Proposed Bill Could Increase CFIUS Jurisdiction, Further Restrict FDI

July 31, 2023 - J. Philip Land
By: Philip Land and Ashley Long (2023 Summer Law Clerk, 2L at USC Law)
A trend in international investment is continuing. Legislators want the Committee on Foreign Investment in the United States (CFIUS) to be more strict on Foreign Direct Investment (FDI) in a way that could affect Greenfield projects.

As noted in an earlier post, CFIUS serves as a review committee for certain inbound FDI transactions, to determine if such transactions pose a risk to national security.
Members of the U.S. House have introduced legislation to curb foreign land ownership near military bases. The new law, known as the Protecting U.S. Farmland and Sensitive Sites From Foreign Adversaries Act, comes in response to growing concerns about foreign adversary entities acquiring land near sensitive sites, including military facilities. This law will have a significant impact on CFIUS decision-making and jurisdiction.
This bill will give CFIUS jurisdiction over foreign adversary real estate transactions. Foreign adversaries include China, Cuba, Iran, North Korea, Russia and Venezuela. CFIUS would also consider food security issues as it reviews the national security risk of transactions. This includes review of biotechnology acquisitions and farmland purchases near sensitive sites. This bill would also require the Secretary of Agriculture to have a vote in the review of transactions that involve farmland or agriculture technology.
This bill also sets a “presumption of non-resolvability” for CFIUS reviews, meaning there will be a higher approval threshold for transactions by foreign adversary entities purchasing land near sensitive sites. Essentially, the Committee would be required to review transactions with the presumption that national security concerns cannot be resolved. This may make it difficult for investors to move forward with a transaction where steep mitigation is all but guaranteed. Currently, CFIUS reviews each transaction on a case-by-case basis with no presumptions. However, this new bill would practically ban Chinese real estate transactions such as the Fufeng Group deal, mentioned in our previous blog post.
Other key provisions of the Protecting U.S. Farmland and Sensitive Sites From Foreign Adversaries Act include:
  • Requiring mandatory CFIUS filings for foreign adversary entities making land purchases near sensitive sites; and
  • Expanding the list of sensitive national security sites designated for CFIUS jurisdiction to include intelligence sites, national laboratories, defense-funded university research centers and more.
The heightened scrutiny is limited to foreign adversaries and allows status-quo review for current, key trading partners. For more information about CFIUS or other economic development matters, please contact Philip or a member of the HSB Economic Development team.