Financial Regulation News Reports on Kevin Wolf’s Testimony on CFIUS Operations Before House Subcommittee

Akin Gump international trade partner Kevin Wolf has testified before the House Financial Services Committee’s Subcommittee on Monetary Policy and Trade at a hearing titled “Examining the Operations of the Committee on Foreign Investment in the United States (CFIUS).” The hearing was called to examine CFIUS’s effectiveness, the challenges it faces in the current economic environment and any potential improvements that could be made.

Wolf, a former Assistant Secretary of Commerce for Export Administration, spoke about CFIUS as being complementary to the export control system. He said CFIUS “has the authority to control the transfer of technology of national security concerns, but only if there is a covered transaction, however defined.” The export control rules, he noted, “regulate the transfer of specific or general types of technology of national security, foreign policy, and other concerns regardless of whether there is a covered transaction.” Wolf said this means that, if there are concerns about specific or general types of technology, “then the export control system can and should control the technology to the specific destinations, end uses, and end users of concern.”

In his testimony, Wolf also discussed the difficulty of identifying, describing and deciding how or whether to control dual-use technologies, and he talked about the Export Administration Regulations.

In addition to the technology transfer aspects of CFIUS, Wolf detailed several other types of national security issues implicated by foreign direct investment, including those that:

• have co-location issues (for example, acquisitions next to military facilities)
• create espionage risks or cybersecurity vulnerabilities
• reveal personally identifying information of concern

In addition, Wolf spoke of the need to provide additional resources to the CFIUS staff for the sake of U.S. national security and so that the United States “remains known as a country that welcomes foreign direct investment with the minimum necessary and quickest possible safeharbor review burden.” He advised that any changes being considered to the operations of CFIUS should be sure to look at how U.S. allies “are controlling or considering controls over foreign direct investment into their respective countries.”

Wolf also suggested, as reported in Financial Regulation News, “if there is even a small expansion in the scope of CFIUS’s review authority, then some companies may be less willing to invest in the United States with the actual or perceived extra burden and time involved in closing a transaction, particularly if there is not a significant expansion in staff.” He further cautioned that more regulations “lead to more words, which leads to more analyses of those words in novel fact patterns, leading to more filings, more reviews, more mitigation agreements, and on and on.”