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Three Common Triggers for CFIUS Review of Acquisitions By Foreign Entities

The Committee on Foreign Investment in the United States (CFIUS) is a federal entity in the U.S. that is tasked with analyzing foreign investments that qualify as potential or perceived national security risks. CFIUS’s authority to analyze these transactions to protect national security interests is extremely broad; and, beyond its authority to investigate, CFIUS also has the authority to block any foreign investments that it deems too great a potential threat.

Nick Oberheiden
Attorney Nick Oberheiden
CFIUS Common Triggers Team Lead envelope iconContact Nick
John W. Sellers
Attorney John W. Sellers
CFIUS Common Triggers Team
Former DOJ Trial Attorney envelope iconContact John
Glenn Karabeika
Glenn Karabeika
CFIUS Common Triggers Team Consultant
Former HSI Special Agent

For foreign entities seeking to invest in U.S. entities and assets, working with CFIUS will often be a necessary part of the process. While CFIUS does not hesitate to block transactions when warranted, it is also willing to work with foreign entities to make an accurate assessment of the risks their proposed transactions present. When warranted, CFIUS will also allow foreign entities to execute transactions with adequate mitigation measures imposed. At Oberheiden P.C., we work with CFIUS on behalf of clients in the U.S. and abroad, and we are familiar with the types of issues and mitigation measures that can come into play during CFIUS reviews.

Three Issues That Can (and Often Do) Lead to CFIUS Review of Foreign Investments in U.S. Entities and Assets

While numerous issues can trigger CFIUS reviews, certain types of transactions tend to raise questions more often than others. For example, the following are three common triggers for CFIUS review of acquisitions by foreign entities:

1. Acquiring an Interest in Real Estate Near a National Security Area

National Security Areas (NSAs) exist throughout the United States. An NSA is defined as “airspace of defined vertical and lateral dimensions established at locations where there is a requirement for increased security of ground facilities.” Due to the nature of National Security Areas, foreign investments in real estate and certain real estate transactions near these areas inherently present security concerns that fall within CFIUS’s assessment and enforcement jurisdiction.

2. Acquiring Sensitive Technology or Personal Data

Pursuant to Executive Order 14083, which President Biden issued on September 15, 2022, CFIUS has enhanced authority to examine foreign investments in businesses that have access to sensitive technology or personal data. Specifically, Executive Order 14083 instructs CFIUS to consider the following three factors when assessing foreign investments in U.S. enterprises:

  • Investments that, in the aggregate, “may facilitate harmful technology transfer in key industries or otherwise harm national security through the cumulative effect of these investments.” This is consistent with Section 1703(c)(2) of the Foreign Investment Risk Review Modernization Act (FIRRMA), which authorizes CFIUS to consider “the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or foreign person.”
  • Investments that present cybersecurity threats to sensitive personal data, including investments “by foreign persons with the capability and intent to conduct cyber intrusions or other malicious cyber-enabled activity — such as activity designed to affect the outcome of any election . . . or the confidentiality, integrity, or availability of United States communications.” This, too, is consistent with CFIUS’s statutory authority under FIRRMA, which identifies the “exacerbate[ion] or creat[ion of] new cybersecurity vulnerabilities” as a relevant consideration during CFIUS reviews.
  • Investments in entities that have access to sensitive data and/or that are “designed to undermine the protection or integrity of data in storage or databases or systems housing sensitive data.” Once again, this is intended to advance the exercise of CFIUS’s authority under FIRRMA, as the statute includes transactions that may “expose . . . personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security,” as covered transactions that are subject to CFIUS review.

Foreign access to sensitive technology and U.S. citizens’ data has long been a concern for the federal government—despite the fact that there is no general data protection law in the U.S. similar to the General Data Protection Regulation (GDPR) in the European Union. But, while no such law presently exists, CFIUS’s authority under Executive Order 14083 and FIRRMA is clear, and CFIUS actively targets transactions that may implicate the three data-related risks listed above.

3. Acquiring a Business Near a Sensitive Location or Involved with Critical Infrastructure

Along with acquisitions of land near NSAs and investments in entities with access to sensitive technology and personal data, CFIUS also heavily scrutinizes foreign investments in businesses near other sensitive locations and involved with critical infrastructure. This includes, but is not limited to, investments in entities that have government contracts for critical infrastructure projects.

It also includes investments in agricultural land and operations. As the U.S. Government Accountability Office (GAO) wrote in early 2024, “Foreign ownership and investment in U.S. agricultural land—which includes farmland, pastures, and forest land—has grown almost 50% since 2017 . . . . But, while there has been this significant increase, USDA and national defense agencies may not have all the information they need to know about which countries are investing and where.” This lack of information has led to increased scrutiny from CFIUS, which is now using its authority to examine foreign investments in agricultural land and operations in addition to other sensitive locations and critical infrastructure.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

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Lynette S. Byrd
Lynette S. Byrd

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Brian J. Kuester
Brian J. Kuester

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Amanda Marshall

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Joe Brown

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John W. Sellers
John W. Sellers

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Linda Julin McNamara

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Aaron L. Wiley
Aaron L. Wiley

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Roger Bach
Roger Bach

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Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Potential Outcomes of a CFIUS Review

As we stated in the introduction to this article, a CFIUS review is not necessarily a barrier to a foreign investment in domestic real estate, domestic companies, or other domestic assets. This is true with all types of foreign investments—including investments in real estate near National Security Areas, investments in companies with access to sensitive technology and personal data, and investments in assets near sensitive locations or involved with critical infrastructure. Broadly, CFIUS reviews have three potential outcomes:

  • Clearance Without Mitigation – In many cases, CFIUS will clear foreign investments in U.S. entities and assets without imposing any mitigation requirements. However, this requires substantial effort on the part of the foreign investor to affirmatively demonstrate that the transaction in question not only doesn’t present any immediate national security threats, but also that it will not present national security threats in the future.
  • Clearance With Mitigation – In some cases, CFIUS will approve foreign investments subject to the adoption of appropriate mitigation measures designed to address any potential national security concerns. Depending on the circumstances, necessary mitigation measures may include the divestiture of certain assets, restructuring the transaction to avoid foreign control of U.S. assets, or canceling government contracts (i.e., in the case of an acquisition of a business involved with critical infrastructure).
  • The Transaction is Blocked – When mitigation measures would be insufficient to address the national security risks associated with a foreign investment, CFIUS has the authority to block the proposed transaction outright. For most legitimate business investments, however, this should not be a concern—as foreign entities should generally be able to adequately address any concerns with the assistance of experienced outside counsel.

CFIUS examines all foreign investments in U.S. entities and assets on a case-by-case basis. As a result, the likelihood of any particular transaction receiving clearance depends on the specific facts and circumstances involved. Working with experienced outside counsel to anticipate CFIUS’s potential concerns and address them proactively can significantly reduce the risk of a transaction being blocked or being approved subject to extensive (and expensive) mitigation measures.

How to Manage the CFIUS Review Process: Tips for Domestic and Foreign Entities

With this in mind, there are several steps that companies—both in the U.S. and abroad—can take to help facilitate a favorable CFIUS review. Some examples of these steps include:

Anticipate CFIUS’s Likely National Security Concerns

As we just mentioned, anticipating CFIUS’s potential concerns and addressing them proactively can be one of the most effective means of securing approval. By coming to CFIUS with answers in hand, parties seeking approval can often streamline the process while building a good working relationship with CFIUS for the future.

Develop Proposed Mitigation Measures, if Warranted

If anticipating CFIUS’s potential concerns indicates that mitigation measures may be necessary, proposing mitigation measures can also assist with securing approval. However, entities seeking CFIUS approval will want to be careful not to propose too much, as this could lead to unnecessary expenditures, limitations, and/or delays.

Thoroughly Document the Parties and Financing Structure of the Transaction

Regardless of whether it appears that mitigation measures may be necessary, parties seeking CFIUS approval should thoroughly document the parties and financing structure of their transactions. CFIUS will be requesting this information, so having it readily available can also help to streamline the approval process.

Work With (Rather Than Against) CFIUS During Its Review

When seeking CFIUS approval, working with (rather than against) CFIUS is often the most prudent approach. While litigation may ultimately prove necessary in some cases, foreign and domestic entities seeking approval will often find that a cooperative approach, within reason, yields the best results.

Engage Experienced Outside Counsel Early in the Process

Due to the challenges involved in securing CFIUS approval, domestic and foreign entities seeking approval should engage experienced outside counsel as early in the process as possible. At Oberheiden P.C., our lawyers have the experience required to help entities work with CFIUS successfully, and we can help you make informed decisions about how to move forward.

Speak with a Senior CFIUS Compliance Attorney at Oberheiden P.C.

If you need to know more about seeking CFIUS approval, we invite you to get in touch. To speak with a senior CFIUS compliance attorney at Oberheiden P.C. in confidence, please call 888-680-1745 or request a complimentary consultation online today.

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