Intervention About Investments: How Politics and Policy Affect Foreign Investment

Welcome to the April 2024 edition of our newsletter!  In this issue, we’ll examine how a growing protectionist trend in American politics is affecting foreign investment opportunities.

Working Together ir Standing Apart: Regulation of Foreign Direct Investment

As governments in many parts of the world retreat from the globalization boom that has fueled the past three decades of growth, the effects of this regression have become more pronounced when it comes to regulatory efforts.  The U.S. Congress, for instance, is seeking to compel the Chinese parent of TikTok to divest its stake and the Federal Trade Commission is blocking mergers like a hockey goalie in a shootout, involving U.S. companies and also multinational ones.  This mindset has always been present at the Committee on Foreign Investment in the United States, or CFIUS – and indeed was a driving force for its creation, to protect American businesses as well as trade and state secrets.  Now, CFIUS is turning up its efforts.

The Treasury Department is seeking to give the committee — which oversees foreign direct investment in United States companies —  authority ro increase its fines for making false statements to $5 million – a 20-fold increase from the current limit of $250,000.  The new proposed rules would also allow subpoenas by the committee to third parties, broadening its enforcement reach, with the stated reason being the identification of national security risks.

If your client is seekinbg investment from a state-owned entity controlled by a  foreign government which is looking to invest in U.S. assets, being aware of heightened penalties for false statements could be key – especially if any joint venture could be liable for them even if your party was not the one uttering them.  As skepticism about the intent of foreign actors essentially becomes policy in more parts of the globe, those who must operate under that framework are urged to use more caution and diligence if they want to see the world as a globe spinning with opportunities, not fueled by threats from abroad.