National Security: Foreign Investment Review and Defense Security

Overview

"Baker & Hostetler has a wide variety of specialist attorneys who work together seamlessly. We have been with Baker & Hostetler for many years with great success.”

– Legal 500 2022

We assist clients in a broad array of industries with foreign investment reviews by the Committee on Foreign Investment in the United States (CFIUS), as well as security clearance matters under the jurisdiction of the Defense Counterintelligence and Security Agency (DCSA), including mitigation of foreign ownership, control and influence (FOCI) and compliance with the rules and regulations applicable to security clearances. Representations have included clients in the aerospace and defense, manufacturing, electronics, energy, food and agriculture, infrastructure, real estate, banking and finance, data storage and analysis, life sciences, semiconductors, and transportation.

Foreign Investment Review: CFIUS

Our National Security team has extensive experience counseling both U.S. businesses and foreign persons regarding all aspects of foreign investment and representing them through all stages of a review by CFIUS. We have a comprehensive understanding of the laws and regulations governing the CFIUS process as well as the myriad of U.S. government agencies involved. We take a straightforward, assertive approach to any transaction that might trigger CFIUS jurisdiction.

Whether the client is a U.S. business contemplating a sale to or investment from a foreign investor or a foreign investor contemplating the acquisition of or investment into a U.S. business, our National Security team can provide guidance on whether the contemplated transaction would be subject to the expansive powers of CFIUS, including its mandatory filing rules.

CFIUS is a U.S. government interagency committee authorized to review foreign investments into U.S. businesses – even minority or noncontrolling interests – as well as certain real estate acquisitions by a foreign person. CFIUS’ powers, authorities and significance have grown exponentially over the last several years, particularly with the 2018 passage of the Foreign Investment Risk Review Modernization Act (FIRRMA).

The purpose of a CFIUS review is to identify whether the investment or acquisition presents U.S. national security risks and to mitigate or prevent any such risks. A CFIUS review may affect the timing and closing of an investment or acquisition, lead to the imposition of restrictions on conduct of the U.S. business post-closing, or result in the referral of the transaction to the President of the United States for final action up to and including blocking the deal or requiring divestment. CFIUS also has the authority to impose significant monetary penalties for failure to make a mandatory filing or abide by mitigation measures imposed by CFIUS, as well as to compel parties to file when they choose not to voluntarily file. Thus, it is important that both investors and U.S. businesses understand, ideally as early as possible in the dealmaking process, how CFIUS could impact their transactions.

While most transactions subject to CFIUS jurisdiction remain subject to voluntary filing rules, certain transactions must be filed with CFIUS at least 30 days prior to closing. A CFIUS filing may be mandatory when the target U.S. business is a “TID U.S. business” – a critical Technology, critical Infrastructure or sensitive personal Data business. Whether a U.S. business is a TID U.S. business requires a fact-specific analysis and, in many cases, a legal analysis of U.S. export control laws. Our National Security team has experienced practitioners who can walk clients through these necessary factual and legal analyses.

Our attorneys provide genuine insight and practical advice on all aspects of the CFIUS process and related decision making, including whether filings are mandatory or otherwise advisable, as well as potential structuring options. We regularly advise clients on whether to make a voluntary filing with CFIUS and the likelihood that a safe harbor from a future CFIUS review will be achieved. We have facilitated numerous successful results for transactions involving acquirers or investors from China, Japan, Taiwan, Israel, Germany and other high-profile nations. Our nationwide presence and multi-practice approach provide us with extensive knowledge of the industries and countries likely to draw CFIUS attention.

Defense Security: Security Clearances and FOCI Mitigation

In relation to CFIUS reviews – and also matters unrelated to CFIUS – our attorneys have extensive experience advising companies on compliance with the rules and regulations applicable to companies and individuals with security clearances overseen by DCSA. We counsel companies on how to obtain facility clearances and related personnel clearances for their employees. We assist cleared companies and their cleared personnel with maintaining security clearances and required reports to DCSA of changed conditions, including in the context of changes in FOCI impacting the cleared company, whether the changes arise from changes in ownership, key investors or personnel, or other circumstances. We assist cleared companies with mitigation of FOCI concerns, including drafting Special Security Agreements, Security Control Agreements, and Proxy and Voting Trust Agreements and related FOCI mitigation plans. While CFIUS and FOCI reviews are carried out in parallel and may affect each other, they are separate processes with their own timelines and different applicable national security regulations. When a CFIUS review and DCSA FOCI mitigation proceed in parallel, our experienced attorneys seamlessly guide our clients through both processes.

Select Experience

  • Secured CFIUS safe harbor and DCSA FOCI mitigation for the partial sale of a leading global producer of highly engineered aerospace systems and components to foreign affiliates of a global private equity firm.
  • Advised a European private equity firm on CFIUS and DCSA FOCI mitigation matters in connection with the acquisition of a global advanced armor protection business with U.S. operations.
  • Secured CFIUS clearance for a U.S entity in the automotive sector regarding an acquisition of assets by a Taiwanese entity with a significant footprint in China.
  • Represented a critical infrastructure U.S. business through the filing and CFIUS review of a declaration.
  • Represented a Dubai-based company owned by a Kuwaiti public company in connection with CFIUS queries regarding a non-notified asset purchase that had occurred three years earlier.
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Experience

  • Secured CFIUS safe harbor and DCSA FOCI mitigation for the partial sale of a leading global producer of highly engineered aerospace systems and components to foreign affiliates of a global private equity firm.
  • Advised a European private equity firm on CFIUS and DCSA FOCI mitigation matters in connection with the acquisition of a global advanced armor protection business with U.S. operations.
  • Secured CFIUS clearance for a U.S entity in the automotive sector regarding an acquisition of assets by a Taiwanese entity with a significant footprint in China.
  • Represented a critical infrastructure U.S. business through the filing and CFIUS review of a declaration.
  • Represented a Dubai-based company owned by a Kuwaiti public company in connection with CFIUS queries regarding a non-notified asset purchase that had occurred three years earlier.
  • Secured CFIUS safe harbor in connection with the sale of a leading SAP managed service provider to a Japanese buyer.
  • Advised a Chinese-owned and -controlled U.S. business in the mobile advertising business on all matters relating to its compliance with a CFIUS mitigation agreement.
  • Represented a U.S. company in the autonomous vehicle sector in connection with CFIUS outreach on a non-notified financing and demonstrated that the foreign investment was not subject to CFIUS jurisdiction.
  • Advised an international asset management firm specializing in the space and satellite technology sectors in response to a CFIUS request for a notice filing regarding a prior transaction.
  • Represented a subsidiary of a German investment company in the purchase of a U.S. researcher and manufacturer of coatings, adhesives and other compounds used in the plastics, oil and gas exploration, electrical, graphic arts, and liquid filtration industries.
  • Represented a leading global producer, designer and supplier of engineered aerospace components, systems and subsystems in connection with the mandatory notification to CFIUS of the sale of one of its U.S. divisions to a buyer headquartered in Ireland.
  • Counseled numerous clients on whether a mandatory CFIUS filing was required or a voluntary filing was recommended, including analysis of whether the target was a TID U.S. business for CFIUS purposes, and performed related due diligence.
  • Represented a leading U.S. private equity firm and its cleared portfolio companies in providing notice to DCSA in connection with numerous mergers, acquisitions and divestitures.
  • Represented a manufacturer of radio frequency and microwave technologies on security clearance matters before DCSA.
  • Counseled a client in the aerospace and defense industry on addressing FOCI mitigation.

Recognition

  • Chambers Global
    • International Trade: Customs (USA) (2017 to 2019, 2022)
    • International Trade: Export Controls & Economic Sanctions (USA) (2017 to 2020)
    • International Trade: Trade Remedies & Trade Policy (USA) (2017 to present)
  • Chambers USA
    • International Trade: Export Controls & Economic Sanctions: Highly Regarded (Band 1) (2022)
    • International Trade: Trade Remedies & Trade Policy (Nationwide) (2017 to present)
    • International Trade: Customs (Nationwide) (2021 to present)
  • The Legal 500 United States – Dispute Resolution: International Trade (2015 to present)
  • Latinvex Top International Law Firms in Latin America (2017 to present)
    • Trade and Sanctions (2021 to present)
  • U.S. News – Best Lawyers “Best Law Firms” International Trade and Finance Law –Washington, D.C. (2016 to present)