Highlights from Recent CFIUS Annual Report

Key Takeaways 

• The U.S. Treasury Department recently published the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) Annual Report to Congress on key activities, including notices, declarations, and withdrawals through 2021 (“Annual Report”). The Annual Report holds important insights for dealmakers contemplating non-U.S. investments in U.S. businesses.
• Record Year for CFIUS: 2021 was the Committee’s most active year to date; there were a record 436 filings (both declarations and notices) presented to the Committee for review. This data reflects both the expansion of the Committee’s jurisdiction in recent years and a surge in global M&A to record levels in 2021.
• Chinese Investments Reviewed by Committee Double: 2021 may mark the return of Chinese investors. Prior to 2021, Chinese investments notified to the Committee were on a ten-year decline. However, the Annual Report shows that Chinese investors submitted 44 notices to the Committee for review, which is over a dozen more than the country with the second highest number of notices submitted for review (Canada). This may signal an increased openness from both Chinese investors and the Committee to negotiating mitigation agreements to resolve potential national security risks.
• Declarations Appropriate for Certain Transactions: 2021 also saw an increase in short-form declarations submitted to the Committee for review (164 in 2021 versus 126 in 2020). A greater portion of these declarations (75% versus 64%) also resulted in clearance, suggesting that CFIUS and the market are finding greater alignment on transactions appropriate for short form filings.
• Continued Use of Mitigation Agreements: The Annual Report data identifies a greater number of mitigation agreements – CFIUS adopted mitigation measures with respect to 31 notices in 2021, up from mitigation measures being imposed with respect to 23 notices in 2020 – although on a percentage basis there was little change. 74 notices were withdrawn from CFIUS review in 2021 as compared to 29 notices withdrawn from CFIUS review in 2020. At the same time, most of these notices were refiled (64 of 74), suggesting that a meaningful percentage of the withdrawn notices were withdrawn and refiled in connection with negotiation of mitigation agreements necessary to achieve clearance.
• Use of New Authorities: CFIUS utilized its authority to extend an investigation by 15 days in “extraordinary circumstances” for the first time in 2021, doing so three times.
• Nine Transactions Abandoned: While the President did not issue any blocking decisions in 2021, in nine instances, parties withdrew their CFIUS filings and abandoned transactions after the Committee informed the parties that it was unable to identify national security measures that would resolve national security concerns or in circumstances where the Committee identified mitigation measures that parties elected not to accept.
• Below, we identify six highlights from the most recent Annual Report. To revisit our OnPoint that covers the 2020 Annual Report, please find it here. You can also find our recent OnPoint on CFIUS recent trends and developments here.
  

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