Proposed FIRRMA Regulations Introduce New Rules Expanding Jurisdiction, Postpone Decisions on Others

September 23, 2019 |Other U.S.

Key elements of the Treasury Department’s recently released proposed regulations on the Foreign Investment Risk Review Modernization Act include an expanded jurisdiction to review “non-controlling investments” and certain exemptions to reviews, Crowell Moring said in a Sept. 19 post.

The regulations would allow the Committee on Foreign Investment in the United States to review non-controlling investments in “TID U.S. businesses,” the post said, meaning “companies involved in certain technology, infrastructure or data.” The regulations also extended a mandatory review over acquisitions of a “substantial interest” in a TID U.S. business by a foreign person “in which a foreign government has a ‘substantial interest,’” the post said.

Exemptions from CFIUS jurisdiction are available for investments “by certain foreign persons from certain foreign states,” the post said, which will be identified separately. The regulations also introduce an option to begin a CFIUS review “via a short-form voluntary declaration in lieu of a joint voluntary notice,” the post said. The proposals are not yet seeking to impose fees related to CFIUS reviews, the law firm said.

The regulation notably left out rulemaking on mandatory filing for transactions that involve critical technologies, according to a Sept. 19 post from Linklaters. CFIUS said it received comments on the fillings in its FIRRMA pilot program but decided to not address the issue until its final rulemaking, the post said. The post also said the “formula for determining” fees related to CFIUS notices will be defined in a future rulemaking.

For all foreign-government controlled transactions eligible to be reviewed by CFIUS, the regulations introduce a process that involves a 30-day CFIUS review period similar to the pilot program, according to a Sept. 19 post by DLA Piper. During the review, CFIUS may issue a “safe harbor letter,” inform the parties that it could not conclude the review and allow the parties to file a “voluntary notice,” ask the parties to file a voluntary notice, or begin a “unilateral review of the transaction,” the post said.