Since our review of the Foreign Investment and National Security Act ("FINSA") in a Washington Update  on October 24, 2007, investors, corporations and attorneys have gotten a taste of how foreign investment will be treated under FINSA  since it was signed into law last year.  A few early trends have started to develop for transactions subject to the Committee on Foreign Investment in the United States ("CFIUS"). 

First, since new CFIUS regulations have yet to be promulgated, applying the existing regulations to transactions under FINSA is often a complex and difficult process. Our experience with recent filings shows that old, yet still binding, regulatory definitions are much narrower than the breadth of the FINSA statutory language, forcing businesses and their counsel to make difficult judgments about whether and how to file voluntary CFIUS notices.

Second, the uncertainty and heightened scrutiny surrounding foreign investment in the US has led to the filing of a greater number of voluntary notices with CFIUS.  In turn, the greater number of cases being reviewed by CFIUS has reduced opportunities for informal vetting of transactions with CFIUS officials. 

Third, President Bush's executive order of January 23, 2008, calls for an even more intense review of foreign investment in the U.S. by, among other things, clarifying the role of the director of national intelligence in reviewing transactions and requiring investigations if any CFIUS member believes that a transaction puts national security at risk.

It is apparent that these trends will continue for the indefinite future while the Department of the Treasury develops FINSA's implementing regulations, a process that is expected to take several more months.  All of these developments have made it even more important that formal notices are complete, accurate and well-drafted.

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