Reform Of Foreign Investment Review OK'd




By Brian Wingfield

The brouhaha that erupted over a Dubai company's efforts to control some of America's major ports last year has finally been put to rest, much to the delight of the business community.

On Tuesday the House of Representatives overwhelmingly passed 370-45, with 16 members not voting, the final version of a bill that will reform the review process for the Committee on Foreign Investment in the United States. CFIUS, as the committee is known, is the federal panel charged with scrubbing foreign acquisitions of domestic assets for national security threats.

The measure gives the director of national intelligence the authority to review potential takeovers for national security threats. It also requires that a U.S. agency take responsibility for each transaction, and it gives CFIUS a relatively brief review process to determine whether a proposed acquisition by a foreign firm poses a risk to national security.

The bill now awaits President Bush's signature before it becomes law. The administration supports the measure.

All of this is great news for business groups, which were concerned that overzealous reform of the CFIUS review process might deter foreign investment in the U.S. A coalition of business groups, including the Financial Services Forum, the Business Roundtable, the Organization for International Investment and the U.S. Chamber of Commerce, roundly supported the measure passed Tuesday.

In a joint statement, the groups said the measure will improve CFIUS's review of foreign acquisitions in a way that "will protect our national security while keeping America open for business and restore predictability and certainty to the CFIUS process, which are prerequisites to attracting global capital."

The business community has been particularly concerned about investment taking root in foreign markets rather than the U.S., especially in the wake of the 2002 Sarbanes-Oxley Act. A report released earlier this year by Sen. Charles Schumer, D-N.Y. and New York Mayor Michael Bloomberg warned that New York is in danger of losing its status as the world's financial center. At the same time, the Bush administration has recently begun working on a program to boost U.S. competitiveness globally.

CFIUS came under fire by lawmakers in 2006 after it approved DP World's attempt to take over operations at six major U.S. ports. In the wake of that uproar, a bill was proposed in the Senate that would have made the CFIUS review process much more rigorous and lengthy, but the measure died due to strong opposition from the business community.

CFIUS review is of particular concern to some industries, such as airlines, telecom and energy companies, that are frequently targeted for review. Within the last year, CFIUS's merger reviews have included the Alcatel-Lucent deal as well as the acquisition that created the oil and gas drilling company CGG Veritas.

In March, the House unanimously passed a more lenient CFIUS bill, and the Senate adopted an almost identical version last month. The House passed the Senate's legislation so the two chambers could avoid having to hold a conference committee session on the measure and send it straight to Bush for approval.

Under the new legislation, a high-ranking Treasury Department official must approve all transactions where CFIUS review is completed within 30 days. If any transaction is subjected to separate, 45-day review for national security concerns, the president's approval is required. CFIUS is also required to notify Congress of each transaction and file annual reports to congressional leaders.

According to Nancy McLernon, senior vice president for the Organization for International Investment, the bill "puts to bed" concerns about protectionism in the U.S. because it increased the reliability of CFIUS review without impeding foreign investment.

"I think it hits the high note for all people that care about this issue," she says.