Authored by Manny Schoenhuber

TRADE & INVESTMENT

President Biden Signs Executive Order to Ensure Robust Reviews of Evolving National Security Risks by the Committee on Foreign Investment in the United States (CFIUS)

On September 15, the Biden administration published a first-ever presidential directive defining additional national security factors for CFIUS to consider in evaluating transaction. Pursuant to the White House briefing on the directive, the U.S. has long recognized that certain investments in the United States from foreign persons, particularly those from competitor or adversarial nations, can present risks to U.S. national security. It is the CFIUS’s charter to implement a robust foreign investment review process to identify and address such risks. The Executive Order now provides formal Presidential direction on the risks that the Committee should consider when reviewing a covered transaction, and seeks to support the Biden administration’s overall national security priorities, such as preserving U.S. technological leadership, protecting Americans’ sensitive data, and enhancing U.S. supply chain resilience.

Five Factors

The Executive Order directs CFIUS to consider five specific factors:

	1) Resilience of critical U.S. supply chains that may have national security implications In addition to the Committee’s traditional focus on the continuity of supply chains that support the military/defense industrial base, this factor now requires consideration of other sectors, such as manufacturing capabilities, services, critical mineral resources, or technologies. The directive specifically calls for diversification into suppliers located in allied or partner countries—such as Europe.
	2) U.S. technological leadership in areas affecting U.S. national security The Order identifies sectors that are fundamental to U.S. technological leadership and therefore national security, including but not limited to microelectronics, AI, biotechnology and biomanufacturing, quantum computing, advanced clean energy, climate adaptation technologies, and elements of the agricultural industrial base that have implications for food security. The Committee should strongly scrutinize whether a transaction involves manufacturing capabilities, services, critical mineral resources, or technologies in such fields and if it may pose a threat to U.S. national security.
	3) Industry investment trends that may impact national security Because there may be a threat associated with a foreign company acquiring multiple firms within a specific sector, the Committee should consider, as appropriate, the risks arising from a transaction in the context of multiple acquisitions or investments in a single sector or in related sectors.
	4) Cybersecurity risks that threaten to impair national security The Executive Order states that the Committee should consider whether a transaction may provide a foreign person, or their relevant third-party ties, with access to conduct cyber intrusions or other malicious cyber-enabled activity.
	5) Risks to U.S. persons’ sensitive data The Committee should consider whether a transaction involves a U.S. business with access to U.S. persons’ sensitive data, and whether the foreign investor has, or the parties to whom the foreign investor has ties, have sought or have the ability to exploit such information to the detriment of national security.

In short, foreign investors from Europe and elsewhere should continue to expect heightened scrutiny for transactions involving U.S. businesses crucial to the domestic supply chains or operating in critical technologies. Notably, this Executive Order does not change CFIUS processes or legal jurisdiction, and should be read in conjunction with the national security factors already set out in the CFIUS statute.

In the words of the White House, the Executive Order focuses on “both strengthening domestic investments and competitiveness at home and in partnership with our allies, while using all available tools to protect America’s edge and prevent our competitors and adversaries from undermining our national security.”

That’s it for now. ♦

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