US authorities announced new rules on Monday aimed at offering more clarity to a controversial review program for foreign investment in US companies.
Officials said the new rules are not aimed at discouraging foreign investment, but would make the secretive review process more predictable and transparent.
The proposed regulations under the Foreign Investment and National Security Act of last year would update the review process for the secretive Committee on Foreign Investment in the United States (CFIUS).
The law was passed amid an outcry in Congress over Dubai Ports World’s (DPW) planned acquisition in 2006 of a company managing US port facilities, which prompted DPW to back away from the deal. The rules set out procedures to implement the new law.
“These regulations reflect America’s strong and continued commitment to safeguarding US national security in a manner that reinforces the longstanding US policy of welcoming foreign investment,” Assistant Treasury Secretary Clay Lowery said.
“The proposed regulations increase clarity and make additional improvements based on experience.”
CONTROVERSIES
The CFIUS review process, which up to now had been by executive order of the president, affects only a small percentage of foreign investments, but has been used to block some controversial acquisitions.
Last month, a planned buyout of US technology firm 3Com by a private equity firm and China’s Huawei Technologies was scrubbed because of what the companies claimed was opposition by CFIUS.
CFIUS is an interagency panel led by the US Treasury, which operates in secrecy. It also includes the heads of agencies including the departments of Homeland Security, Commerce, Energy, the Department of Defense and the State Department, as well as the attorney general.
CERTIFICATION
The rules would require a high-level official to certify to Congress that any investment plan has “no unresolved national security plans.” In some cases, the president must publicly announce a decision.
They would also formalize the process in which the panel determines whether a foreign acquisition would “impair” national security or give a foreign entity control over “critical infrastructure.”
The panel may reopen an investigation if it determines false information was provided.
Foreign investors would be exempt from a review if they owned less than 10 percent of a US company and if the stake was “solely for the purpose of investment.”
The proposal does not set an official threshold on what would be “control” of a company, but allows a review if an investment could give a foreign entity key decision-making power.
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