United States: CFIUS Updates The List Of Excepted Foreign States

Highlights

• The Committee on Foreign Investment in the United States (CFIUS) determined that Australia and Canada satisfied all of the criteria for a permanent status as excepted foreign states.
• CFIUS also extended the deadline for the U.K. to satisfy the criteria outlined in the CFIUS regulations for excepted foreign states and excepted real estate foreign states.
• New Zealand is now also added to the list of eligible excepted foreign states.

During the first week of January, the Committee on Foreign Investment in the United States (CFIUS), chaired by the U.S. Department of the Treasury (Treasury), published a series of rules and notices regarding the definitions of "excepted foreign state" and "excepted real estate foreign state" in the CFIUS regulations. As further explained in the Treasury Fact Sheet, the CFIUS regulations limit CFIUS jurisdiction over certain investors from an excepted foreign state, lowering the burden for those foreign investors. This more-limited jurisdiction is underpinned by the excepted states' own foreign investment screening regimes and coordination with the United States on matters relating to investment security.

First among the updates, CFIUS published its determination that Australia and Canada had satisfied the criteria to qualify as excepted foreign states under 31 C.F.R. Part 800 and excepted real estate foreign states under 31 C.F.R. Part 802.1 By satisfying the criteria outlined in the regulations, Australia and Canada will now remain excepted foreign states and excepted real estate foreign states absent future CFIUS action and publication in the Federal Register.

Notably, CFIUS published a rule extending by one year, until Feb. 13, 2023, the deadline for the United Kingdom (U.K.), which was on the initial list of eligible countries, to meet all the criteria in the regulations, as Canada and Australia were just deemed to have done. The U.K. has not been determined to have met such requirements yet, even though the U.K. also updated its investment regime, and effective Jan. 4, 2022, foreign investment in the U.K. is subject to a much stricter review requirement.

Finally, CFIUS also identified New Zealand as an eligible foreign state under 31 C.F.R. § 800.218(a) and 31 C.F.R. § 802.214(a). With this announcement, New Zealand will be treated as an excepted foreign state and excepted real estate foreign state, alongside Canada, Australia and the U.K., allowing foreign investors from New Zealand preferential treatment under CFIUS regulations. In its Fact Sheet, the Treasury explained that the decision was made based "on [New Zealand's] intelligence-sharing relationship with the United States and its collective defense arrangement and cooperation with the United States." Barring any further updates to the regulations, New Zealand has until Feb. 13, 2023, to amend its laws with respect to inbound investments to satisfy CFIUS criteria.

Footnotes

1 For the determination under Part 800, see Determination Regarding Excepted Foreign States, 87 Fed. Reg. 731, Jan. 6, 2022; for the determination under Part 802, see Determination Regarding Excepted Real Estate Foreign States, 87 Fed. Reg. 875, Jan. 7, 2022.

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