FIRRMA and National Security

Abstract

As a result of growing American insecurity related to Chinese investment, the U.S. Congress is again revising its foreign investment law, less than a dozen years after the last major overhaul. This brief article, prepared for the 2018 Annual General Conference of the European China Law Studies Association, will describe the history of U.S. foreign investment regulation and its chief regulator, the Committee on Foreign Investment in the U.S. The article then turns to the development of the recently proposed Foreign Investment Risk Review Modernization Act (FIRRMA), with particular focus on how FIRRMA is meant to respond to U.S. concerns about the rise of China as a technological power and, more specifically, about whether China is unfairly using investments in sensitive U.S. technologies to facilitate that rise. In previous versions of U.S. foreign investment regulations, Congress was careful to avoid what might have been perceived as discriminatory treatment of a particular country in its foreign investment laws. That is not the case with FIRRMA, which targets China in a variety of ways. Yet, there is significant uncertainty surrounding the final CFIUS rules enacting FIRRMA. This uncertainty is magnified by the Trump administration’s apparent willingness to evaluate foreign investment through a transactional lens, rather than relying on a stable policy view that would benefit both foreign acquirers and U.S. firms and reduce the risk that other countries will take a similarly transactional tack in response to U.S. policies.