The United States Treasury Department is seeking to strengthen the enforcement powers of the Committee on Foreign Investment in the United States (CFIUS) in response to growing concerns over Chinese investments in the country. A recent proposal would grant CFIUS new powers to expand its oversight of foreign investments by enabling it to more easily subpoena companies involved in corporate acquisitions, require them to turn over additional information, and impose higher fines. This move comes amidst congressional action targeting Chinese-owned app TikTok, with a recent bill passed by the House of Representatives threatening to ban the app unless its parent company sells it.
CFIUS is a federal interagency committee responsible for assessing the national security implications of foreign investments in the U.S. The proposed measures are aimed at addressing gaps in CFIUS’ enforcement authority and aligning its compliance tools with its expanded scope and practice. Robert A. Friedman, a partner at Holland & Knight’s Washington, D.C. office, notes that while these measures may not have a significant impact on cross-border dealmakers individually, they are important in signaling CFIUS’ commitment to identifying transactions that were not notified to the committee and providing it with increased subpoena power and higher fines.
A significant trend in recent years has been the rise in CFIUS’ non-notified inquiries, where parties do not file with the committee. The new enforcement and compliance proposal seeks to ensure that CFIUS has the necessary authorities to conduct these inquiries and that parties are encouraged to cooperate transparently in preliminary reviews. CFIUS, established in 1975 by President Gerald Ford, is chaired by the Secretary of the Treasury and consists of representatives from various government departments involved in evaluating transactions that could result in control of a U.S. business by a foreign entity.
The Foreign Investment Risk Review Modernization Act of 2018 expanded the types of transactions subject to review by CFIUS, introduced mandatory declarations for certain transactions involving critical technologies, and provided the committee with more resources and authority to address national security threats. The proposed measures to enhance CFIUS’ enforcement powers are part of a broader effort to address concerns over Chinese investments in the U.S. and to ensure that the committee has the necessary tools to assess and mitigate potential national security risks associated with foreign investments.
With the growing scrutiny of Chinese investments in the U.S., Congress and regulatory agencies are increasingly focused on strengthening oversight mechanisms, including empowering CFIUS to more effectively review transactions that could impact national security. The proposed changes, if implemented, would enable CFIUS to proactively assess non-notified transactions and ensure that parties cooperate transparently in preliminary reviews. These enhancements to CFIUS’ authorities and compliance tools are critical in safeguarding national security interests and addressing potential risks posed by foreign investments in the country.
