Last week, the U.S. Senate overwhelmingly passed the 2019 National Defense Authorization Act, H.R. 5515 (NDAA). The Senate version contains several differences from the NDAA as passed by the House, and these discrepancies must now be resolved through a joint conference committee. Notably, the Senate attached to the NDAA its proposed Foreign Investment Risk Review Modernization Act (FIRRMA), which would update and alter the CFIUS review process. The House had not attached its CFIUS reform bill, H.R. 5841, but recently passed this bill as a standalone piece of legislation.

While there are also commonalities, important differences between the Senate and House proposed CFIUS reform legislation are described below.

• Non-Passive Investments
  
  
  • The House bill does not add certain non-passive investments to the definition of a “covered transaction” but rather keeps the focus on acquiring “control” of a U.S. business
  • The Senate version would expand CFIUS jurisdiction to include any investment, other than a passive investment in a U.S. critical technology or critical infrastructure company. Notably, non-passive investments would include transactions where a foreign person obtains access to material nonpublic technical information or a Board observer seat, among other things.
  • There are several exemptions for certain non-passive investments, such as:
    
    
    • Transactions involving certain countries as to be defined via CFIUS regulations (e.g., NATO members or allies); and
    • Investment funds where the fund is managed by a U.S. general partner and any foreign limited partners do not have the ability to control the fund, including the ability to approve or disapprove investment decisions or unilaterally dismiss or prevent the dismissal of the general partner.
• CFIUS Review Period
  
  
  • The Senate version increases the length of the CFIUS review period from 30 days to 45 days, and allows for one 30-day extension to the current 45-day investigation period.
  • The House version retains the current structure (30-day review + 45-day investigation), though would allow for only one 15-day extension of an investigation period.
• Declarations
  
  
  • The Senate version creates a streamlined voluntary declaration process for most transactions, with mandatory declarations for certain other transactions, such as those involving significant foreign government interests.
  • The House version has a similar declaration framework, though it is entirely within CFIUS’ discretion whether to implement corresponding regulations.
• Judicial Review
  
  
  • The Senate version expressly creates an avenue for judicial review of a CFIUS finding or action through a civil claim in the U.S. Court of Appeals for the D.C. Circuit.
  • The House version does not contain an express avenue for judicial review of CFIUS determinations.
• Fees
  
  
  • The Senate version allows for filings fees, as well as an additional “prioritization fee” to move the filing up in the CFIUS queue.
  • The House version does not create a fee structure for CFIUS filings.

As evidenced by the above, the Senate changes currently attached to the NDAA would more dramatically alter the CFIUS process. However, it remains to be seen whether the NDAA will be adopted in full by the House once in conference. Reports indicate Congress is hoping to resolve discrepancies between the House and Senate versions by the end of July, setting up a subsequent vote with significant implications on the CFIUS reform effort.