Richard Sofield Richard Sofield. Courtesy photo

This story has been updated.

More proposed regulations implementing the Foreign Investment Risk Review Modernization Act, affecting investments by foreign entities in U.S. companies, were released Tuesday by the Treasury Department for comment.

The new rules would expand requirements for review by the Committee on Foreign Investment in the United States, or CFIUS, the interagency panel, to include minority stakes in investments in more industries and additional real estate transactions, under the law enacted by Congress last year.

"U.S. companies need to be aware of their business activities that are covered by these new rules in anticipation of receipt of any future investment from foreign investors. For foreign investors in the U.S., they need to be aware not only of the business activities of their U.S. targets but of where the U.S. businesses in which they are investing are located, because the U.S. government continues to demonstrate increasing interest in scrutinizing international transactions in the interest of national security," said Wiley Rein international trade, national security and telecom partner Richard C. Sofield, former director of the foreign investment review staff for the National Security Division at the U.S. Department of Justice.

The new rules would apply broadly but CFIUS is looking to build in exceptions for certain countries, he said. The deadline for written comments is Oct. 17, according to the Treasury Department notice.

 Briefly, here are three things to know about the new proposed rules:

  1. CFIUS is expanding jurisdiction to cover investments that are less than controlling investments in technology, infrastructure and data companies, collectively known as TID businesses. It is lowering the threshold level of investment in these three types of transactions to assert jurisdiction over more transactions.
  2. CFIUS is requiring mandatory filings for certain investments in which a foreign government has a "substantial interest," and it is extending its jurisdiction to cover a broad swath of real estate transactions. Any investment by a sovereign wealth fund, for example, a government-owned entity.
  3. CFIUS will apply to a broad swath of certain real estate transactions. Before it was mainly proximity issues. Transactions that are part of air or maritime ports within "close proximity" of military installations or "extended range" of certain military installations and within certain geographic areas associated with missile fields and offshore ranges are included. 

According to an alert posted by Arent Fox partner David Hanke, the new rules also apply with respect to real estate if a parcel "meets one of three specific criteria in relation to a U.S. military installation or other U.S. government facility that is 'sensitive for reasons relating to national security.' These criteria are that the real estate: Is in 'close proximity' to that installation or facility; could enable foreign intelligence collection on activities conducted there; or could otherwise expose national security activities there to risk of foreign surveillance."

The Treasury Department previously released guidance for dealmakers on new CFIUS regulations concerning investment funds exceptions under its Critical Technology Pilot Program introduced in November 2018.

Partner Christian Davis at Akin Gump Strauss Hauer & Feld in Washington, D.C. summarized: "The proposed regulations reflect CFIUS's effort to implement the FIRRMA mandate while taking into consideration both national security and business concerns.  The result is a much more complex regulatory regime that investors and businesses will need to unravel."

Read More: 

CFIUS Issues More Guidance for Dealmakers, Lawyers Say 

CFIUS Rules for Critical Infrastructure Are Coming, and They're Not What You Think 

CFIUS Arms Race Heats Up With Hires at V&E, Linklaters, Norton Rose Fulbright