The Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) recently submitted its annual report to Congress for calendar year 2010. The report, which provides general information on notices filed, reviews and investigations completed by CFIUS during the year, and the types of security arrangements and conditions that the Committee has employed to mitigate national security concerns, reveals that a larger number of reviews are proceeding to the investigation stage and that the Committee is increasingly conditioning its tacit approval of transactions upon the parties’ adoption and implementation of various mitigation measures.

Section 721 of Title VII of the Defense Production Act of 1950, as amended (“Section 721”), authorizes the President to suspend or prohibit transactions that could result in control of a U.S. business by a foreign person (“covered transactions”) if there is credible evidence to suggest that the foreign person might take action that threatens to impair U.S. national security. CFIUS is a multi-agency committee chaired by the Secretary of the Treasury that reviews and advises the President on such transactions. Section 721 authorizes the President to order the divestiture of any assets acquired through a covered transaction if the parties fail to notify CFIUS and obtain a termination letter (which effectively authorizes the transaction) from CFIUS beforehand. Parties therefore generally prefer to file a voluntary notice with CFIUS containing detailed information on the transaction and the parties involved prior to closing the transaction.

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