United States: Treasury Issues Interim CFIUS Regulations For FIRRMA Implementation

The U.S. Department of the Treasury ("Treasury") issued temporary regulations to implement the Foreign Investment Risk Review Modernization Act ("FIRRMA"). FIRRMA, enacted earlier this year, broadened the powers of the President and the Committee on Foreign Investment in the United States ("CFIUS") to scrutinize and halt foreign transactions with national security implications. The regulations includes a pilot program, effective November 10, 2018, to expand the scope of transactions subject to CFIUS review to include certain non-controlling investments made by foreign nationals in U.S. businesses. A focus of the pilot program is "to protect critical American technology and intellectual property from potentially harmful foreign acquisitions." The pilot program makes effective FIRRMA's mandatory declaration provisions for transactions that fall within its scope.

In addition to the pilot program regulations, Treasury issued temporary regulations to implement provisions of FIRRMA that became immediately effective upon its enactment and will guarantee consistency between CFIUS's regulations and the statute. These regulations will go into effect on October 11, 2018.

Commentary / Joseph V. Moreno

While the new CFIUS regulations and the FIRRMA pilot program are not country-specific, they are clearly designed with an eye toward preventing China from obtaining U.S. technology and trade secrets through a wide range of corporate transactions. Formerly, CFIUS review was limited to transactions that would result in foreign persons having control of a U.S. business. Under the new interim rules, CFIUS will be able to review and potentially prevent a foreign person from obtaining even a non-controlling interest in a U.S. company that produces one or more "critical technologies," such as certain export-controlled items. Meanwhile, the declarations provisions transform CFIUS review from a purely voluntary process to one which is mandatory for certain transactions.

KeithGerver co-authored this comment.

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