CFIUS Annual Report for 2018 and Statistics for 2019: Signs of a more efficient process under FIRRMA

CFIUS’s just-released 2018 annual report and preliminary 2019 statistics show that CFIUS is able to move more quickly after recent changes to its governing law and regulations, but more transparency would aid companies and advisors, as well as increase predictability and the credibility of the process.

The Committee on Foreign Investment in the United States (CFIUS) has issued its annual report for calendar year 2018 as well as preliminary statistics for 2019. These releases provide some of the first looks at how CFIUS is functioning since the enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and interim regulations that took effect in November of that year.

Key takeaways from these reports include the following:

CFIUS Caseload is Growing

CFIUS’s transaction caseload has grown even as the number of notices has remained fairly static. CFIUS received 231 notices of transactions in 2019, or approximately the same number as in 2018 (229 notices) and 2017 (237 notices). These figures, however, are not adjusted to reflect notices that were withdrawn and refiled; withdrawals and refilings are fairly common (occasionally more than once for some transactions) to allow CFIUS more time to complete its diligence regarding a transaction or to reach agreement with the parties on acceptable risk mitigation conditions. After accounting for refiled notices, and even assuming no more than one refiling per transaction (though anecdotally, multiple refilings were more likely in 2017 and 2018), the growth of CFIUS’s caseload in 2019 becomes more clear:


Notices Filed

Notices Withdrawn and Refiled

Net Transactions Reviewed













Importantly, these figures also do not reflect CFIUS assessments under a post-FIRRMA pilot program, started in November 2018, requiring short-form, pre-closing declarations for certain investments in U.S. businesses that develop or produce critical technologies. CFIUS reported conducting 21 assessments of declarations submitted in 2018, including 12 declarations submitted for noncontrolling investments not previously subject to CFIUS jurisdiction and one declaration that was eventually withdrawn by the parties for commercial reasons. CFIUS cleared two of these transactions, but has not reported how many of the other transactions were subsequently resubmitted for review through the filing of full CFIUS notices; this statistic is expected to be included in future annual reports.

The 10 percent clearance rate for the initial batch of pilot program declarations is low, but reflects a small sample size and the novelty of short-form declarations. While official figures have not yet been released, we understand that as many as 1/3 of pilot program declarations submitted through the end of 2019 resulted in clearances, a figure that may also seem small but reflects the inherent sensitivity of critical technology businesses. Future annual reports may list similar clearance rates for newly required pre-closing declarations of certain investments in U.S. businesses engaged in critical infrastructure or the collection or maintenance of sensitive personal data of U.S. citizens. Now that declarations may be submitted voluntarily for other transactions subject to CFIUS jurisdiction, however, we expect the overall clearance rate for declarations to increase substantially.


FIRRMA Is Enabling CFIUS to Move Faster

The use of short-form declarations, which are assessed by CFIUS in only 30 calendar days, is only one of the mechanisms intended to allow CFIUS to expedite CFIUS reviews. Prior to FIRRMA, CFIUS notices were subject to an initial review period of 30 calendar days, followed by a 45-calendar day investigation phase when necessary. The initial review period was expanded by FIRRMA to 45 calendar days, a change that took effect in November 2018. The statutory length of the review or investigation period is important; as noted in the 2018 annual report, the median number of days for completing a review or investigation was nearly the maximum length of time permitted by law, both before and after FIRRMA was enacted.

In 2017, 33 percent of notices required a second-stage investigation, but that figure jumped sharply to 69 percent in 2018. By 2019, however, the number of cases requiring investigations had improved to 48 percent, despite, as noted above, the increase in the number of actual transactions reviewed by CFIUS as well as the (unreported) number of short-form declarations that CFIUS was considering in parallel. The clearance of more cases in review likely reflects: (i) the longer deadline for completion of the review period and (ii) hiring of more staff using resources provided in FIRRMA, including a direct appropriation ending the days of CFIUS being an unfunded mandate.  

Still, even with the positive developments on clearance times, CFIUS efficiency statistics for 2020 can be expected to suffer due to delays caused by the COVID 19 pandemic, even if M&A activity also decreases during the crisis. Eventually, however, we expect further improvements in the handling of CFIUS cases, reflecting FIRRMA’s limits on the intake period for CFIUS notices, greater understanding of and experience with new CFIUS processes, and increased use of declarations for less sensitive transactions. That said, CFIUS staffing and other resources will need to keep pace with an expected increase in the number of notices and declarations.


CFIUS Is Stopping Fewer Transactions

As discussed in our December 2019 client note regarding the 2016-17 annual report and preliminary 2018 statistics, CFIUS raised serious objections to more than 9 percent of CFIUS notices filed during the two-year period. This reflects two transactions formally prohibited by the President and 42 transactions abandoned (and notices withdrawn) by the parties in the face of CFIUS objections, or “soft blocks.” As discussed above, the number of actual transactions reviewed during those years was substantially lower than the number of filed notices, so the effective rate of blocked transactions was considerably higher. In two other cases notices were rejected by CFIUS because of material misstatements or omissions (which would also qualify as serious CFIUS concerns) or because there had been a material change in the notified transaction.

The statistics for 2018 showed a slightly lower percentage of blocked transactions (8.3 percent) than 2017, but the preliminary statistics for 2019 show an accelerating downward trend. During 2019, while another transaction was formally blocked by the President, only eight notices were withdrawn in response to CFIUS objections (one more notice was also rejected). The effective rate of blocked transactions in 2019 was therefore below 4 percent, or less than half of the rate in 2018 or 2017.  

Detailed country-specific statistics for 2019 are not yet available from CFIUS. Although the number of CFIUS cases originating in China remained fairly constant in the period from 2016-2018, Chinese investment in the United States dropped sharply in 2019, according to a recent report prepared on behalf of the U.S.-China Investment Project; it seems likely that the number of CFIUS filings from China in 2019 would also be lower. Given the state of U.S.-China relations and the Congressional concerns about China that contributed to the enactment of FIRRMA, it would not be surprising if a greater number of transactions originating outside China is leading to a higher CFIUS clearance rate.


CFIUS Transparency Remains Limited

FIRRMA requires CFIUS to include in its annual report to Congress:

A list of all notices filed and all reviews or investigations completed during the period, with basic information on each party to the transaction, the nature of the business activities or products of all pertinent persons, along with information about any withdrawal from the process, and any decision or action by the President under this section.

This information, if made public, could greatly increase the transparency of the CFIUS process, giving investors far more insight into the CFIUS prospects of investments under consideration. We suspect this was Congress’ intent in including this provision in FIRRMA.

As it stands, the 2018 annual report does not include this information, instead providing aggregated data (as in the annual reports for past years) rather than a list of transactions. CFIUS might have argued, as it does with other FIRRMA reporting requirements, that this provision of FIRRMA was not effective until February 2020 and therefore will apply to data reported for calendar year 2020; instead, the annual report says this requirement is applicable to the current reporting period.  

CFIUS might also have maintained that under FIRRMA, the unclassified version of the report need only include (apart from certain enumerated items) information consistent with “safeguarding national security and privacy.” Providing the list required by FIRRMA is arguably consistent with both standards, especially if CFIUS were to interpret “basic information” as not including the names of the parties.

Whatever the justification, we are disappointed not to find the transaction list required by FIRRMA in the unclassified version of this year’s report.  


Please see Linklaters’ Navigating CFIUS webpage for more information on CFIUS, FIRRMA, and their implications for prospective cross-border investments.