US Deprives Terrorism of the Freedom to Merge and Acquire
The US House of Representatives has passed a bill entitled "National Security Foreign Investment Reform and Strengthened Transparency Act of 2007," which toughens the rules governing access by foreign investors to the US mergers and acquisitions market. However, unlike in Russia, the newly empowered Committee on Foreign Investment in the United States (CFIUS) still has not been endowed with the right to forbid such deals.
On Wednesday the US House of Representatives passed a resolution strengthening government control over foreign investment in the American economy and requiring the US director of national intelligence to investigate and analyze any deal involving foreign capital. The document, H.R. 556, was approved unanimously by all 423 representatives.
H.R. 556 imposes special controls on all investment deals that could result in American companies, particularly those in "strategic sectors of the economy," passing into the hands of foreign governments or their agents. The legislation places particular emphasis on investigations of investors representing governments that "comply with any boycott of Israel or…which do not ban foreign terrorist organizations." The law is primarily aimed at closer control over possible ties between Middle-Eastern companies in the M&A market and Arab investment and charity funds that are flagged as financers of international terrorism. The activities of such companies could be illegal under US law if those companies are discovered to have dealt with sponsors of terrorism.
United States Director of National Intelligence Mike McConnell has been personally charged with the task of analyzing national security threats that could be posed by deals involving foreign capital. He will be assisted by the Director of the Office of Foreign Assets Control within the Department of the Treasury and the Director of the Financial Crimes Enforcement Network, and he is also directed to solicit the opinions of the appropriate intelligence agencies.
The legislation approved by the House significantly increases the power residing with the Committee on Foreign Investment in the United States (CFIUS), which will now be a multi-statutory agency that reports directly to the US president. The new status of CFIUS is close to the Russia federal committee that oversees foreign investments in strategic sectors of the Russian economy. The 14 members of the committee will include the heads or the designated representatives of agencies such as the Department of Defense; the State Department; the Treasury; the Department of Homeland Security; the Justice, Commerce, and Energy Departments; the Attorney General; and several presidential advisors on economics and security. The committee is slated to receive $40 million in funding from the federal budget for 2008-2011.
A key difference, however, is that CFIUS, like the American intelligence agencies and unlike its Russian counterpart, will not have the authority to approve or reject deals autonomously. If the committee fails to approve a deal, the government may undertake an analysis of the deal's circumstances, while approval will mean that there is no need for further study. Any further questions concerning the legality of individual details of the deal will fall to law-enforcement agencies and then to the courts: the US government does not reserve for itself the right to impose an outright ban on any deal.
The legislation has its origins in last year's attempt by an operator from the company Dubai Port World (DPW) to acquire six American ports. At first, CFIUS approved the deal, which provoked a storm of outrage in Congress, and the members of CFIUS who had green-lighted the acquisition were accused of ignoring the interests of national security. After the deal with DPW was effectively blocked in March 2006 by an announcement from a key committee in the House of Representatives, which stated that an official investigation of the deal might be commissioned, the state-owned Arab Emirates company decided to take its business elsewhere.
Legislation to increase government control over foreign investors was drafted in the Senate last year, but the business community took umbrage with the requirement that CFIUS inform Congress about deals under review without making any final recommendations on them. According to the new version of the legislation, CFIUS is obliged to inform Congress about deals involving foreign investors only after a thorough study of the potential deal has been completed. In addition, the legislation proposes to increase the committee's review period from 30 to 45 days, although the White House, which otherwise fully supports the bill, has expressed concern that the larger time period may scare off potential investors.
Before H.R. 556 can become law, it must still pass through the Senate. Kommersant will continue to keep an eye on further developments.
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Foreign Investors Sent Back to the Ministers
Yesterday was the deadline by which legislation "Concerning Foreign Investments in Russia in Commercial Organizations with Strategic Importance for Russia's National Security" was due to be reworked to incorporate changes proposed by Prime Minister Mikhail Fradkov.
On the final day of the designated period, Russian Union of Industrialists and Entrepreneurs head Alexander Shokhin announced that the legislation meets the requirements of the federal agencies involved and that it will probably be sent to the State Duma within the next few days. "The amendments that the Ministry of Industry and Energy was charged with including were trifling, and they were already agreed upon several weeks ago," said Mr. Shokhin, adding that the Duma may take up the question of the legislation in its spring session. The ministry, however, said that the legislation is still in the approval process and that the question of when the document will be introduced in the Duma has not been discussed at all. The legislation was approved by the cabinet on January 31, but the prime minister requested that several changes be introduced in the text and gave the Ministry of Industry and Energy a month to incorporate the amendments. On February 3, Industry and Energy Minister Viktor Khristenko sent the amended document to the Ministry of Trade and Economic Development, the Natural Resources Ministry, and the FSB with a request to approve the new text within ten days. The Natural Resources Ministry told Kommersant that it has no complaints about the document, while the other agencies had difficulty clarifying what stage the approval of the document was at.
Natalia Portyakova and Dmitry Butrin
All the Article in Russian as of Mar. 02, 2007
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