The Foreign Investment Risk Review Modernization Act ("FIRRMA"), which aims to address national security concerns by expanding, strengthening, and modernizing the existing authority and jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”), was signed into law on August 13, 2018. On September 17, 2019, the Department of the Treasury issued proposed regulations that will implement FIRRMA. Over the coming days, we will be posting a series of articles analyzing the proposed regulations and their practical implications for foreign and domestic companies alike. In the meantime, this alert provides a basic overview of the proposed regulations’ scope.
The proposed regulations will implement two aspects of FIRRMA:
- First, the “Provisions Pertaining to Certain Investments in the United States by Foreign Persons” would replace the existing interim rules enacted on October 11, 2018 to partially implement FIRRMA and extend CFIUS’ jurisdiction over non-controlling “covered investments.”
- The “Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States” are a new series of rules that would extend CFIUS’ jurisdiction over a foreign person’s purchase or lease of, or concession to, certain real estate in the United States.
While the first set of regulations largely mirrors the current interim rules, they also contain substantial changes. Further, the second set of regulations creates an entirely new set of rules that have not previously been addressed by the Department of the Treasury.
Notably, these new regulations are not intended to modify or replace the pilot program. In fact, the Department of the Treasury welcomes further comments on the pilot program, which must end no later than March 5, 2020.
These rules are not yet finalized, and the Department of the Treasury is accepting comments on the proposed regulations through the eRulemaking Portal. Interested stakeholders have until October 17, 2019 to comment on the proposed regulations. The Department of the Treasury will use these comments to refine the final regulations, which are to become effective no later than February 13, 2020.
These regulations are the final step before FIRRMA’s full implementation. While future changes and updates to the law are always possible (and likely), this development marks the last opportunity for stakeholders to comment on CFIUS’ expansion before the rules are finalized.
For more information on FIRRMA’s changes to CFIUS, we encourage you to review of previous analyses of FIRRMA:
- Part 1: CFIUS Now
- Part 2: CFIUS' Expanded Jurisdiction
- Part 3: Country Specific Exceptions
- Part 4: "Passive Investment" Redefined
- Part 5: The Declaration Mechanism
About the Authors
Jennifer S. Huber and Adam Munitz are Partners in FH+H's International Trade + Transactions Practice. Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam position U.S. businesses for overseas growth and help foreign investors/acquirers and U.S. sellers navigate the CFIUS review process.
Megan Paster is an Associate in FH+H's International Trade + Transactions Practice. Ms. Paster advises and counsels companies and individuals on a wide variety of matters, including foreign investment, export compliance, foreign ownership, control and influence, and CFIUS issues. Ms. Paster has a range of previous experience in the public and non-profit sectors, where she focused on trade law, international development, and comparative regulatory analysis.
FH+H Of Counsel Mary Beth Long is the first-ever Senate confirmed female Assistant Secretary of Defense and worked directly with Secretaries of Defense Rumsfeld and Gates on the Department’s highest priority issues. As the Defense Secretary’s principle advisor on the Middle East, Europe and Africa, including Iraq and Afghanistan, Ms. Long represented the Department of Defense at the National Security Council and the White House, and with foreign Ministers of Defense. She has expertise in export compliance, securities regulations, and other regulatory regimes.
Additional information regarding the FH+H International Trade & Transactions Practice and previous representations can be found here.