CFIUS Legislative Update for May 2021: The Cicada Edition
Readers in the mid-Atlantic portion of the United States are undoubtedly familiar with the recent re-emergence of cicadas that live underground and then resurface every 17 years. While CFIUS-related legislative efforts are perhaps not quite as infrequent, they also tend to come in cycles, and we seem to be in the middle of such a cycle now. This month’s legislative review provides an update on some of the legislation we’ve discussed previously as well as some other bills that have been introduced in the U.S. Congress.
Mandatory reviews of foreign grants to universities
In our April 27 update, we noted that the proposed Strategic Competition Act of 2021 (SCA) had been passed on a bipartisan basis by the Senate Foreign Relations Committee, and that Section 138 - under which CFIUS would review certain foreign gifts to, or contracts with, U.S. universities - had been included without amendment. The SCA was subsequently incorporated into the proposed United States Innovation and Competition Act of 2021 (USICA), currently under consideration by the U.S. Senate. (SCA Section 138 appears in the USICA as Section 3138.)
While we previously identified implementation issues with this proposal, we viewed its prospects optimistically in light of the broad bipartisan support it received in the Foreign Relations Committee.
We may have spoken too soon. The USICA also incorporates the Meeting the China Challenge Act of 2021 (MCCA), bipartisan legislation proposed by the Senate Committee on Banking, Housing and Urban Affairs. Notably, because CFIUS is chaired by the U.S. Department of the Treasury, the Banking Committee is the Senate body with oversight responsibilities over CFIUS. It appears that the Banking Committee was not pleased with the incursion on its turf by the Foreign Relations Committee, because Section 5212 of the USICA, part of the MCCA, specifically prohibits CFIUS reviews of foreign gifts to, or contracts with, U.S. universities unless the transactions were previously subject to CFIUS jurisdiction.
The conflicting provisions of the USICA will not both become law. Turf battles with CFIUS’s oversight committees in the U.S. Senate and House of Representatives have hampered previous attempts at CFIUS-focused legislation, and may do so again in this case.
Report on information sharing between CFIUS and foreign allies
Section 5305 of the USICA, also part of the MCCA, would require CFIUS to report to CFIUS’s oversight committees within six months on the implementation of the process for CFIUS to exchange information with friendly governments, as required under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Whether this report will be made public remains to be seen, but it may be instructive in identifying countries - other than Australia, Canada, and the United Kingdom - that meet one of the qualifications for “excepted foreign states” under CFIUS’s regulations implementing FIRRMA.
Mandatory reviews of transactions involving genetic information
Senators Marco Rubio (R-Florida) and John Cornyn (R-Texas) have introduced Senate bill 1745, the Genomics Expenditures and National Security Enhancement (GENE) Act. While the bill’s text is not yet available, Senator Rubio has issued a statement indicating that the bill would require mandatory CFIUS filings for any transactions that involve targets working with genetic information, and also requiring the Department of Health and Human Services (DHHS) to be consulted on those cases.
Separately, the bill also would allow the Senate Select Committee on Intelligence (SSCI) to receive briefings on CFIUS cases. Currently, briefings are required to be provided only to the Senate and House leadership, the CFIUS oversight committees of both bodies, and certain senators and representatives representing districts in which relevant critical infrastructure is located. In practice, other members of Congress may be invited to briefings as a courtesy, but this is not required by law. SSCI already receives copies of the threat analyses prepared for each CFIUS case by the U.S. intelligence community, but this bill would give SSCI greater insight into decision making by CFIUS’s voting agencies. As with the CFIUS-related provision of the SCA, this proposal may encounter pushback from the Senate Banking Committee.
Permanent addition of the U.S. Department of Agriculture to CFIUS
In April, Representative Frank Lucas (R-Oklahoma) introduced House bill 6540, the Agricultural Security Risk Review Act (ASRRA). The ASRRA, an extremely brief bill, would add the U.S. Department of Agriculture (USDA) as a permanent member of CFIUS.
The ASRRA is not the first legislative attempt to have USDA join CFIUS permanently, and we suspect that this latest proposal, like its predecessors, will be unsuccessful.
As we’ve previously noted, CFIUS has long held - and routinely used - the authority to bring in U.S. government agencies (including USDA) with particular expertise or substantive equities relating to specific transactions and have those agencies participate on an ad hoc basis in the CFIUS decision process. Permanent membership, however, would require USDA to devote limited resources to participate in the vast majority (and increasing numbers) of CFIUS reviews of transactions involving businesses and sectors having nothing to do with USDA's responsibilities.
The SCA proposal would require U.S. Department of Education participation in CFIUS cases arising from foreign gifts to universities, and the GENE Act would require DHHS to be involved in cases concerning genetic information, but unlike the ASRRA, neither would require permanent membership of those agencies on CFIUS.
Mandatory CFIUS Reviews of Government-Backed Real Estate Transactions
In our previous update, we noted the introduction of Senate bill 1278, the Protecting Military Installations and Ranges Act of 2021 (PMIRA), which 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 PMIRA has been referred to the Senate Banking Committee for consideration, but no further action has been reported.