CFIUS to Maintain Focus on Chinese Investment Under Biden, Lawyers Say

The Committee on Foreign Investment in the U.S. will maintain its focus on Chinese investment, prioritize enforcement and continue to tweak its jurisdiction under the Joe Biden administration (see 2009170017 and 2010270050), trade lawyers said. CFIUS also will likely continue to see an increase in filings, the lawyers said.

CFIUS will likely continue to emphasize “scrutiny” on Chinese investments (see 2007150031 and 2005290027), said Jeremy Marwell, a Vinson & Elkins lawyer who regularly advises clients on CFIUS matters. That scrutiny stems from U.S. concerns that Chinese companies are taking advantage of investment transactions to acquire sensitive U.S. technologies. “That doesn't mean that Chinese investment is not welcomed or that all Chinese deals are going to be blocked,” Marwell, who previously worked as a Justice Department attorney, said during a Jan. 21 webinar hosted by Vinson & Elkins. “But I think investors should anticipate that scrutiny.”

Marwell also is expecting a continued increase in the number of transactions that are filed with CFIUS, especially after the committee’s jurisdiction was expanded last year to cover certain transactions involving export-controlled critical technologies (see 2010020055). Although companies are still determining how to best comply with those changes, which were made by the Foreign Investment Risk Review Modernization Act (see 2002110042), Marwell expects the Biden administration to continue to update the regime and the scope of CFIUS.

“Congress deliberately did not make all the provisions in FIRRMA immediately effective, understanding that there needed to be a phase-in,” Marwell said. “I think we're probably still in that phase-in process, to some degree. CFIUS is going to be tweaking that regime.”

But the overall focus of CFIUS -- including its prioritization of foreign investments from China -- is expected to remain the same, said Vinson & Elkins lawyer Damara Chambers, who also advises clients on CFIUS matters. Much of the CFIUS staff is composed of career civil servants who will continue to shape how the committee functions, Chambers said, and added that many of the more technical aspects of CFIUS procedures are mandated by statutes. “A lot of this work has been done by a consistent group of individuals who will be focusing on the national security issues in the same way from one administration to the next,” Chambers said during the webinar. “So I wouldn't expect a lot of swings in that fashion.”

Chambers also said industry should expect CFIUS to continue to emphasize reviews of older transactions. She said she has heard about CFIUS inquiries into transactions that closed as many as 10 years ago. “Perhaps at some point that process of looking at those older transactions will run its course and the focus will really be on more recent closings,” Chambers said. “But right now they're still very much in the process of reviewing what has transpired in the past.”

Marwell said he has noticed more of an “integration” between CFIUS due diligence and U.S. export controls and sanctions. More companies are asking foreign acquirers whether they are complying with U.S. export restrictions and sanctions programs, Marwell said, and are looking into whether the acquirer has business ties to China. “I would not be particularly surprised to see that continue,” he said.