Chinese and other foreign companies considering investments in the United States often are confused about the degree to which the United States is open to foreign investment. They hear terms such as CFIUS, Exon-Florio and FINSA and claims that the United States is now hostile to foreign investment, especially from China and the Middle East.
The reality is that the United States remains one of the economies most open in the world to foreign investment. When it comes to greenfield investments creating new businesses in the United States, foreigners are as free to invest as domestic concerns. The United States does have procedures for reviewing foreign acquisitions of existing businesses under the Foreign Investment National Security Act of 2007 (“FINSA”), conducted by the inter-agency Committee on Foreign Investment in the United States (“CFIUS”), presided over by the U.S. Treasury Department. However, as the Treasury Department noted when it published its CFIUS guidance, “CFIUS focuses solely on any genuine national security concerns raised by a covered transaction, not on other national interests.”
Notwithstanding today’s difficult economic climate and the confusion over national security reviews of foreign investment, Chinese companies obviously remain interested in acquiring U.S. companies. For example, on October 23, 2009 BGP Inc., a subsidiary of China National Petroleum Corporation, agreed to a joint venture with ION Geophysical Corporation, a Houston, Texas based company specializing in seismic products used in oil and gas exploration. According to ION’s press release, the transaction, which would result in the Chinese company owning 16.66% of ION, is contingent upon obtaining clearance of the transaction from CFIUS. This proposed acquisition is likely to face an exhaustive and extended CFIUS review because it is in a particularly sensitive sector, energy, and the ultimate acquirer is a Chinese state-owned enterprise. Although CFIUS may require some conditions designed to mitigate national security concerns, the transaction probably will be approved.
Congress passed FINSA in 2007 following controversies over the China National Offshore Oil Corporation’s attempted acquisition in 2005 of Unocal, a U.S. energy company, and Dubai Ports World’s acquisition in 2006 of a British company that managed several major seaports in the United States. These controversies focused congressional attention on CFIUS; the earlier Exon-Florio procedures for review of foreign acquisitions; potential harm to U.S. national security that could arise from foreign control of energy, infrastructure and critical technologies; and on investments by state-owned entities. The public debate over these cases and a new law, however, was not one-sided and the Administration convinced Congress to balance national security concerns with the need for the United States to remain open to foreign investment. FINSA, legislated on July 26, 2007, is not a barrier to foreign investment, but a balance of investment with national security.
FINSA covers any transaction that “could result in control of a U.S. business by a foreign person.” It covers transactions that could result in the switch of control from one foreign person to another. However, it does not cover greenfield investments or a strictly real estate transaction. Control over an existing U.S. business must be at stake. “Control” is defined very broadly. Thus, even the acquisition of a relatively small minority stake in a company could be covered by FINSA.
FINSA does not pose a significant barrier to the vast majority of foreign acquisitions of U.S. businesses because, although all such acquisitions are covered transactions, the President’s authority under FINSA to suspend or prohibit a covered transaction can be exercised only when the President finds that “the foreign interest exercising control might take action that threatens to impair the national security.” Neither the statute, nor its implementing regulations, defines “national security” and Congress intended CFIUS to interpret that term broadly to include, among other things, energy, critical materials, critical technologies, homeland security and infrastructure. Nonetheless, where there is no plausible connection between the business conducted by the U.S. company to be acquired and national security, FINSA will not be an issue.
Whenever a transaction covered by FINSA might affect national security, FINSA provides a review process whereby the parties to the transaction can seek clearance from CFIUS before they have invested a great deal. A CFIUS review is not mandatory, but companies generally seek one whenever there is a possibility that the transaction could be considered to affect national security. Once a transaction has been cleared by CFIUS, it cannot subsequently be challenged under FINSA unless one of the parties to the transaction submits false or misleading material information.
Companies take advantage of the CFIUS safe harbor – the preclearance — by submitting a voluntary notice of a proposed transaction providing the detailed and extensive information that CFIUS’ regulations require for such notices. The filing of the notice commences a 30 day initial review process. Most transactions are cleared within this initial 30 day period.
When any of the CFIUS member agencies have unresolved national security concerns with a proposed transaction, a formal 45 day investigation begins. The parties typically resolve transactions that go through this second stage by agreeing with the government to mitigate the agencies’ national security concerns.
Mitigation agreements can involve modifications to the transaction, certain limitations on the new foreign owner’s exercise of control, or extra protections for critical technologies or facilities. A very small number of transactions pose national security concerns that cannot be mitigated successfully. Those transactions usually are abandoned before the completion of the CFIUS process. It is rare for CFIUS to complete its review with a recommendation to the President that a transaction be blocked.
The United States remains committed to an open investment environment, treating foreign investors on an equal footing with their domestic competition. It was for this reason that Congress set the initial CFIUS review deadline at 30 days, to coincide with the 30 day antitrust review period for mergers and acquisitions. The expanded view of national security mandated by FINSA does mean that CFIUS national security reviews are a crucial part of transactions involving foreign investment, but it is no more onerous than an antitrust examination.
Most important for success in a CFIUS review is understanding in advance the concerns of CFIUS member agencies, creative thinking about how to demonstrate that those concerns are not threatened, and where perceived threat may be reasonable, creative proposal to mitigate them. In most cases early attention to the CFIUS process and to the legitimate concerns of the member agencies, Congress, and the public, can ensure smooth and timely proceedings that result in CFIUS clearance without restrictions, or on terms that preserve the value of the transaction for all parties.
虽然当前经济不景气，而且外资对国家安全审查困惑重重，中国公司仍然对美国公司感兴趣。例如，2009年10月23日，中国石油天然气集团公司（CNPC）的子公司BGP公司与德克萨斯州休斯敦市、对主要生产用于石油天然气开发中的地震产品ION Geophysical Corporation 达成建立合资公司的协议，BGP公司将拥有ION公司百分之16.66的股权。根据ION的新闻公告，这一协议仍有待外国投资委员会批准。因为是中国国有企业投资敏感的能源领域，外国投资委员会很有可能进行严格审查。虽然外国投资委员会可能要求两家公司采取措施减少美国国家安全隐患，但这一协议应该可以得到批准。