CFIUS Review Requires Due Process
- The U.S. Court of Appeals for the D.C. Circuit recently held in the Ralls Corporation case that, in certain situations, the Committee on Foreign Investment in the United States (“CFIUS”) is required to afford due process to persons submitting notices for CFIUS review, which submittal is required of acquisitions of U.S. businesses by a foreign person where there are potential national security concerns, after the closing of a transaction.
- The direct effect of the holding in Ralls is not clear, at least for most transactions notified to CFIUS. First, unlike in the instant case, transactions generally are notified to CFIUS before closing, where the parties’ property interests are contingent and, under the Court of Appeals’ analysis, due process considerations may not apply. Second, new opportunities to be provided with due process by the government may not be that significant for the vast majority of CFIUS reviews, which result in CFIUS's clearing the transactions without substantial controversy.
- Nevertheless, the Ralls decision might encourage greater transparency and potential give-and-take with respect to enabling parties to address the government’s potential concerns that foreign control of a business could raise national security concerns. The decision may also have significance to the larger field of property and investor rights, as well as constitutional, statutory and bilateral investment treaty protections for those rights.