applicable Regulator and Process Overview . 7.3 Remedies and Commitments To the extent it identifies a risk with respect to a “covered transaction”, the CFIUS has the authority to negotiate and impose conditions, which generally vary based on the nature of the risk identified. 7.4 National Security Review Enforcement To the extent it identifies a national security risk with respect to a “covered transaction” that cannot oth - erwise be mitigated, the CFIUS may make a recom - mendation to the President of the USA with respect to a course of action relating to the transaction. The President has the authority to suspend or prohibit the transaction, including requiring divestment by the for - eign entity if the transaction has already been con - summated. There are other federal and state regulatory reviews and/or requirements on FDI transactions that are industry-specific. An example of this is the required licensing and authorisation from the Federal Com - munications Commission for foreign investment in US companies within the telecommunications ser - vices sector. For the purposes of Puerto Rican law, the banking, mortgage banking and insurance indus - tries are subject to special statutory regimes that may impact FDI transactions. 8. Other Review/Approvals 8.1 Other Regimes
498 CHAMBERS.COM
Powered by FlippingBook