In our June 23, 2022, client alert, we noted that Congress had introduced legislation, and that the Biden administration (the Administration) was considering an executive order, that would establish a new national security mechanism to screen and monitor outbound investment from the United States to “countries of concern” (most notably China). The mechanism is colloquially referred to as “Outbound CFIUS,” as it would mirror the Committee on Foreign Investment in the United States (CFIUS), which screens foreign investment into the United States. Congress has not yet passed legislation to create an Outbound CFIUS mechanism, but an executive order appears imminent.
Two new reports (the agency reports) from the Department of the Treasury (Treasury) and the Department of Commerce (Commerce) shed light on what the Administration is contemplating. The Administration is expected to restrict outbound U.S. investment in sectors involving sensitive technologies, such as semiconductors. The agency reports indicate that the Outbound CFIUS mechanism would likely feature a combination of agency screening in targeted sectors (with the ability to block certain investments) and monitoring, which would be used to inform the further improvement and likely expansion of the mechanism over time. While industry groups have strongly resisted an Outbound CFIUS mechanism, there is broad bipartisan consensus in Congress and the Administration to be “tough on China.” Thus, the Administration likely views an executive order as a relatively noncontroversial tool to address its national security concerns.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.
Attorney Advertising—Sidley Austin LLP, One South Dearborn, Chicago, IL 60603. +1 312 853 7000. Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships, as explained at www.sidley.com/disclaimer.
© Sidley Austin LLP