What is the Foreign Investment Risk Review Modernization Act (FIRRMA)? - Federal Lawyer
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What is the Foreign Investment Risk Review Modernization Act (FIRRMA)?

  • FIRRMA’s enactment was precipitated by increasing concerns that foreign investment into the United States by certain foreign entities or foreign governments such as China pose a high risk to U.S. economic security and national security.
  • Some of the key provisions of FIRMMA include an expanded definition of covered transactions under the jurisdiction of CFIUS; an enhanced emphasis on mitigation and compliance agreements with parties; and changes to procedures regarding the filing process of certain foreign transactions.
  • Consider hiring a team of defense attorneys skilled in managing the implications created by FIRRMA, including the broadened investigative authority of CFIUS.

FIRRMA Defense Team

If you need advice regarding the implications of FIRRMA and the increased power and investigative authority of CFIUS, it is time to get in touch and receive the advice of an experienced defense attorney.

The increase in foreign threats has prompted a massive federal response that resulted in comprehensive legislative reform—the Foreign Investment Risk Review Modernization Act.

This reform includes more scrutiny of transactions between U.S. businesses and foreign persons or foreign entities.

Complying with this new reform and responding to requests from CFIUS regarding foreign direct investment and other foreign transactions could pose either an inconvenience or a serious challenge to your company.

If you need advice regarding a proposed or pending foreign transaction with your company, contact our FIRRMA defense team today.

At Oberheiden, P.C., our attorneys have experience collaborating with federal authorities and advising our clients on how FIRRMA affects company transactions involving foreign parties.

Do not wait to get in touch with a qualified attorney today.

Put Oberheiden, P.C. on your side to advise you on these legal issues and security implications regarding FIRRMA.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden



Lynette S. Byrd
Lynette S. Byrd

Former Department of Justice

Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney
Former DA

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

What is FIRRMA?

On August 13, 2018, President Trump signed into law the National Defense Authorization Act (“NDAA”) for Fiscal Year 2019, which incorporated the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).

FIRRMA introduces massive reforms to the process the United States uses to investigate and address national security-related concerns regarding foreign investment into the United States.

It strengthens the Committee on Foreign Investment in the United States (“CFIUS”) by expanding its jurisdiction to respond to increasing threats to the national security of the United States.

This broadened jurisdiction allows CFIUS to explore and address possible foreign exploitation of investments that were previously outside the purview of its jurisdiction.

What is CFIUS?

CFIUS is a U.S. quasi body that is chaired by the Secretary of the Treasury.

CFIUS operates under the Exon-Florio Act of 1988 (section 721 of Title VII of the NDAA of 1950), as revised by the Foreign Investment and National Security Act of 2007 (“FINSA”). In 2018, FIRRMA substantially revised the scope and duties of CFIUS.

CFIUS’s chief objective is to review foreign direct investments or “covered transactions” in U.S. businesses for potential national security issues.

Under FIRRMA, CFIUS can review foreign transactions that not only purport to control a U.S. business but also that affect certain additional covered transactions. In other words, foreign “control” of a U.S. business is not determinative.

Policy and Legislative History Behind FIRRMA

Before FIRRMA’s enactment into law, several policymakers have observed and argued that foreign direct investment into the United States by entities controlled or owned by certain foreign governments presented a high risk to the integrity of U.S. economic security.

Such foreign investments—especially those involving novel or otherwise breakthrough technologies—posed a severe risk to U.S. personally identifiable information.

Specifically, these issues centered around China’s growing investments in the United States, especially its investment in the technology industry.

Therefore, the push for FIRRMA was anchored on serious concerns over China’s presence in American technologies and the potential loss of U.S. economic security.

The NDAA 2019 contained FIRRMA and immediately provided comprehensive reform to the CFIUS process regarding its review of foreign investments in the United States.

In a nutshell, FIRRMA accomplishes the following objectives:

  • expands CFIU’s jurisdiction to more thoroughly scrutinize foreign direct investment in the United States,
    • redefines the review and investigative process of CFIUS,
    • mandates certain procedures by CFIUS in response to identified national security risks such as mitigation agreements, and
    • grants the President the authority to block pending foreign transactions—such as M&As or takeovers—with a foreign person or foreign entity where such transaction could result in the foreign control of a U.S. business that threatens the national security of the United States.

How Does FIRRMA Affect CFIUS?

FIRRMA first and foremost expands the jurisdiction of CFIUS to better investigate foreign direct investment in the United States. CFIUS was accorded a more open-ended mission, which gives it more leeway to carry out its investigative procedures.

For instance, as opposed to merely preventing foreign entities from controlling the assets of sensitive U.S. industry sectors, CFIUS now has the authority under FIRRMA to ensure the U.S. supremacy of certain industries such as the technology sector in order to protect U.S. national security.

Additionally, FIRRMA increases the scope of “covered transactions” that CFIUS investigates. While CFIUS was primarily charged with scrutinizing foreign mergers and acquisitions, FIRRMA allows CFIUS to review previously exempt transactions such as minority foreign direct investments.

Lastly, and critically, FIRRMA transformed CFIUS into a quasi-governmental agency that is now staffed with its own funding, staff, and resources to combat alleged national security threats to the United States from foreign investment.

Therefore, FIRRMA has drastically altered the nature and scope of foreign investment in the United States. It is important to note that the United States still welcomes foreign investment; however, by strengthening CFIUS, FIRRMA both protects U.S. national security while preserving safe and economic foreign investment.

Key Components of FIRRMA

Below we provide a summary of some of the key components that FIRRMA introduces or changes regarding foreign direct investment in the United States and the authority of CFIUS:

  • Expands the definition of “covered transactions” that CFIUS is authorized to investigate by including the following new covered transactions within CFIUS purview:
  • certain real estate transactions such as a purchase, lease, or concession involving a foreign person of real estate regarding sensitive government assets or facilities;
  • other investments in U.S. businesses that are non-controlling such those that grant a foreign individual access to material non-public information, decision-making power, or other rights in the U.S. business and that involve critical technology, critical infrastructure, or sensitive personal data—otherwise known as TID Businesses;
  • transactions that change a foreign person’s rights or otherwise result in foreign control; and
  • transactions, agreements, or other arrangements that attempt to evade or circumvent CFIUS review.
  • Gives CFIUS and the President additional factors to consider when determining whether the proposed or pending transaction poses significant national security risks.
  • Increases the time periods for CFIUS to investigate and review foreign investments for possible national security implications, including a separate national security analysis by the Director of National Intelligence.
  • Enhances the use and importance of mitigation measures or mitigation agreements between parties such as by including compliance plans for the parties to adhere to if they want the proposed or pending foreign transaction to be approved.
  • Changes the filing process for certain transactions from voluntary filing to mandatory filing and also provides that some transactions be completed with a declaration to CFIUS while others be completed by the more formal written notification that receives increased scrutiny (e.g., countries that are a special concern).
  • Grants CFIUS the authority to conduct pilot programs to implement its authority under FIRRMA.

This list above is only representative of the major changes that FIRRMA introduced, especially with respect to the modified scope and authority of CFIUS.

If you need advice regarding how these changes or other changes affect your business transactions with foreign entities, contact our FIRRMA defense team immediately.

Need National Security Advice Regarding FIRRMA?

It is challenging to stay abreast of legislative reform, especially those that hinge on foreign transactions and those that vest an increased investigative power in federal agencies.

Nevertheless, it is critical that U.S. businesses are up-to-date on how these reforms affect their business operations and transactions that involve foreign individuals or foreign entities.

If you need advice regarding national security concerns as they relate to FIRRMA or the new investigative powers of CFIUS, you need the advice of a skilled attorney.

The attorneys at Oberheiden, P.C. have the experience and knowledge needed to properly advise you.

Call or contact our office online for a free consultation to help resolve these regulatory challenges and national security concerns.

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