On September 15, President Biden signed the first-ever Executive Order (E.O.) on CFIUS – the Committee on Foreign Investment in the United States. While the E.O. does not substantively change CFIUS’s jurisdiction or the legal process, the Biden Administration provides some explicit guidance on certain national security priorities and factors for CFIUS to consider when evaluating transactions – focusing in on protecting U.S. technological advantage, supply chain resiliency, and sensitive data from U.S. adversaries. No doubt, the E.O. will impact certain cross-border transactions and investments as CFIUS develops strategies to incorporate the E.O. into practice and align national security priorities with other national security tools.
The E.O. provides explicit guidance for CFIUS to focus on certain factors
The E.O. provides CFIUS a list of specific national security factors and considerations in assessing a transaction. None of these create new jurisdiction, but do help direct the Committee’s priorities to better align with other U.S. national security tools and priorities. Janet Yellen, Secretary of the Treasury, indicated that“Strengthening our supply chains and protecting against foreign threats enhances our national security” (See Statement here).
The EO outlines these five categories:
- Technological leadership. Focus on U.S. technological advantage in the following industries, among others:
- Semiconductors and microelectronics
- Artificial intelligence (AI)
- Biotechnology and biomanufacturing
- Quantum computing
- Advanced clean energy
- Climate adaptation technologies
- Supply chain resiliency
- Focus on a transaction’s effect on the resilience of key supply chains, both inside and outside of the defense industrial base.
- Aggregate industry investment
- Focus on how a series of transactions over time in certain industries may increase systemic vulnerability even if a single transaction does not.
- Also focus on how such a series of transactions could create a national security risk in a later industry transaction where a similar transaction earlier in the series may not have shown the same risk profile.
- Focus on the cybersecurity capabilities of the foreign investor and the cybersecurity practices of the domestic entity.
- U.S. Sensitive Data
- Refocus on U.S. sensitive data protection and signal to the industry that technological and big data advances may undermine the concepts of the identified or anonymized data.
Is this about any particular country?
When asked whether the order was directed at China, Senior White House officials stated that the order is “not country specific.” However, they noted that where an investment is coming from is “going to matter.” This is consistent with a position that the U.S. established in 2018, treating China as an adversary in a struggle for economic and technological dominance. It is clear that the areas of focus that are directed above are the areas where the executive branch has identified a threat from China and is acting to protect a U.S. economic, technological, or security advantage by restriction foreign access through investment into that area.
The main takeaway is that CFIUS has not changed. The E.O. creates no new powers for the committee, no changes to the triggers for mandatory CFIUS filings, and no changes to types of transactions that are covered by CFIUS jurisdiction. The E.O. builds upon the national security trends we have seen – focusing in on advanced technologies, supply chain vulnerabilities, personal data, and cybersecurity risks. From a practical perspective, we are likely to see the number of transactions CFIUS reviews continue to grow, CFIUS reviews to expand, and the timelines for those reviews to be impacted as well.
*Claire Le Tollec is a legal consultant in the firm’s Brussels office.