ANNOUNCEMENT 17 Jan 2020
On 17 January 2020, the US Department of the Treasury released two final regulations implementing the Foreign Investment Risk Review Modernization Act of 2018.
NUMBER OF INTERVENTIONS
U.S. Department of Treasury, CFIUS. "Provisions Pertaining to Certain Investments in the United States by Foreign Persons". Federal Register, Vol. 85, No. 12, 17 January 2020. https://home.treasury.gov/system/files/206/Part-800-Final-Rule-Jan-17-2020.pdf
U.S. Department of Treasury, "Fact Sheet: Final CFIUS Regulations Implementing FIRRMA", 13 January 2020. https://home.treasury.gov/system/files/206/Final-FIRRMA-Regulations-FACT-SHEET.pdf
On 17 January 2020, the US Department of the Treasury released two final regulations implementing the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) that strengthened the Committee on Foreign Investment in the United States (CFIUS) and its jurisdictions. The regulations, which were released in two parts (the Final Rule on investments by foreign persons in US businesses and the Final Rule on real estate transactions), became effective on February 13, 2020. Some of the provisions from the new regulations have been already enacted in a pilot program, but now there are of general application.
Under the new regime, the CFIUS will be competent to screen non-controlling investments in critical technology, critical infrastructure, and sensitive personal data businesses. This is, however, limited only to instances, when a foreign investor gains i) access to any material nonpublic technical information in the possession of the U.S. business related to critical technology or covered investment critical infrastructure; ii) membership or observer rights on, or the right to nominate an individual to a position on, the board of directors, or equivalent governing body of the U.S. business; or iii) any involvement, other than through voting of shares, in substantive decision-making of the U.S. business.
Some notable points can be listed as follows. Firstly, prior to February 13, 2020, the regulations focused on transactions that could result in foreign control of any U.S. business. On the other hand, effective February 13, 2020, the regulations implement changes that FIRRMA made to CFIUS’s jurisdiction and process, including with respect to certain non-controlling “covered investments” that afford a foreign person certain access, rights, or involvement in certain types of U.S. businesses. Secondly, the disclosure obligations are set forth in a very detailed manner. Thirdly, the regulations introduce mandatory filings for foreign investors, in which a foreign country has a substantial interest. Fourthly, strict sanctions are applied. For example, a fine of up to USD 250,000 per violation may be imposed for a misstatement or omission, or false certification in the fillings. Finally, the regulations clarify conditions, under which foreign acquisitions of real property and related rights in the US are subject to screening. In general, these are real estates being or located in close proximity to airports, seaports, or military installations.
The regulations will be effective on February 13, 2020.