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Treasury Identifies Oil and Gas, Petrochemical, Maritime, Financial Services, and Real Estate as CFIUS Focus Areas

The US Treasury Department (Treasury) recently published proposed rules which would significantly expand the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) over foreign direct investments in the United States as contemplated by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA).

The proposed rules expand CFIUS jurisdiction to minority acquisitions and incremental investments by foreign persons and state-owned entities and reflect a clear intent by CFIUS to increase its scrutiny of foreign investments in the oil and gas, petrochemical, maritime, and financial services sectors. The proposed rules also provide guidance about the types of real estate investments which may warrant CFIUS review, namely real estate in proximity to airports, maritime ports, and military and government facilities and installations. 

CFIUS review will remain largely voluntary under the proposed rules. Further, in an effort to mitigate the regulatory burden, the rules also will limit the scope of disclosures required for most transactions and shorten the initial review period from 45 to 30 days. Treasury also plans to exempt certain investment fund transactions and publish a “white list” of countries whose citizens will be able to pursue investments in US firms with abridged scrutiny. 

While the increasing scrutiny of foreign investments is primarily driven by legitimate national security concerns, the impact of political, media attention, and trade disputes on CFIUS outcomes should not be discounted, particularly with respect to transactions involving Chinese nationals and state-owned entities. Further, although most transactions will not require a filing, it would be a strategic mistake for transaction parties to assume that their transaction will fly under the radar or to underestimate the importance of CFIUS risk-shifting provisions in their definitive agreements. As such, CFIUS should be considered early on in transactions involving foreign direct investments to permit identification of regulatory concerns and the development of effective arguments to address them. 

Co-Authored by Abra Murray special counsel in Jones Walker’s Corporate Practice Group

© 2019 Jones Walker LLP

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About this Author

Mark A. Cunningham, partner,Litigation Practice Group, corporate compliance, white collar defense team, New Orleans

Mark provides strategic advice to clients on competition and trade issues related to the structuring of national and global distribution networks, joint ventures, mergers and acquisitions, and intellectual property protection. Mark also serves as first-chair trial counsel for companies and individuals under law enforcement scrutiny or facing bet-the-company litigation.

Mark is ranked in the first band — the top tier — for white-collar crime and government investigation in Louisiana by Chambers USA and Benchmark LitigationSuper LawyersThe Best...

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Asher J. Friend partner Corporate Practice Group ,M&A , private equity New Orleans Houston
Partner

Asher J. Friend is a partner in the Corporate Practice Group and a member of the firm's M&A and private equity and corporate and securities and executive compensation teams.

Asher focuses his practice in the areas of mergers and acquisitions, private equity, securities, and general corporate law.

Asher has developed significant experience in the hospitality, healthcare, energy, and technology industries, including representing clients in myriad acquisitions, divestitures, joint ventures, and related corporate transactions involving hotels, casinos, bars, restaurants, nightclubs, food service businesses and retail products, healthcare systems, practices and ancillary assets, energy and oil-field service assets, and other related core intellectual property assets.   

Throughout the course of his professional career, Asher has represented clients at each stage of the growth cycle: from emerging, start-up, privately owned companies to mature, publicly traded companies, with a concentration in M&A transactions, public and private offerings of debt and equity securities, and advising and assisting clients through the entire spectrum of related corporate and transactional matters

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