MRLC Series of Lectures Phrase IV “U.S. National Security Review ‘CFILUS’” was Held in Law School of RUC

2015.05.14 - 2015.05.14

At 8:00 am on May 14th, 2015, MRLC series of lectures phrase IV “U.S. National Security Review ‘CFILUS’” was held in Room 104 of Mingde Business Building of Renmin University. This lecture was held by Associate Professor Meng Yanbei of Renmin Law School, Associate Professor Song Biao and Doctor Guo Rui was invited to be the commentator. Lawyer Brian Curran and Lawyer Roy Liu, who come from Washington D.C. office of Hogan Lovells International Law Firm, were the speakers of this lecture. They gave students a detailed introduction of U.S. Security Review “CFIUS” Procedure, and further interpreted the procedure combined with two hypothetical CFIUS cases.

 

 

Lawyer Brian Curran and Lawyer Roy Liu started their lecture with the topic of “U.S. National Security Reviews of Chinese Investment: How Can a Chinese Company Navigate through a CFIUS Review?” Firstly, lawyer Brian Curran gave a brief introduction of Chinese investment in the U.S. and CFIUS. In recent years, China’s investment in America is increasing rapidly. It is estimated that in 2012 and 2013, China’s investment in the U.S. surpassed U.S. investment in China, and most Chinese investment in the U.S. has not run into opposition from the U.S. government. However, a few Chinese acquisitions of U.S. companies have been aborted or blocked due to U.S. Government opposition on national security grounds. Lawyer Brian Curran mentioned that U.S. president may block foreign investment that threatens U.S. national security. The U.S. Government interagency committee can investigate the U.S. national security implications of any transaction that “could result in control of a U.S. business by a foreign person”. CFIUS includes member agencies and observers, and its role lies in analyzing U.S. national security implications of transaction.

 

 

 

Afterwards, Lawyer Roy Liu explained the CFIUS considerations and process in detail. Whether to file for CFIUS review firstly needs to consider threshold questions, in other words, it is required to ensure whether the transaction is covered by the CFIUS regulations. Lawyer Roy Liu introduced that filing a CFIUS notice is not legally required, but CFIUS may ask the parties to file a notice or may self-initiate a review. President may block or impose conditions on the transaction or may require divestment. Other considerations about whether to file include the U.S. Government’s view of the threat, vulnerability or consequences of the transaction, the parties’ risk tolerance, long-term U.S. investment strategy, target factors and foreign investor factors. CFIUS also includes political considerations. Political considerations can affect transactions that are undergoing or have undergone CFIUS review. Lawyer Roy Liu further interpreted the procedure combined with two CFIUS hypothetical cases.

 

 

 

Finally, Lawyer Brian Curran and Roy Liu showed some CFIUS data, and gave a general introduction of CFIUS procedure and recent trends. The data of cases filed to CFIUS showed that from 2011 to 2013, most transactions reviewed by CFIUS are ultimately cleared by CFIUS. During this period, there was only one case blocked by the committee, which is China’s Sany Heavy Industry Co., Ltd.’s acquisition of America’s wind power plant. Besides, the law regulates that CFIUS process involves 75 days. The review of formal filing includes 30days, if not passed, then it enters into the second phrase - investigation, and this phrase includes 45 days. Then the president makes the final decision in 15 days. In summary, there is an increasing number of Chinese companies file for CFIUS, and the recent trends include more CFIUS filings involving China and more questions from CFIUS during review. Furthermore, Lawyer Roy Liu concluded that in practice, to the Chinese companies that want to invest in America, firstly, CFIUS should be a key consideration for Chinese companies interested in investing in the U.S. Secondly, wide variety of cross-border transactions are subject to CFIUS review, and finally, it’s important to engage experienced counsel to consider whether to file, the interrelationships of various U.S. government agencies and develop a comprehensive political and public relations strategy.

 

 

 

Associate Professor Song Biao believed that this topic is the most complicated one in the lawyer affairs. It involves commerce, investment, national administration and other aspects, while behind it covers political, cultural, historical morphology and many other factors. Moreover, there are many links deserve to be discussed, for instance, CFIUS review and MA review may overlap, so how will these two systems coordinate with each other? Furthermore, security review is the right of the federation, while many projects will do with the interests of the state, so how will the federation and state game the interest when it comes to the foreign investment? In practice, comprehensive knowledge and sensitive political consciousness are needed to catch more public policies and legislation development of countries doing trade with U.S.

 

 

 

Doctor Guo Rui expressed that national security and rule of law seems two incompatible conceptions, however, from the CFIUS procedure, it can be concluded that although it’s hard for national security to have a certain standard in nature, the procedure of federal government will be more transparent and predictable. Besides, Doctor Guo Rui had a further discussion with Lawyer Brian Curran and Roy Liu on the topic of the main review agency in the review committee and whether the political atmosphere will affect the review result.

 

 

 

In the end, Associate Professor Meng Yanbei made a brief summary of this lecture. She said that this topic is of great importance in China. Chinese enterprises that go out to invest may be faced with different access policies of foreign investment in different countries, moreover, national security review is a key chapter when China drafts its own foreign investment law. Besides, in the anti-monopoly domain, the relationship between national security review and anti-monopoly review also deserves great attention.