From fretting takeovers to vetting CFIUS: finding a balance in U.S. policy regarding foreign acquisitions of domestic assets

Vanderbilt Journal of Transnational Law, Oct, 2006 by Gaurav Sud

A few procedural aspects of the current CFIUS review process are also worth highlighting because of their relevance to the changes proposed in this Note. Section 721(a) of the Exon-Florio Amendments permits any transaction within the ambit of the Amendments to be subject to investigation that must commence within thirty days after notice of the transaction has been made. (105) This notice provision does not require that the parties provide notice of the transaction, and historically many parties have chosen not to do so. By failing to do so, however, the parties implicitly allow CFIUS to commence an investigation at any time. (106) Technically, CFIUS also has the power to begin an investigation and seek divestiture of a transaction after the acquisition has closed and to unilaterally decide to review a particular transaction after providing the parties with written notice. (107) Interestingly, "[c]ompetitors, shareholders and governmental agencies" have no authority to trigger CFIUS review, though they can contact CFIUS to raise questions or express concern about a transaction. (108) Although they have rarely come into play in the past, these procedural provisions do provide the basis for some significant opportunities for reform.

The Exon-Florio Amendments also state that if there are national security concerns--however that term may be construed--then the Chief Executive is required to make specific findings that "there is credible evidence ... to believe that the foreign interest exercising control might take action that threatens to impair the national security," and that other legal avenues do not provide "adequate and appropriate authority for the President to protect the national security" with respect to the proposed transaction. (109) The statute also explicitly states that the President's findings are not subject to judicial review, indicating the tremendous amount of deference given to the President in evaluating the results of the CFIUS investigation. (110) In short, the President "enjoys the power to completely prohibit a contemplated transaction." (111) That is not to say, however, that there are no checks on the President's power in this regard. The statute requires him to provide a written report of his determination, including a "detailed explanation" of his findings and the factors considered. (112)

Responding to concerns about the "lack of transparency" in the CFIUS review process, Congress passed the Byrd Amendment to the Exon-Florio Amendments in 1992. (113) This provision requires the President to deliver a report to Congress if the President makes any decision regarding a proposed foreign acquisition. (114) Further, it makes clear that an investigation is required in cases where "the acquirer is controlled by or acting on behalf of a foreign government; and the acquisition could result in control of a person engaged in interstate commerce in the U.S. that could affect the national security of the U.S." (115) Until the past year, this marks the only concerted attempt to reform the CFIUS process, and the Byrd Amendment did not address the most problematic aspects of the regulations in question.