This blog posted an article titled “Setting The Record Straight: The U.S. Is Open For Chinese Business; Don’t Worry Too Much About National Security Reviews” on December 12, 2009. Two weeks later Northwest Non Ferrous International Investment Co., Ltd. (“Northwest”) dropped its plans to acquire a Nevada mining company because a national security review under the Foreign Investment National Security Act “FINSA” was coming to an unfavorable conclusion. We do not stand corrected.
The rejection of the Northwest acquisition was based on unique facts and not because of opposition to Chinese investment generally. Chinese companies should not let this case dissuade them from acquiring companies and otherwise investing in the United States.
Northwest proposed to acquire control over a mining company, Firstgold Corp., all of whose operations are adjacent to Naval Air Station Fallon, the U.S. Navy’s premier tactical air warfare training center. The Navy opposed a company owned by the Chinese Government having control of property from which its most sensitive training activities might be monitored. Also in that area are other security and military assets so sensitive that the U.S. Government treats even their identities as classified information.
Due to the sensitive nature of the government installations, any acquisition by a foreign company, including companies based in NATO countries, would have raised national security concerns. Whether China created more concern is entirely speculative and ultimately unknowable. However, Chinese companies should not view the CFIUS result in this case as based on an objection focused on China, but rather as based on the serious national security concerns it definitely presented regardless of the foreign country. FINSA requires CFIUS to consider whether the acquiring company is state-owned. However, given the serious national security concerns raised by the location of Firstgold’s facilities, the result likely would have been the same even had the acquirer been a private company.
Northwest’s lawyers have described extraordinary but failed efforts to make the acquisition compatible with national security concerns. Their memorandum to Northwest, published on the New York Times website, reports that the Committee on Foreign Investment in the United States (“CFIUS”) looked closely at all kinds of scenarios to mitigate the national security concerns, but concluded that none of them would be feasible because all four of Firstgold’s properties are located adjacent to Naval Air Station Fallon or other military sensitive locations.
The lawyers’ report demonstrates that CFIUS’ goal is not to block investments. Instead, CFIUS seeks to mitigate national security concerns. The exceptional facts in this case are that all of the operations to be acquired raised concerns. When national security is at issue, it usually affects some part of the deal and can be mitigated. Here, all of the deal was implicated; mitigation (such as spinning off some part of the deal while preserving the essential economic value) apparently was impossible.
Northwest acted wisely in this case, seeking a CFIUS review before investing because of uncertainties about national security. Reportedly, Firstgold did not want to request CFIUS review. Northwest could have invested, only to have CFIUS recommend and the President of the United States undo the deal, not because of animus toward Chinese investment, but because of the serious implications for national security.
It is important not to misinterpret the Northwest case. It proves the utility and wisdom of early CFIUS review, not an objection to Chinese investment. Notwithstanding CFIUS’ rejection of Northwest’s proposed acquisition of Firstgold, the United States remains one of the economies most open in the world to foreign investment, including from China.
2009年12月12日，本博客刊登了《美国向中国企业敞开大门，请勿过分担心国家安全审查》。两周后，Northwest Non Ferrous International Investment Co., Ltd. （简称Northwest）因在根据《外国投资和国家安全法》展开的国家安全审查中面临不利裁决，而被迫放弃并购位于内华达州一矿产公司的计划。