New CFIUS Executive Order Adds National Security Factors for Evaluating Foreign Investments

September 22, 2022 - On September 15, 2022, President Biden signed Executive Order (EO) 14083 expanding the list of national security factors that the Committee on Foreign Investment in the United States (CFIUS) should consider when reviewing foreign investments into the United States. 

A White House fact sheet summarizing the provisions of EO 14083 is available here.

Background

Section 721(f) of the Defense Production Act (DPA), codified at 50 U.S.C. § 4565(f), sets out ten factors that CFIUS may consider when reviewing a foreign investment transaction in the United States, and authorizes the President and CFIUS to determine other factors as appropriate generally or in connection with a specific review or investigation. 

New Factors

EO 14083 expands the list of factors in Section 721(f) to include five additional factors for CFIUS to consider as appropriate:

• A given transaction’s effect on the resilience of critical U.S. supply chains that may have national security implications, including those outside of the defense industrial base.
• A given transaction’s effect on U.S. technological leadership in areas affecting U.S. national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies.
• Industry investment trends that may have consequences for a given transaction’s impact on U.S. national security.
• Cybersecurity risks that threaten to impair national security.
• Risks to U.S. persons’ sensitive data.

EO 14083 is the first such order to provide direction to CFIUS in addition to the DPA and CFIUS’s regulations. Notably, EO 14083 makes no changes to the scope of CFIUS’s jurisdiction or other legal processes. In practical terms, the executive order appears to give legal effect to factors already being informally considered by CFIUS. We therefore anticipate that EO 14083 is unlikely to have a significant impact on matters before CFIUS. 

Nevertheless, as other countries adopt foreign direct investment regimes similar to that in the United States, EO 14083 may also be intended to outline the specific expectations of the U.S. government in considering whether those countries should qualify for the preferred status of an “Excepted Foreign State” within the meaning of CFIUS’s regulations (i.e., a country that has “established and is effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security).

EO 14083 highlights the need for persons engaged in foreign investment in the United States to keep abreast of evolving CFIUS practice and its connections to other national foreign direct investment regimes.