Gone with the Wind III: Ralls’ Historic Appeal and Lessons for Foreign Investors

Abstract

An unexpected July 2014 decision of the U.S. Court of Appeals for the District of Columbia Circuit pertaining to the Committee on Foreign Investment in the United States (CFIUS) merits consideration by both foreign investors and the U.S. national security community. Reversing a decision of the District Court below, the Circuit Court found that CFIUS and the President denied Ralls Corporation (Ralls), a foreign investor, its constitutionally protected due process rights in connection with requiring Ralls to divest acquired property on national security grounds. The case centered on a July 2012 finding by CFIUS that Ralls' acquisition of several windfarm projects located near a U.S. Naval facility in Oregon posed a national security risk to the United States. The President then issued an historic order-just the second of its kind-mandating the unwinding of the completed transaction pursuant to a national security review. Ralls then took CFIUS and the President to court, arguing CFIUS and the President denied its due process. Between two hearings in February and October 2013, the District Court dismissed all of Ralls' claims, finding national security interests outweighed Ralls' interest in learning the specific grounds for the President's divestment order. In the recent decision, the Circuit Court reversed and remanded to the District Court, finding CFIUS and the President failed to give constitutional due process to Ralls. The Circuit Court also ruled that CFIUS must share all unclassified information on which it relied and provide Ralls an opportunity to rebut. As we explore below, the Circuit Court's decision could impact the CFIUS review process and considerations for foreign investors. Even if the decision ultimately does not stand, as we have discussed at length in companion articles, the Ralls case underscores the importance for potential foreign investors in the United States to carefully consider CFIUS issues early in the investment process.