New Legislation Tightens US Foreign Investment Regulations

WASHINGTON, Aug. 2 /PRNewswire-USNewswire/ -- Foreign investment in theUnited States will face increased government scrutiny, more delays,uncertainty that completed deals may have to be unwound and a higher riskof Congressional involvement following the recent enactment of the ForeignInvestment and National Security Act of 2007 ("FINSA"), according to aleading international trade lawyer at White & Case LLP. Christopher Corr, an authority on the impact of US national securitylaws on international trade and foreign direct investment, said that FINSA,which President Bush signed into law yesterday, has already caused a steadyratcheting up of US attention to foreign investment and deals. "In effect, the national-security review apparatus had already startedto tighten the screws in anticipation of the legislation's adoption," saidCorr. "Now, with the President having signed the law, we can expect this toincrease as time goes by." Adopted by Congress in the shadow of recent controversies over foreigninvestment in the US, such as the bid by China's controversial CNOOC bidfor oil company UNOCAL, and the forced unwinding last year of the DubaiPorts World deal to operate US maritime facilities, FINSA expands the scopeof the interagency Committee on Foreign Investment in the United States(CFIUS), which reviews foreign investments to determine if they threatennational security. Corr said that foreign investors face new levels of uncertainty inseveral key areas: -- CFIUS's broader mandate will subject more foreign investment transactions to review, extending beyond the traditional defense and related sectors to now encompass "critical infrastructure," such as energy facilities and capacity. -- Increased delays will result through provisions that will force more transactions to be subject to government review beyond the 30-day clearance period by forcing a 45-day supplemental investigation phase, unless upper-level CFIUS officials sign-off to the contrary. -- Investment by state-owned enterprises will get tougher treatment including automatic investigation unless an exemption is approved, and required consideration of factors likely unrelated to the deal, such as the investing country's compliance with US and multilateral counter- terrorism, non-proliferation and export-control regimes. -- Increased Congressional oversight and scrutiny, which means higher political risk for delay or interference. -- The government will have new powers to negotiate "mitigation" changes to transactions in exchange for their overall approval, including, for example, restructuring, spinning off or walling off certain operating units, providing access or data to law enforcement, and the like. -- No deal will ever be truly closed, thanks to evergreen powers that authorize CFIUS to reopen and reverse previously reviewed and cleared transactions upon a finding of intentional omission or falsehood in the initial filings with CFIUS, or a material breach of a mitigation agreement. "Overall, there is no doubt that there will be more governmentinvestigations, leading to delays that could mean the difference betweenclosing a transaction and abandoning it," says Corr, adding that foreigninvestors must now account for the higher level of risk and delay. "FINSA vetting should be a priority for foreign investors and theirdeal partners," he said. "This could be especially vexing in biddingsituations where foreign firms compete with US firms, foreign state-ownedenterprises compete with private bidders or bidders from US-alliedcountries go up against bidders from countries viewed as higher securityrisks." Corr's practice concentrates on international trade and regulatorymatters, including national security controls on investment in US entitiesadministered by CFIUS and the Department of Defense. He works closely withsovereign and private sector clients in Asia, Latin America, Europe andCanada on international trade, counsels US companies engaged ininternational commerce and handles the negotiation ofgovernment-to-government agreements. He was lead counsel in one of thefirst NAFTA panel dispute resolution cases and previously worked for theOffice of Unfair Import Investigations of the ITC. The International Trade Practice of White & Case has approximately 60lawyers and professionals in 10 offices in North America, Europe and Asia,who provide legal representation and analytical advice on internationaltrade issues. The practice includes former trade officials with experiencein all aspects of WTO and FTA negotiations, counsel to foreign sovereignsduring the Tokyo Round, Uruguay Round and Doha Development Agenda andformer staff of the WTO Secretariat. About White & Case White & Case LLP is a leading global law firm with more than 2,000lawyers in 35 offices in 23 countries. Our clients value the breadth anddepth of our US, English and local law capabilities and rely on us fortheir complex cross- border commercial and financial transactions and forinternational arbitration and litigation. Whether in established oremerging markets, the hallmark of White & Case is our complete dedicationto the business priorities and legal needs of our clients.