USA Law and Practice Contributed by: G. J. Ligelis Jr., Christopher K. Fargo, Alyssa K. Caples and Margaret T. Segall, Cravath, Swaine & Moore LLP
If the DOJ or the FTC seeks to block an investment before it is made, then the agency must bring suit in federal district court for a preliminary injunction pro - hibiting the investment from being made pending a court’s decision on the merits. If the DOJ or the FTC seeks to challenge an investment after it is made, they must also challenge the investment in court (the DOJ in federal district court and the FTC in either federal district court or through administrative proceedings). The judge’s decision may be appealed to an appeals court by either the parties to the transaction or the relevant agency.
or intended to evade the CFIUS process. Transactions subject to review by the CFIUS are referred to as cov - ered transactions. Covered transactions First, the CFIUS has the authority to review any trans - action that could result in a “foreign person” control - ling a US business, including through a joint venture. The CFIUS defines “control” as the power to deter - mine, direct or decide important matters affecting an entity. There is no bright-line ownership thresh - old for “control”, and the CFIUS may find “control” at relatively small ownership percentages if the foreign investor holds certain rights (eg, veto rights over cer - tain actions by the US business). The CFIUS will not find “control” in any transaction resulting in the foreign investor holding 10% or less of the outstanding voting interests of the US business, provided that the trans - action is solely for the purpose of passive investment. Second, the CFIUS has the authority to review certain non-controlling investments by “foreign persons” in US businesses that deal with critical technologies, critical infrastructure or sensitive personal data (“TID US businesses”). Specifically, the CFIUS may review an investment by a “foreign person” in a TID US busi - ness if the investment would afford the foreign inves - tor: • access to material non-public technical information in possession of the TID US business; • membership or observer rights on the board of directors of the TID US business; or • any involvement (other than through the voting of shares) in substantive decision-making of the TID US business regarding certain specified matters. Third, the CFIUS has the authority to review the pur - chase or lease by, or concession to, a “foreign per - son” of certain real estate located within a specified distance (in some cases, up to 100 miles) of ports and sensitive US government facilities. Exempt investors Currently, investors from Australia, Canada, New Zea - land and the UK that satisfy certain criteria are exempt from the CFIUS’s jurisdiction over non-controlling investments and real estate transactions but remain
7. Foreign Investment/National Security 7.1 Applicable Regulator and Process Overview Overview
The CFIUS is a US government committee authorised to review certain foreign investment transactions in order to determine the effect of the transactions on the national security of the USA. The CFIUS is comprised of the heads of nine US government departments and offices and is chaired by the Secretary of the Treasury. The CFIUS operates pursuant to Section 721 of the Defence Production Act of 1950 (as amended) (50 USC 4565) (Section 721), regulations promulgated by the Treasury Department (31 CFR Part 800, et seq), Executive Order 11858 (as amended) and Executive Order 14083. The CFIUS has played an increasingly prominent role in cross-border investments in the last several years, particularly following the enactment of the Foreign Investment Risk Review Modernisa - tion Act of 2018 (the “FIRRMA”), which significantly expanded the CFIUS’s powers and resources. Investments Subject to Review The CFIUS may review any investment in the USA that involves a “foreign person” and satisfies certain other criteria summarised below, regardless of industry, sector or transaction value. Generally, a “foreign per - son” is a foreign national, a foreign entity or a foreign government, or any entity over which “control” is exer - cised or exercisable by one of the foregoing. In addi - tion, the CFIUS may review any transaction designed
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