For foreign entities that need approval from the Committee on Foreign Investment in the United States (CFIUS) to pursue investments in the U.S., working with experienced legal counsel is essential. While CFIUS will approve transactions when approval is warranted, it will also err on the side of protecting national security issues when a transaction presents untenable national security implications or when the risks a transaction presents are unclear.
Similar to matters involving the Office of Foreign Assets Control (OFAC) and other cross-border matters, relatively few lawyers practice in the area of CFIUS compliance. As a result, when a foreign entity needs to go through the CFIUS process, its choice of legal counsel is extremely important.
“CFIUS compliance is a niche area within federal practice. For foreign entities needing CFIUS approval for investments in the United States, choosing the right lawyer to represent them is critical.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
From determining whether a transaction is subject to CFIUS’s review to preparing CFIUS notifications and shepherding transactions through the review process, there are several reasons why foreign entities pursuing foreign ownership in the U.S. need to engage experienced domestic counsel. Failing to comply with all pertinent laws and regulations or failing to secure CFIUS clearance for a pending transaction can prove extremely costly—and these are mistakes that generally can (and should) be avoided with an informed and strategic approach.
10 Key Considerations for Selecting a CFIUS Lawyer
With this in mind, how do you select a CFIUS lawyer? Here are some key considerations:
1. A Focus on Complex Federal Legal Matters
The first step is to identify law firms that focus their practice on representing clients in complex federal legal matters, including international trade. In the United States, most lawyers practice at the state level. State and federal matters are very different, and federal matters tend to be both more complex and more high-risk. So, while many lawyers who practice at the state level are very good at what they do, they simply don’t have the background or resources necessary to provide effective representation in federal matters.
While nearly all (if not all) of the big law firms headquartered in the United States have lawyers who practice at the federal level, boutique law firms also represent clients in federal matters. Boutique law firms have less overhead and generally provide representation at more competitive rates; in many cases, their lawyers come from big firm backgrounds and/or have prior experience working for the federal government.
2. A Practice that Includes CFIUS Compliance
Beyond choosing a lawyer who focuses his or her practice on handling complex federal legal matters, you will want to choose a lawyer whose practice specifically includes representing clients regarding CFIUS compliance and mitigation agreements. Even within the federal sphere, managing CFIUS compliance is unique in many respects. A lawyer who has experience advising clients in this area will be able to provide you with immediate insights, whereas a lawyer who doesn’t routinely handle CFIUS compliance matters will need time to research the relevant laws, regulations, and Executive Orders.
Due to the unique nature of CFIUS representation, the subset of lawyers who practice in this area is extremely small. But, among those who routinely handle CFIUS-related matters, you will typically find that they are extremely well-versed in the relevant legal principles and attuned to the practical considerations involved in being subject to the Committee’s oversight.
3. Experience Managing the CFIUS Review Process
Typically, foreign entities will first encounter CFIUS when seeking to invest in businesses or real estate assets located in the United States. This foreign direct investment is subject to CFIUS’s review in many cases, and CFIUS has the authority to block proposed foreign investments that present threats to U.S. national security.
Due to the stakes involved in undergoing a CFIUS review, engaging experienced counsel to manage the review process is extremely important. A lawyer who has experience successfully guiding transactions through the review process will be able to help you take proactive steps to ensure that the process goes as smoothly and favorably as possible. While there are no guarantees, engaging a lawyer with a good working relationship with CFIUS and an in-depth understanding of CFIUS’s approval factors can significantly improve your chances of obtaining CFIUS clearance.
4. Prior Federal Government Experience
In addition to considering a lawyer’s experience handling CFIUS matters in the private sector, it is worth considering the lawyer’s prior experience as well. For example, if a lawyer came to private practice after several years (or decades) of working for the federal government, he or she may have an even greater understanding of the federal review and approval processes than a lawyer who has spent his or her entire career in the private sector.
CFIUS is composed of federal attorneys and other personnel from several federal agencies. These include the U.S. Department of Treasury, U.S. Department of State, U.S. Department of Justice, and U.S. Department of Homeland Security, among others. Lawyers with backgrounds working at these agencies may be particularly well-attuned to the complexities and nuances of CFIUS compliance.
5. A Team of Senior-Level Lawyers and Consultants
Successfully managing CFIUS compliance and navigating the CFIUS review process requires more than just a lawyer. In most cases, it requires a team of lawyers and consultants who can all lend their respective knowledge and insights to protect the client’s legal and financial interests. As a result, when selecting a CFIUS lawyer, it is important to learn about the rest of the firm’s personnel as well.
Some law firms employ numerous junior associates. While this helps ensure that the next generation of lawyers will be prepared to advise and represent their clients effectively, when dealing with highly complex and high-stakes matters such as CFIUS reviews, you are typically going to want a highly experienced team on your side. As a result, a firm composed entirely of senior-level lawyers and consultants may be the most prudent choice when you need experienced counsel to help you manage CFIUS compliance or secure CFIUS’s approval for a pending transaction.
6. A Nationwide Practice and Global Capabilities
When engaging counsel in the U.S. to shepherd a cross-border transaction through the CFIUS review process, choosing a lawyer at a firm with a nationwide practice and global capabilities is important. Depending on the nature of the transaction, it may be necessary for your company’s counsel to visit the target’s facility or the real estate your company is planning to acquire in person. Regardless, you will need your legal team to be available not only when CFIUS’s personnel are in the office, but when you are in the office as well. Communication, scheduling, and coordination can prove challenging when cross-border transactions traverse the globe. But, if the law firm you engage routinely handles these types of matters, then none of these should be an issue.
7. A Reputation for Handling Complex and High-Risk Matters at the Federal Level
You will want to choose a lawyer (and law firm) with a reputation for handling complex and high-risk matters at government agencies. Publications, media interviews, and quotes in relevant articles can all shed light on a lawyer’s reputation within and outside the legal community. While your lawyer doesn’t necessarily need to be a celebrity, choosing a lawyer with a strong reputation can help to position your company for a favorable result.
8. Testimonials From Clients with Similar Matters
Testimonials from clients who have entrusted similar legal matters to the lawyer or law firm you choose can also help give you confidence in your decision-making. Under U.S. law and the rules enforced by the U.S. Federal Trade Commission (FTC), testimonials published online must be from real clients, they must accurately reflect clients’ sentiments, and they may not be cherry-picked to exclude unfavorable reviews. While not all law firms publish testimonials on their websites, if you find one that does, reviewing the firm’s testimonials will generally be worthwhile.
9. Referrals from Clients and Colleagues on the Bar
Along with testimonials, referrals from clients and the lawyer’s colleagues on the bar can help give you confidence in your decision-making. If a client recommends the CFIUS team based on their personal experience, or if another lawyer refers his or her clients when they need experienced legal representation for complex federal matters, this will usually be a good sign. With that said, every engagement is unique, and past results do not guarantee obtaining CFIUS approval.
10. Accessibility and the Ability to Get Started Immediately
Finally, when choosing a lawyer for any matter, it is important to ensure you can get in touch when needed. It is also important to ensure the lawyer can get to work immediately. When you need to go through the CFIUS review process before finalizing a substantial investment in the United States, you do not want to experience delays because of your choice of legal counsel.
