USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters LLP
7.4 National Security Review/Export Control Generally, four different US bodies are respon- sible for addressing national security concerns that could arise from foreign investments in tech transactions: • the Committee on Foreign Investment in the United States (CFIUS); • the Defense Counterintelligence and Security Agency (DCSA); • the Directorate of Defense Trade Controls (DDTC); and • the Committee for the Assessment of Foreign Participation in the United States Telecommu- nications Services Sector (“Team Telecom”). A single transaction can implicate more than one regime. CFIUS is a multi-agency panel charged with identifying and addressing national security risks arising from a variety of foreign investments in US businesses, as well as certain transactions involving US real estate. The CFIUS process normally involves a joint filing by the parties to a transaction, followed by additional questions from CFIUS. CFIUS has jurisdiction over any acquisition of control of a US business (often including US activities of a non-US parent) and also has jurisdiction over certain non-controlling investments in companies involved with critical technologies, critical infrastructure or sensitive personal data (“TID Businesses”). Investments in TID Businesses can sometimes be subject to mandatory pre-closing CFIUS filings. If CFIUS has jurisdiction over a transaction, it will have the right to call in the transaction for review at any time after closing. On the other hand, CFIUS offers a “safe harbour” against further review if it has cleared an acquisition of
control or a non-controlling investment (though in the latter case, incremental acquisitions that increase the investor’s rights can be subject to a new CFIUS case). One of the DCSA’s responsibilities is to mitigate foreign ownership, control or influence (FOCI) of US businesses that hold facility security clear- ances and (since 2024) certain other uncleared defence contractors and subcontractors. The DCSA does not approve transactions, but fail- ure to receive FOCI mitigation could lead to the DCSA terminating a contractor’s facility clear- ance or covered contract. FOCI mitigation is based on the sensitivity of the contractor’s activ- ities and the nature of the foreign ownership, and comes in a number of forms that combine vary- ing degrees of governance requirements with the implementation of security policies addressing a variety of technical, physical and operational security concerns. The DDTC is part of the Department of State and regulates foreign ownership or control of manufacturers, service providers, exporters and brokers whose activities are governed by the International Traffic in Arms Regulations (ITAR, discussed below), a set of export controls gov- erning military items. The DDTC requires pre- and post-closing notifications of new or changed foreign ownership or control of ITAR registrants. The DDTC also cannot block a transaction, but non-compliance with ITAR can cause revocation of a company’s registration. Team Telecom is a multi-agency panel led by the Departments of Justice, Homeland Security and Defense, which conducts national security- and law enforcement-related reviews of foreign appli- cations for certain telecommunications licences granted by the Federal Communications Com- mission (FCC). Team Telecom can recommend
450 CHAMBERS.COM
Powered by FlippingBook