On September 15, 2022, President Biden issued an EO that “elaborated and expanded” the factors that CFIUS must consider as part of its national security review process. Although the EO does not change the formal CFIUS process or the jurisdiction of CFIUS, the President plays a critical role in the CFIUS process as he is the only person with the authority to prohibit or “block” transactions on the recommendation of CFIUS ’, and President Biden’s personal direction will almost certainly impact how CFIUS conducts reviews on a daily basis. The EO directs CFIUS to consider the following criteria, which parties should consider and address in future assessments of cross-border investment opportunities:
- The transaction’s impact on the resilience and security of the supply chain—both inside and outside the United States defense industry, in manufacturing capacity, services, critical natural resources, or technology fundamental to national security. Sectors identified in the EO include microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy (e.g. battery storage and hydrogen), climate adaptation technologies, critical materials (e.g. lithium and rare earth elements), elements of agriculture and industrial Base impacting food security and other sectors identified in EO 14017, Executive Order on America’s Supply Chains.
- The transaction’s impact on US technological leadership in areas affecting national security, including biotechnology and biomanufacturing, artificial intelligence, microelectronics, quantum computing, advanced clean energy and climate change adaptation technologies.
- Industry investment trends, including incremental investments over time in a sector or technology that suggest a transaction would facilitate “harmful technology transfer in key industries” or otherwise impact national security.
- Cybersecurity risks (including “cybersecurity attitudes, practices, skills, and access of both foreign person and US business”) that could compromise national security or facilitate cyberattacks and other malicious cyber activities in the United States.
- Risks to the security or integrity of data in databases or systems containing sensitive data and the risk of using sensitive data of US persons.
The EO makes no mention of a specific country, but does cite the threat of investments “that directly or indirectly involve foreign adversaries and other countries of particular concern” that could pose an unacceptable risk to U.S. national security “due to the legal environment that.” intentions or capabilities of the foreign person involved in the transaction, including foreign governments.” The EO comes at a time when U.S. officials have raised concerns about the security dimensions of U.S.-China trade and investment, particularly in the technology sector and the Significantly expanded trade controls against Russia.
The EO also requires that the Committee provide regular reports to the National Security Advisor on its processes, practices and regulations. These reports must also include policy recommendations that the committee deems necessary to address evolving national security risks and signal the White House’s intention to be actively involved in how CFIUS manages its inspection powers.
Jones Day publications should not be construed as legal advice as to any specific fact or circumstance. The Content is for general informational purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, given or withheld at our discretion. To request permission to reprint any of our publications, please use our “Contact Us” form which can be found on our website at www.jonesday.com. The sending of this publication is not intended to create an attorney-client relationship, and receipt of it does not create an attorney-client relationship. The views expressed herein are the personal views of the authors and do not necessarily reflect those of the company.