Current state of play

In its Annual Report to Congress for calendar year 2021, CFIUS reported a nearly 40 percent increase in overall CFIUS filings in 2021 from 2020. Notwithstanding this substantial increase in volume, the metrics indicate that CFIUS has mostly maintained, and in some cases slightly improved, its efficiency in dealing with filings. Moreover, there were not significant increases in the percentage of transactions requiring mitigation or abandoned based on CFIUS concerns, though some cases requiring mitigation took longer to resolve. CFIUS also identified more non-notified transactions compared to the prior year, but ultimately requested fewer total filings. Overall, while parties are notifying substantially more transactions, CFIUS continues to approve the vast majority of cases without mitigation.

A broadened view on security

The Committee on Foreign Investment in the United States (CFIUS), the interagency committee authorized to review certain transactions involving foreign investment into the US, continued to ramp up its outreach in 2021. Under the Biden administration, the committee remains steadfast in its comprehensive approach to deal reviews, with particular focus on a wide range of areas of interest, such as global supply chains, and an increased engagement with international allies.

Under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS continues to broaden its involvement in certain sectors on the grounds of national security. One such example is real estate. FIRRMA's implementing regulations include separate regulations for investment and real estate transactions, and a single transaction cannot fall under both sets of regulations. While fewer than 2 percent of the CFIUS filings made in 2021 were pursuant to the real estate regulations, those regulations are useful for investment transactions because they provide parameters for assessing whether a target's US locations could raise national security concerns based on their proximity to sensitive US government facilities. This assessment is particularly important when a transaction involves investors from higher-threat countries.

Outbound investment control?

There remains some discussion surrounding the extent to which CFIUS should control outbound investments from the US, with interest in this area growing over the past six months. This has been driven by interest in having more control over outbound technology transfers and investments, beyond what is already in place through export control regulations.

In March of this year, US Secretary of Commerce Gina Raimondo expressed support for a screening regime to review outbound investments. This follows on from similar moves by the White House earlier this year, signaling that an outbound investment screening mechanism could be a possibility in the future.

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