Business praises proposed foreign investment rules

On Monday the Department of the Treasury e-mailed the first details of regulations to govern how the government oversees foreign purchases of sensitive U.S. assets. Industry and business groups worried that the proposed rules included in the ninety-page proposal would make life difficult for foreign investors who have been pouring billions of dollars into the U.S. economy in recent months, but Politico’s Eamon Javers writes that these groups were pleasantly surprised. The lawyers and lobbyists working for the business community had come to a consensus that the regulations would be a terrific deal for corporate America. By noon on Monday, four business groups circulated an e-mail praising the proposed Treasury’s regulations. The groups — the Business Roundtable, the Financial Services Forum, the Organization for International Investment, and the U.S. Chamber of Commerce — said the regulations would provide much-needed certainty for investors. The groups also noted that foreign direct investment in the United States supports more than five million jobs with an annual payroll of $335.9 billion. They said keeping that pipeline of foreign capital flowing is crucial. “At a time when the U.S. economy is slowing, encouraging investment in America is more important than ever,” said Taylor Griffin, senior vice president for communications at the Financial Services Forum.

The proposed regulations follow in the wake of congressional passage of the Foreign Investment and National Security Act of 2007, which tightened federal scrutiny of overseas investments. That new law, which tightens scrutiny of foreign companies buying U.S. critical infrastructure assets, was the result of the firestorm two years ago which greeted the sale of management operations in major U.S. sea ports to Dubai Ports World, a UAE-based company. The regulations define exactly how that new law will be implemented and spell out which deals will come under scrutiny of the Committee on Foreign Investment in the United States (CFIUS), the interagency body that oversees the transactions. A forty-five-day public comment period began Wednesday, when the proposed regulations were published in the Federal Register. After that, the rules will be finalized. “What we tried to do is create regulations based on last year’s statute that reflect a strong and continuing commitment by the U.S. government to maintain an open investment climate as well as to safeguard national security,” said Clay Lowery, assistant Treasury secretary for international affairs. “And we think we accomplished that.”

Wall Street has been particularly focused on two key issues: how the regulations would define “control” of the entity being purchased and how they would define “critical infrastructure,” the purchase of which would come under government review. Javers writes that on the control issue, Treasury re-emphasized that even those deals in which a foreign entity takes less than a 10 percent stake in the U.S. asset can be reviewed by CFIUS. On the critical infrastructure issue, Treasury drew a fairly narrow definition, specifying that sales of only those assets the “incapacity or destruction” of which would have a debilitating effect on national security would be reviewable by the committee. “The critical infrastructure definition is plain vanilla,” said Christopher Wall, a partner in the law firm Pillsbury Winthrop Shaw Pittman who specializes in advising clients on the CFIUS process. “This should send a positive signal to companies investing in the area.”