CFIUS Mitigation Agreements: What You Need to Know
The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee that reviews foreign investments in the U.S. in order to identify and mitigate potential national security risks. If CFIUS determines that a transaction poses a risk, it may require the parties to negotiate a mitigation agreement that addresses those risks.
What is a CFIUS mitigation agreement?
A CFIUS mitigation agreement is a legally binding contract between the parties to a transaction that outlines the steps they will take to mitigate any potential national security risks identified by CFIUS. These agreements are typically negotiated between the parties and CFIUS, with the guidance of the Department of Justice and other regulatory agencies.
What do CFIUS mitigation agreements cover?
CFIUS mitigation agreements can cover a wide range of issues, depending on the nature of the transaction and the risks identified by CFIUS. Some common topics that may be addressed in a mitigation agreement include:
– Governance and control: CFIUS may require the foreign investor to limit its influence over the U.S. business, such as by agreeing to limit its ownership stake or appointing U.S. citizens to key positions.
– Security measures: CFIUS may require the parties to implement additional security protocols to safeguard sensitive information or technology.
– Reporting requirements: CFIUS may require the parties to report certain transactions or activities to the government, such as changes in ownership or transfers of technology.
– Divestitures: In some cases, CFIUS may require the parties to divest certain assets or business lines in order to address national security concerns.
Why are CFIUS mitigation agreements important?
CFIUS mitigation agreements are an important tool for protecting national security while still allowing foreign investment in the U.S. economy. By identifying and addressing potential risks up front, these agreements help ensure that foreign investment does not compromise sensitive technologies or other critical infrastructure.
For companies considering foreign investment, understanding the CFIUS process and the potential for mitigation agreements is critical. Working with experienced legal and regulatory advisors can help ensure that the parties are able to navigate the process and negotiate favorable terms.