Although FIRRMA still has a long way to go before it becomes law, recent CFIUS actions point to increased risks for transactions involving non-US entities. CFIUS has been subjecting transactions to critical scrutiny, with particular attention to concerns over US consumer data security and the protection of national security interests. The following table demonstrates CFIUS’s recent high level of activity:
- In September 2017, following a 75-day CFIUS review, President Trump issued an order blocking Chinese-government backed Canyon Bridge Capital Partners from acquiring Lattice Semiconductor Corp. This is only the fourth time a transaction has been blocked by a US president pursuant to the CFIUS statute; all four transactions involved Chinese investors.
- Recently, on January 2, 2018, Ant Financial, controlled by Alibaba founder Jack Ma, abandoned its contemplated merger with MoneyGram International Inc., a US-based company, after the deal failed to obtain CFIUS approval amid concerns over US consumer data security and privacy.
- It has also been reported that CFIUS will block Chinese buyer HNA Group Co. from investments in two separate transactions, one for a majority stake in the hedge fund firm SkyBridge Capital LLC and the other involving the US-based petroleum products storage and logistics business of Glencore, should HNA fail to provide sufficient information on its shareholders.
Despite CFIUS’s recent increased activity, Congress is actively considering the FIRRMA legislation. At hearings on January 18 and January 25, several US senators expressed support for FIRRMA, specifically pointing to concerns about Chinese investment in the United States and the possibility of inappropriate access to US technology and know-how. The Trump Administration also has expressed support for FIRRMA in its current form.
Other policymakers have expressed concerns about the jurisdictional scope of CFIUS under the draft FIRRMA legislation. Scott Kupor, chair of the National Venture Capital Association and managing partner at the venture capital firm Andreessen Horowitz, testified, noting that FIRRMA, if passed, would raise “significant questions when a US startup accepts foreign investment, even if that investment is for a small stake in a startup or when co-investing with US investors.” Kupor also noted his concern about CFIUS filing obligations under FIRRMA for US-based venture capital funds that have “any amount” of foreign investors. While others expressed concern that if FIRRMA is passed, “[f]or the first time, CFIUS would review outbound international commercial activity, including many thousands of non-sensitive [intellectual property] and technology licensing transactions, even with friendly nations.” Policymakers further cautioned that “FIRMMA would turn CFIUS into a supra-export control agency, duplicating long-standing US export control regimes and unilaterally limiting the ability of American firms to do business around the world.” It was recently reported that Congress is considering amendments to address these concerns.
While it is presently unclear how FIRRMA will evolve in Congress, the legislation likely will advance in 2018, potentially becoming law by year’s end.