On December 22, 2008, new regulations setting forth the U.S. government’s national security review process for foreign mergers and acquisitions of U.S. businesses became effective. They are the ultimate step in a lengthy effort to revise and strengthen the reviews undertaken by the Committee on Foreign Investment in the United States (“CFIUS”).

CFIUS administers the so-called Exon-Florio statute, which provides the U.S. President with the authority to review mergers, acquisitions and takeovers (“M&As”) that may result in foreign control over a U.S. person or entity engaged in interstate commerce in the United States. (Greenfield investments are not subject to CFIUS review.) For M&As that threaten to impair U.S. national security in a manner that cannot be mitigated or that is not, in the President’s judgment, otherwise addressable through other U.S. laws, the President can suspend or prohibit such foreign investments — a decision not subject to any judicial review.

The Exon-Florio statute itself, and CFIUS as the statute’s administering body, came under political attack in the wake of the 2006 Dubai Ports World debacle. Some in the U.S. Congress sought to tighten drastically the legal regime for foreign investment in the United States. Fortunately, through the leadership of certain key members of Congress, the administration and the business community, the debate shifted to improving the review process in a manner that protects national security while preserving the openness of the U.S. to foreign investment. The end result was the Foreign Investment and National Security Act of 2007, which thoughtfully enhanced Exon-Florio and the CFIUS process. The Treasury Department, working with the other CFIUS agencies, has now issued final regulations implementing the Act.