CFIUS Legislative Update: Mandatory Reviews of University Grants and Government-Backed Real Estate Transactions
Mandatory CFIUS Reviews of Foreign Grants to Universities
On April 21, the U.S. Senate Foreign Relations Committee, on an overwhelming and bipartisan basis, passed the Strategic Competition Act of 2021, a bill that would counter various activities by China viewed as contrary to U.S. government interests.
Among the bill’s provisions that were left untouched by the Senate Committee is Section 138, which would institute mandatory CFIUS reviews of certain foreign gifts to, or contracts with, U.S. universities that directly or indirectly receive financial support from the U.S. government. As discussed in our April 14 post, there would be a number of implementation issues if Section 138 were enacted as currently written.
The Senate committee’s passage of the bill on April 21 does not forestall amendment of Section 138 as the bill proceeds through the remaining steps of the legislative process. In fact, several members of the Foreign Relations committee delayed the introduction of proposed amendments to the bill until later stages of the process, and other legislators in both the Senate and House of Representatives will also have an opportunity to submit their own amendments. However, there is a strong chance that the bill will ultimately pass with broad bipartisan support.
We will continue to track the bill and update you on its progress.
Mandatory CFIUS Reviews of Government-Backed Real Estate Transactions
Also on April 21, Republican Senators Cruz (Texas) and Rubio (Florida) introduced the Protecting Military Installations and Ranges Act of 2021. This bill, if enacted, would require mandatory CFIUS reviews of certain foreign real estate transactions if the foreign party is backed by the governments of Russia, China, Iran or North Korea.
The covered real estate transactions would include purchases and leases of property located within 100 miles of military installations and 50 miles of military training areas and related airspace. Moreover, the bill would require CFIUS to initiate these reviews unilaterally (commonly referred to as “agency notices”) rather than wait for the parties to initiate the review processes with their own filings.
Finally, if a CFIUS review is undertaken under this bill, the U.S. Departments of Defense and Transportation would be required to delay completion of their reviews of energy projects (typically, wind farms that might interfere with air traffic or otherwise affect national security) until completion of related CFIUS reviews.
The proposed legislation would fill a couple of gaps in current CFIUS authorities. First, the bill would make CFIUS reviews of covered real estate transactions mandatory (currently, CFIUS reviews of real estate transactions are undertaken following voluntary filings by the parties). Second, the bill would expand the scope of real estate subject to CFIUS jurisdiction.
As with Section 138 of the Strategic Competition Act of 2021, this bill presents its own implementation issues, with the most significant being the requirement that CFIUS self-initiate reviews of the relevant real estate transactions. This requirement places an additional administrative burden on CFIUS to identify transactions for which these reviews are required, and also may prevent CFIUS from being able to penalize the parties for not submitting their own filings, as in other situations for which pre-closing CFIUS filings are required.
As noted by Senator Cruz, similar legislation was unsuccessfully introduced last year. Given this history and the lack of bipartisan support at this stage of the legislative process, prospects for this bill seem less bright than for the Strategic Competition Act of 2021. Still, we will monitor its progress and provide updates if it seems to be gaining traction.