Gone with the Wind II: The Ralls Decision and Lessons for Foreign Investors

Abstract

A recent decision of the US District Court for the District of Columbia (District Court) merits consideration by both foreign investors and the US national security community. The case involved a dispute between a foreign investor, Ralls Corporation (Ralls), and the US Government. In July 2012, the Committee on Foreign Investment in the United States (CFIUS) found that Ralls' acquisition of several windfarm projects located near a US Naval facility in Oregon posed a national security risk to the United States. As we discussed at length in a prior article in this Journal, the President then issued an historic order-just the second of its kind-mandating the unwinding of a completed transaction pursuant to a national security review. Ralls then took CFIUS and the President to court, marking the first time an aggrieved foreign investor had done so. After an initial hearing, in February 2013 the District Court dismissed all but one of Ralls' claims, granting an additional hearing only to determine whether Ralls' due process claim merited further consideration. On October 9, 2013, the District Court rejected Ralls' due process argument as well, finding national security interests outweighed Ralls' interest in learning the specific grounds for President Obama's divestment order. For prospective foreign investors, this ruling offers an important lesson, underscoring the importance of seeking prior approval from CFIUS before entering into a "covered transaction."