What is CFIUS and what are its powers?

Often called a “black box,” the Committee on Foreign Investment in the United States (CFIUS) assesses the potential national security risks of investments in the U.S. and operates in a classified environment. So who is CFIUS and what are its actual powers? To peel back the curtain, we sit down with two longtime leaders of the CFIUS committee, Aimen Mir and Colin Costello and discuss the substantive changes and new powers conferred by FIRRMA as well as CFIUS strategy for businesses under the Biden administration. Aimen Mir is a partner at the global law firm, Freshfields. Formerly, Aimen served in several leadership roles at the Department of the Treasury including serving as the CFIUS chair. Colin Costello is a CFIUS client advisor at Freshfields. Prior, Colin served as the Acting Director of the National Intelligence Council, Investment Security Group with CFIUS responsibilities. ► http://www.talksonlaw.com for more legal explainers and interviews with the titans of law. ► Facebook: http://www.facebook.com/talksonlaw ► Instagram: http://www.instagram.com/talksonlaw ► Twitter: http://www.twitter.com/talksonlaw ► TalksOnLaw does not provide legal advice. Learn more here: https://www.talksonlaw.com/briefs#about_tol_briefs_tol_is_not_your_lawyer ____________________ Interview with CFIUS Lawyers – Aimen Mir and Colin Costello Joel Cohen (Host): So, Colin, before we get too deep into the details, why don't you give us a quick overview. What is CFIUS?  Colin Costello (Costello): So, CFIUS is an interagency committee that's chaired by the Department of the Treasury and is made up of other departments, including the departments of Energy, Homeland Security, Justice, Commerce, Defense, State, the United States Trade Representative, and the White House's Office of Science & Technology Policy. What CFIUS does is it looks for risks to national security in foreign investments in U.S. companies in certain real estate transactions. What transactions can CFIUS review? Host: What types of transactions are they able to review? Costello: CFIUS has jurisdiction over three types of transactions: (1) transactions that result in foreign control of a U.S. business; (2) transactions that are non-passive but also non-controlling in certain types of U.S. businesses, involving critical technology, sensitive personal data, or critical infrastructure; (3) certain types of real estate transactions that are near sensitive U.S. government facilities. Host: So, they have the ability to review these types of transactions all in the name of national security. What about muscle? What kind of power does CFIUS actually deploy? Costello: So, a very common misconception about CFIUS is that it blocks transactions. CFIUS itself doesn't technically block transactions as a legal matter. Only the President has the authority to actually prohibit or suspend a transaction. What CFIUS does after reviewing a transaction and identifying a risk to national security is seek to mitigate the transaction and its primary vehicle for doing that is going to be a negotiated mitigation agreement, although it can also impose mitigation if the parties choose not to engage in negotiations. If it identifies a risk that it does not think can be mitigated through a mitigation agreement, at that point, it can recommend to the President that the President prohibit the transaction via presidential order. Host: Oh, interesting. So, the committee's real power is that the President takes it seriously, but the decision making itself to block must be made at the top level. Costello: Yes, that's correct. The power of the committee, particularly when negotiating a mitigation agreement, is the veiled threat that if the parties don't agree to mitigate through a negotiated agreement, that CFIUS always reserves the right to make a recommendation to the President to prohibit or suspend the transaction. Aimen Mir (Mir): And Joel, I would add that as a general matter, CFIUS acts by consensus. So, when it makes a recommendation to the President, that means that the Department of Defense, Department of Justice, Department of Homeland Security, Treasury, Commerce, et cetera have all, in most cases, determined that it presents a risk. So, as you'd imagine, the likelihood that the President would take a different view than the recommendation of the committee is pretty low. And as a result, what usually happens is that the committee will inform the parties that the committee intends to recommend to the President that he prohibit a transaction, and then even without the transaction going to the President, the parties will withdraw their notice and abandon the transaction.