Measure on Security Reviews
Of Investments Draws Criticism

WASHINGTON -- A House committee voted to curb the government's ability to reopen reviews into how foreign investments in U.S. companies might affect national security. But some business leaders said the proposed change doesn't go far enough.

At issue is the Bush administration's decision to reserve the right to revisit -- and potentially unwind -- foreign-led deals, even after they have been cleared by the U.S. government. The Bush administration insisted on including such an "evergreen authority" clause as part of its approval in November of the $11.6 billion purchase of Lucent Technologies Inc. by France's Alcatel SA. Business, concerned about the uncertainty added by such a clause, has lobbied Congress over the issue.

Under U.S. regulations, certain foreign-investment deals must undergo a review by, and receive approval from, the Committee on Foreign Investment in the U.S., before going ahead. The secretive panel was set up in 1975 and is represented by 12 government departments and agencies, led by the Treasury Department.

The House Financial Services Committee, acting on an amendment advanced by its chairman, Rep. Barney Frank (D., Mass.), yesterday approved a measure requiring that any decision to expose business deals to additional security reviews be triggered at the most senior levels of the government. Under the proposal, only officials who are ranked third or higher in any department -- undersecretaries and above -- could trigger a reopening of a case. They would be authorized to do so only in situations where there is a perceived breach by the foreign company of a past agreement with the U.S. government.

"The burden would be on the undersecretary to find a material breach," Mr. Frank said. "We raise the level under which it happens."

But Todd Malan, president of the Organization for International Investment, a group representing American subsidiaries of foreign companies, urged that the so-called evergreen authority be made even more difficult to invoke, if not taken away from the administration entirely. He said the authority acts as "a cloud on clear title" in deals involving foreign companies.

Mr. Frank's proposal was folded into a broader bill, which Mr. Malan said his group supports, designed to raise U.S. scrutiny of the security implications of foreign-led deals. That bill cleared the House Financial Services Committee by voice vote, and is expected to garner wide support on the House floor when it is considered, possibly in the final week of February. Senate leaders have also vowed to take on the issue.

The House committee also approved, by a 40-29 vote, an amendment requiring a presidential decision in transactions involving companies from countries deemed by the U.S. to be sponsors of terrorism.