An Eight-Part Introduction to the Foreign Investment Risk Review Modernization Act

Part 3: Country Specific Exceptions


by the Fluet International Trade & Transactions team
Contact one of our professionals here


Last week, in anticipation of The Foreign Investment Risk Review Modernization Act’s (FIRRMA) impending passage, we provided a comprehensive overview of the manner in which FIRRMA expands the Committee on Foreign Investment in the United States’ (CFIUS) jurisdiction, and the five new types of acquisition/investment that will be considered “covered transactions” under the legislation. 

This week, we will focus on a critical exception to that expansion. 

As noted last week, FIRRMA addresses two national security vulnerabilities by expanding CFIUS’ jurisdiction to (a) certain purchases/leases of real estate, and (b) investments in/acquisitions of “critical technology companies” and “critical infrastructure companies.” 

This modification will not only lead to significantly more “covered transactions” each year but will also result in reviews of investments/acquisitions by entities domiciled in ally nations that would not have been scrutinized previously.  Accordingly, FIRRMA stipulates that real estate, critical technology, and critical infrastructure investments/acquisitions that would otherwise require CFIUS review shall be not be considered “covered transactions” where “each foreign person that is a party to the transaction, and each foreign person with ownership or control over a party to the transaction” is from a country that satisfies certain key criteria. 

While FIRRMA does not explicitly identify those criteria, it does provide four examples for CFIUS’ consideration:

     1. whether, in the sole judgment of the Committee, the process of the country for reviewing the national security effects of foreign investment and associated international cooperation effectively safeguards national security interests the country shares with the United States;

     2. whether the country is a member country of the North Atlantic Treaty Organization or is designated as a major non-NATO ally pursuant to section 517 of the Foreign Assistance Act of 1961 (22 U.S.C. 2321k);

     3. whether the country adheres to nonproliferation control regimes, including treaties and multilateral supply guidelines, which shall be informed by sources such as the annual report on ‘Adherence to and Compliance with Arms Control, Nonproliferation and Disarmament Agreements and Commitments’ required by section 403 of the Arms Control and Disarmament Act (22 U.S.C. 2593a); and

     4. whether excluding transactions by foreign persons from the country advances the national security objectives of the United States.

Presumably, FIRRMA imposed this country-specific exception to manage CFIUS’ caseload, which will grow significantly as a result of its expanded jurisdiction, and/or to preserve the U.S. Government’s relationships with key strategic allies whose business entities may, as a result of this expanded jurisdiction, be subjected to CFIUS’ scrutiny for the first time. 

Either way, foreign persons investing in, or acquiring, U.S. real estate, critical technology companies, and critical infrastructure companies should carefully assess the finalized list of excepted countries in the updated CFIUS regulations so as to determine their regulatory exposure.


Be sure to check back in with us next week as we examine the manner in which FIRRMA limits the breadth of the existing exception for “passive investments” by foreign persons.


Up Next: We will examine the manner in which FIRRMA limits the breadth of the existing exception for “passive investments” by foreign persons.

About the Authors

Jennifer Huber and Adam Munitz are Partners in Fluet’s International Trade + Transactions Practice.  Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam position U.S. businesses for overseas growth and help foreign investors/acquirers and U.S. sellers navigate the CFIUS review process.

Fluet Of Counsel Mary Beth Long is the first-ever Senate confirmed female Assistant Secretary of Defense and worked directly with Secretaries of Defense Rumsfeld and Gates on the Department’s highest priority issues. As the Defense Secretary’s principle advisor on the Middle East, Europe and Africa, including Iraq and Afghanistan, Ms. Long represented the Department of Defense at the National Security Council, the White House, and with foreign Ministers of Defense. She has expertise in export compliance, regulatory regimes, and securities regulations.

Additional information regarding the Fluet International Trade + Transactions Practice and previous representations can be found here.