As CFIUS Turns 45 Years Old, U.S. Regulation of Foreign Investment Is The Toughest Among Advanced Countries
The CFIUS was created in 1975 in response to the then growing investments by the members of Organization of Petroleum Exporting Countries (OPEC), which many US policymakers considered as potentially suspect.
Subsequently in 1988 the Exon-Florio Amendment to the Defense Production Act 1950 was passed amid concerns arising out of growing investments by Japanese firms, including a bid by Japanese computer juggernaut Fujitsu for the American Fairchild Semiconductor.
The Exon-Florio Amendment turned CFIUS into a powerful review body and gave the U.S president extensive authority to block foreign investments on grounds of "national security" without congressional approval or and judicial review. The definition of "national security" then did not include critical infrastructure.
Then in 2006, the Dubai based, state owned corporation Dubai World Port's bid for six ports in the U.S highlighted the need to protect critical infrastructure from being owned or controlled by foreign powers. The deal was approved by the Bush administration and CFIUS, but both the Republicans and Democrats were alarmed and objected to it on the grounds of increased risk of terrorist attacks with one Senator asking, "Should we be outsourcing our own security?" The deal was finally aborted and in the wake of this event the Foreign Investment and National Security Act of 2007 was passed giving the Congress greater oversight of CFIUS, required CFIUS to investigate all foreign investments by entities owned or controlled by foreign powers and extended the meaning of "national security" to include critical infrastructure.
In 2018, under the Trump administration the U.S policy makers became worried about the growing foreign investments in critical technology sectors. That led to Trump signing the Foreign Investment Risk Review Modernization Act 2018 (FIRRMA). This Act gave CFIUS significant new overarching statutory and regulatory powers over certain categories of FDI.
For a panoramic view of the development of CFIUS's powers from an insider's perspective please read the article in the shared link.
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