Proposed CFIUS Rules Would Delay Determination with Respect to Excepted Foreign States
The “excepted foreign state” definition in the CFIUS rules operates together with other relevant terms to exclude from CFIUS’s jurisdiction covered investments by certain foreign persons who meet certain criteria establishing sufficiently close ties to certain foreign states. Section 800.218 defines excepted foreign state by a two-criteria conjunctive test, with delayed effectiveness for the second criterion. The first criterion is that the Committee identify a foreign state as an eligible foreign state. The second criterion is that, by the end of the two-year delayed effectiveness period ( i.e., by February 13, 2022), the Committee make a determination under § 800.1001(a) for each eligible foreign state as to whether such foreign state “has established and is effectively utilizing a robust process” to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security.
The “excepted real estate foreign state” definition in the Part 802 Rule operates together with other relevant terms to exclude from CFIUS’s jurisdiction certain real estate transactions by certain foreign persons who meet certain criteria establishing sufficiently close ties to certain foreign states. The Part 802 Rule applies a two-criteria conjunctive test in the definition of excepted real estate foreign state that is analogous to the test in the Part 800 Rule, except that the second criterion is a determination under § 802.1001(a) that the foreign state must have “made significant progress” in establishing and effectively utilizing the robust process and coordination that is described in § 800.1001.
On January 17, 2020, the Committee identified Australia, Canada, and the United Kingdom of Great Britain and Northern Ireland as eligible excepted foreign states under the Part 800 Rule and as eligible excepted real estate foreign states under the Part 802 Rule. Thus, as of February 13, 2020, when the Part 800 Rule and the Part 802 Rule became effective, each of the three identified eligible foreign states was deemed to be an excepted foreign state and excepted real estate foreign state, without regard in each case to the second criterion, which is a determination under §§ 800.1001 and 802.1001. In order to remain an excepted foreign state and excepted real estate foreign state after February 12, 2022, each foreign state must remain eligible under §§ 800.218(a) and 802.214(a), respectively, and the Committee must make the determinations required under §§ 800.1001(a) and 802.1001(a), respectively, regarding the foreign state.
CFIUS has published a proposed rule that would change the date in each of §§ 800.218 and 802.214 from February 13, 2022, to February 13, 2023. The proposed rule therefore would have the effect of extending the delayed effectiveness period for the second criterion in each of the Part 800 and Part 802 Rules without making any change to the two-criteria conjunctive test in either the definition of excepted foreign state or the definition of excepted real estate foreign state. The proposed rule would make no change to any country’s status as an excepted foreign state or excepted real estate foreign state. Under the proposed rule, the Committee may make a determination under § 800.1001 or § 802.1001 for an eligible foreign state, including Australia, Canada, the United Kingdom of Great Britain and Northern Ireland and any other state that the Committee identifies as eligible, at any time before the revised February 13, 2023, date.
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