CFIUS Head Says Gov't Is Mitigating More Deals, Still Debating Outbound Screening

Rosen, speaking during a May 17 law conference in Washington, said CFIUS is seeing an uptick in mitigation agreements -- a set of conditions imposed by the committee before it allows a deal to close. He said the rise in mitigation is a “preview [of] where we're going.”

CFIUS is still clearing “the majority” of transactions after an initial 45-day review period, Rosen said, “but we're also mitigating more agreements, which means we're identifying more risk that needs to be addressed.”

The committee is looking for new employees “across all areas” to help with the increasing work, Rosen said. “If anyone wants to come work with CFIUS, we've got an ongoing posting,“ he said during the conference, which was hosted by Mayer Brown, the American Bar Association and American University. “We're doing more cases, we're taking on more risk mitigation and the like.”

He said more employees will help the committee “make sure, frankly, that we’re not missing anything, that we have the staff to do a thorough review, but also that we have the staff to be responsive to transaction parties so that we're not unduly delaying transactions that may close.”

Although the committee is hiring, it “largely” has all the tools it needs to “do the job that Congress has asked us to do,” said Rosen, Treasury’s assistant secretary for investment security. But he also said CFIUS is “always evaluating how strong our tools are,” pointing specifically to the bipartisan Restrict Act introduced in the Senate in March (see 2303070075). That bill could give the administration new authority to block transactions with foreign technology products that threaten U.S. national security.

“There are other tools that would be helpful in the sort of the broader U.S. government toolkit when it comes to national security,” Rosen said, “and I think that’s an example of what you see with the Restrict Act.”

Although CFIUS has historically been criticized for lacking transparency (see 2208050028), Rosen said he’s “interested in demystifying” the committee. He declined to comment on specific cases -- including the committee’s controversial decision last year not to intervene in China-based Fufeng Group's attempted purchase of North Dakota farmland near Grand Forks Air Force Base (see 2212150035 and 2302070028) -- but he said releasing more information about the CFIUS process is in ​”everybody’s interest,” pointing to the committee’s first-ever enforcement and penalty guidelines released in October (see 2210200042).

“It was a priority of mine when I first came in,” said Rosen, who was confirmed by the Senate in May 2022 (see 2205250017). He said he wanted CFIUS to explain the “kinds of considerations and things that we're going to be thinking about when it comes to assessing national security risks.”

The new penalty guidelines also reflect CFIUS’ “much more active approach in assessing violations of our statute and mitigation agreements,” Rosen said. The committee is more closely analyzing breaches of mitigation agreements, he said, including to determine “whether there should be civil penalties or some other enforcement action taken.”

Rosen said he’s already noticed a difference. “We've seen conduct change,” he said, adding that CFIUS is beginning to see voluntary self-disclosures for violations of mitigation agreements and failures to make a mandatory filing to the committee. “When a party sees that they may be in violation, they come to us,” Rosen said. “And I think that says it all in terms of the importance of these guidelines.”

Although he declined to confirm whether CFIUS determined not to intervene in Fufeng Group’s purchase of U.S. farmland last year, he stressed that many real estate transactions are outside of the committee’s purview. “Congress was very clear that they did not want CFIUS to have jurisdiction over every transaction,” Risen said. “In fact, that would bankrupt us from a case processing perspective.”

He also touched briefly on a potential outbound investment screening mechanism, which is “continuing to be quite debated and deliberated” within the administration. The questions the government is grappling with are “complicated,” Rosen said, and Treasury is also “spending a lot of time thinking about these issues” so it will be ready to help implement the new tool if it needs to.

The U.S. is mainly concerned with American investments in foreign industries that may be accompanied by “technological know-how” or “expertise” that can help propel “very nascent stages of technology development overseas in countries or sub-sectors of concern that can then be used to advance these technologies” to harm the U.S. Rosen specifically mentioned outbound investments that could help a U.S. adversary develop “the next generation chip, for example, that’s going to go into a warfighter, or other things that can be used against us from a national security perspective.”

“The way we're thinking about this challenge is really a sort of a core, narrow national security challenge, and that is the dollars of American investments” that can help develop “new technologies that export controls, for example, aren't yet able to capture,” Rosen added. “That conversation is active and it's ongoing.”

He said Treasury is working to make sure -- if it’s involved in the potential mechanism -- that the tool is “clear, that it’s enforceable, that it’s understandable,” and that the agency has the “ability to ensure compliance with whatever regulatory framework may come out.” Rosen also stressed that the tool won't look to cut off a broad range of outward investments.

“I think there's a way to address the national concern this administration is worried about,” he said, “while also promoting broad global flows of capital and investments.”