Investment Screening

CFIUS reviews inbound investments for national security concerns and has the authority to impose conditions on investments, block investments, and order divestment. Even transactions that do not clearly raise national security concerns may nonetheless draw the attention of CFIUS agencies, Congress, and the President. To navigate the CFIUS process efficiently and successfully, businesses must be attuned to an array of complex and sensitive legal, commercial, political, and public relations issues.

March 2023, Deal of the Year Winner, China Business Law Journal

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CFIUS Tutorial: Using the CFIUS Case Management System

CFIUS Capabilities

Our lawyers have decades of experience guiding foreign investors and U.S. companies through CFIUS declaration and notice proceedings, advising on deal structures, assessing CFIUS risks, and negotiating national security mitigation agreements (NSAs). We have provided CFIUS advice in connection with transactions across a wide range of sectors, including: aerospace, biotech and pharmaceuticals, energy, financial services, green technology, manufacturing, mining, satellite communications, semiconductors, software, technology, and transportation.

Our Team

We have a strong team of CFIUS practitioners with extensive experience on security matters. Our team includes, among many others: former general counsels to the Office of the U.S. Trade Representative, the National Security Council, and the Office of Management and Budget; a former deputy director in the Office of Foreign Investment Review at the Department of Defense; former associate counsels to the President in three different administrations; a former acting attorney general, deputy attorney general, and assistant attorney general at for the Civil Division of the Department of Justice; a vice chairman of the Privacy and Civil Liberties Oversight Board; former Congressional staffers, including for the House Financial Services Committee; a former principal deputy general counsel at the Department of the Treasury; and a former legal counselor to the European Union. Additionally, a member of our team assisted with the development and implementation of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA).

Global Outlook and Influence

Outside the United States

Many jurisdictions around the world have adopted, or are considering adopting, regulations to screen foreign investment on national security and public order grounds. In today’s world, investors need to be cognizant of these regulations, as the consequences for failing to comply are potentially severe. Divestment orders, and civil and criminal penalties, are possible in many cases, and such actions can result in significant reputational consequences. Sidley is well positioned to advise clients on these matters worldwide.

Proficiency in Related National Security Areas

The U.S. government and other governments have put in place an array of other processes and requirements that apply in addition to the investment screening process and that may influence investment screening decisions. These processes include the following:

Export Controls: Our export controls lawyers focus on licensing and compliance under the Export Administration Regulations and the International Traffic in Arms Regulations administered by the Departments of Commerce and State, respectively. We regularly advise on export control rules as set out both at the EU and EU Member State levels and, following Brexit, as adopted by the United Kingdom.
Sanctions: Members of Sidley’s economic sanctions team have a clear command of the economic sanctions administered by the Department of the Treasury’s Office of Foreign Assets Control, the Council of the European Union, and, following Brexit, those maintained by Her Majesty’s Treasury of the United Kingdom.
FOCI Mitigation: We advise clients on all aspects of interactions and agreements with the Defense Counterintelligence and Security Agency (DCSA) needed to mitigate FOCI, including mitigation instruments such as Special Security Agreements, Proxy Agreements, and Board Resolutions required by the DCSA. This advice is normally provided in connection with mergers and acquisitions, principally when non-U.S. entities, including private equity funds with non-U.S. investors or offshore intermediary entities, are acquiring U.S. businesses that perform classified work and therefore require DCSA security clearances. Similar advice is also provided for transactions in which Sidley clients are selling entities performing classified work, to ensure that buyers’ counsel and sellers’ counsel can work effectively together to ensure continuity in this area. Recently, our FOCI team has advised clients in the United States, Europe, Asia, and Australia on purchase and sales transactions focused on companies with high-level security clearances.
Team Telecom: Sidley has a dedicated team of lawyers who counsel clients regarding the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (formerly, Team Telecom). Our lawyers handle applications before the Federal Communications Commission that generate Committee/Team Telecom inquiries; respond to Committee/Team Telecom questionnaires; engage with the Executive Branch agencies that make up the Committee/Team Telecom to address questions and negotiate agreements; and generally assist clients in understanding and navigating through the telecommunications foreign ownership process.
Defense Contracting and Procurement: Our firm represents many U.S. and foreign aerospace and other defense contractors in a range of advisory, investigative, and litigation roles related to contracts with departments of the U.S. government. Our advice extends to contract structuring, contract claims and disputes, the Federal Acquisition Regulation’s cost principles, False Claims Act suits, and investigations and compliance programs addressing various ethical and criminal law requirements, including those of the Foreign Corrupt Practices Act.
Privacy and Information Governance: Sidley’s privacy and information governance team has extensive experience in information law. Our lawyers address U.S., EU, Chinese, and other data privacy issues; global data protection programs; information security; internet issues; and representation in connection with data breaches. These issues often intertwine with other national security issues, especially those that involve classified information or cross-border data transfers.

Representative Matters

PDSTI, a Chinese company, investing in ICON Aircraft, Inc. (recognized for “Deal of the Year” by China Business Law Journal)
A Chinese company investing in the media sector
A U.S. investment fund in the sale of a regional railway to a Mexican investor
A U.S. stock exchange being sold to Chinese investors
A French company in the acquisition of two U.S. manufacturing companies, one of which was a defense contractor
A Japanese company in the acquisition of a U.S. manufacturing company in the defense sector
A Chinese company in an acquisition in the semiconductor sector
A sovereign wealth fund in an investment in a U.S. company involved in processing, transporting, and storing natural gas, natural gas liquids condensate, and crude oil
A sovereign wealth fund in an investment in a U.S. software company
A sovereign wealth fund in an investment in a U.S. data management company
A sovereign wealth fund in an investment in a U.S. company providing electricity transmission services
A sovereign wealth fund in an investment in a U.S. company providing certain telecommunications and data services
A sovereign wealth fund in investments in the U.S. power generation sector
A foreign investor in an investment in the satellite sector
A Japanese company in an investment in the pipeline sector
An Israeli company in an investment in a defense contractor
A Chinese company investing in a U.S. auto parts manufacturer
A Chinese company investing in the energy sector
A major U.S. multinational in the sale of a manufacturing division to a European company
A Chinese company on investments in the technology and telecommunications sectors
U.S. investors with respect to a joint investment with a Chinese entity in the mining sector
A U.S. company in the semiconductor sector with respect to a potential investment by a Chinese company

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CFIUS Tutorial: Using the CFIUS Case Management System

Contacts

James Mendenhall

Partner

jmendenhall@sidley.com +1 202 736 8141

Washington, D.C.
Sven De Knop

Partner

sdeknop@sidley.com +32 2 504 6468

Brussels
Jen Fernandez

Partner

jen.fernandez@sidley.com +1 202 736 8824

Washington, D.C.

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