From: The Diplomat
Indian firms hoping to invest in the U.S. need to include CFIUS in their thinking.
By Ziad Haider
As Chinese investment in the United States has hit record levels and, at times, attracted official scrutiny for national security risks, how has foreign investment in the United States from Asia’s other touted if slowing economic giant, India, fared under the national security review conducted by the Committee on Foreign Investment in the United States (CFIUS)? Moreover, what lessons might Indian firms seeking to invest in the United States draw from this record?
Established in 1975, CFIUS is an interagency committee in the U.S. federal government chaired by the Department of the Treasury. CFIUS operates pursuant to the amended 1950 Defense Production Act that authorizes the President to suspend, block, or otherwise modify select transactions prior to closing that could result in foreign control of U.S. businesses, if such control threatens U.S. national security. It also authorizes the president to seek divestment or other relief in the case of concluded transactions, as at least one Indian firm, discussed below, has experienced.
With nearly 40 percent of cases reviewed by CFIUS in 2012 (the latest period of official CFIUS data) proceeding from a 30-day review to a 45-day investigation, CFIUS scrutiny of foreign acquisitions is mounting. Given that Indian firms are one of the fastest growing sources of foreign direct investment (FDI) in the United States, leaping from $227 million in 2002 to almost $5.2 billion in 2012, so too must their attention to this important if obscure regulatory process.
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First, CFIUS review is not limited to firms from states deemed “unfriendly” to the United States. While Chinese firms topped the list for review in 2012, U.K. firms did so for the prior three consecutive years, accounting for 21 percent of filings from 2010-2012. To date, Indian firms have themselves had a range of outcomes of which future Indian investors should take note.
Second, while not all foreign investment is subject to CFIUS review, Indian investment has often touched on sensitive sectors such as IT that have attracted scrutiny and that will only grow in sensitivity given mounting cybersecurity concerns.
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