On July 23, 2024, the Committee on Foreign Investment in the United States ("CFIUS" or "the Committee") released its annual report to Congress regarding the Committee's national security reviews and investigations of certain foreign investment transactions from the preceding year. The report offers valuable insight into the CFIUS review process and highlights the various foreign investment transaction elements that are coming under scrutiny. Even with an overall decrease in global merger and acquisition activity in 2023, CFIUS activity was still significant.
CFIUS Jurisdiction Overview
CFIUS is a U.S. interagency body, chaired by the Department of the Treasury, acting under authority granted under Section 721 of the Defense Production Act of 1950 (50 U.S.C. § 4565) and the Foreign Investment Risk Review Modernization Act of 2018 ("FIRRMA"), which authorize review of certain foreign investment and real estate transactions in the United States by foreign persons (known as "covered transactions") to determine the effect of such transactions on U.S. national security. Where CFIUS identifies transaction elements warranting action, the Committee may enter into agreements with, or impose conditions on, the parties to the transaction. Some foreign investment transactions require mandatory filing with CFIUS; however, transacting parties submit most filings with the Committee as voluntary declarations or notices.
Key Takeaways
- Declarations
- CFIUS received and reviewed 109 declarations in 2023, a decrease from 2022 that totaled 154. Three of these declarations were for covered real estate transactions.
- 36 declarations were subject to mandatory filing requirements.
- From the review of these 109 declarations, CFIUS requested parties file 20 notices.
- Canadian investors filed the most declarations for 2023 with 13, followed by Japan and France with 11 each.
- Notices
- 233 notices of transactions were filed with CFIUS in 2023 (compared to 286 in 2022).
- CFIUS conducted investigations on 128 of the 233 notices.
- 57 of the 233 notices were withdrawn. In 43 of these instances,
the parties filed a new notice (34 were refiled in 2023 and eight
in 2024).
- Of the 57 notices withdrawn, nine of the notices were withdrawn and the transactions abandoned due to: i) CFIUS informing the parties that no mitigation measures would resolve the national security risks identified in the transaction; or, ii) CFIUS presented mitigation measures that the parties chose not to accept.
- Of the 57 notices withdrawn, five of the transactions were withdrawn by the parties for other commercial reasons.
- Processing Times: Reviews of notices closed in an average of 45.8 days; Investigations closed in an average of 85.8 days.
- The industry sectors with the highest percentage of notices filed were Finance, Information and Services (50%) and Manufacturing (29%).
- Chinese investors filed the most notices for 2023 (33), followed by United Arab Emirates (22), and then United Kingdom and Singapore investors (19).
- Mitigation Measures
- In 2023, CFIUS adopted mitigation measures and conditions in 43 instances (35 notices of covered transactions; one to address residual national security concerns on a notice voluntarily withdrawn and abandoned; interim risk mitigation on one notice; conditions were imposed for six notices where the Committee granted withdrawal and abandonment).
- Notable mitigation measures:
- restricting hiring of certain personnel;
- ensuring that certain facilities, equipment, and operations are located only in the United States;
- establishing a corporate security committee, voting trust, and other mechanisms to limit foreign influence and ensure compliance, including the appointment of a U.S. Government-approved security officer and/or member of the board of directors and requirements for security policies, annual reports, and independent audits;
- notifying customers or relevant U.S. Government parties when there is a change of ownership in the U.S. business; and,
- assurances of continuity of supply to the U.S. Government for defined periods, notification, and consultation prior to taking certain business decisions, and reservation of certain rights for the U.S. Government in the event that the company decides to exit a business line.
- Critical Technologies
- In 2023, CFIUS reviewed 153 covered transactions involving foreign acquisitions of U.S. critical technology companies.
- The originating countries, in order of volume of filings, are: Canada and United Kingdom (14 each), Germany, Japan, and South Korea (12 each), and France (10), notably all U.S. ally countries.
- As in 2022, China is again the largest non-U.S. ally country attempting to acquire U.S. critical technology companies with seven filings submitted to CFIUS.
Overall, total filings with CFIUS decreased from 440 filings in 2022 to 342 filings in 2023. The decrease in M&A in 2023 likely explains the decrease in filings.
Non-Notified Transactions
The Committee continues to use various methods to identify "non-notified transactions," which are covered transactions for which no declaration or notice was filed with CFIUS. In 2023, CFIUS identified 60 non-notified transactions, resulting in the Committee requesting filings in 13 of the 60 transactions. These numbers do not reflect instances where the parties in receipt of non-notified-related outreach voluntarily filed a declaration or notice prior to receiving a formal request; there were three such instances in 2023.
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