Invoking national security, US tightens rules on sensitive foreign investments

Washington – Tighter new rules governing sensitive foreign investments will take effect in a month, US officials said Monday, broadening the president’s ability to review and block transactions that could threaten national security.

The new rules enforce reforms Congress enacted in 2018 amid heightened concern about Chinese economic espionage, although officials said the measures do not target any one country.

The new rules broaden the authority of a federal interagency panel – the Committee on Foreign Investment in the United States, or CFIUS – which was created in the 1970s to prevent US adversaries from gaining access to sensitive technologies, critical infrastructure or military installations.

In a statement, Treasury Secretary Steven Mnuchin said the new regulations modernized the process for reviewing such investments while still encouraging foreign investment in “American businesses and workers.”

Among the changes, CFIUS will now have the power to review investments – even if they do not involve the sale of a controlling stake in a target company – when they involve crucial technologies and infrastructure or sensitive personal data.

According to media reports, CFIUS has recently reportedly opened a national security review of the Chinese-owned video app TikTok and required the Chinese gaming company Beijing Kunlun Tech to sell the gay dating app Grindr.

After publishing draft regulations in September, US officials modified the final rules to clarify some definitions and rules, including the way rules apply to investment funds and the geographic areas near military installations covered by the rules.

Three allied countries, Australia, Canada and Britain, enjoy a special status as “excepted foreign states,” meaning the rules’ application to them is limited. The list of such countries may be expanded in the future, according to the US Treasury.