Foreign Investment Update and Outlook from the Gibson Dunn Public Policy Group

April 11, 2006

In the days after the Dubai Ports World deal failed, more than twenty different pieces of legislation were introduced in the Congress. In recent weeks, there have been a series of Committee hearings on these various legislative proposals that would affect foreign investment in the United States, including the interagency process by which such investments are overseen.

There are two main pieces of legislation that will bear watching in coming weeks and are likely to be enacted into law this summer. First, and moving most rapidly through the Congress, is legislation that would reform the government’s foreign investment review process. On March 24, Senator Richard Shelby (R.-Alabama) introduced legislation that would bring a number of reforms to the Committee on Foreign Investment in the United States (CFIUS), the inter-agency process, chaired by the Treasury Department, that examines foreign acquisitions in the United States for their national security implications. Shelby’s initial legislation was roundly criticized by the American business community, which feared that the legislation would impose extensive, time-consuming notification and reporting requirements on companies. In subsequent days, the Shelby bill was modified to take into account some of these business concerns, and on March 30 the bill was unanimously approved by the Senate banking Committee. When Congress returns in late April from its Easter recess, the full Senate will take up the bill. Further, it is expected that the House Financial Services Committee and also the House Homeland Security Committee will hold hearings on parallel legislation in late April. There continues to be serious concern in the business community about legislation that will unduly extend the CFIUS’ investigation timelines and also give Congress a greater role in foreign investment matters. Such legislation will not only impede foreign investment in the United States but also likely constrain American investment abroad as other countries adopt comparable legislation regarding foreign investment in their own countries.

In addition to reforming the CFIUS process, Congress this year is likely to enact new legislation aimed at heightening security at America’s ports. In the Senate, Homeland Security Committee Chair Susan Collins (R-Maine) and Patty Murray (D.-Wash.) have introduced the so-called Green Lane Bill, which is designed to enhance security at American ports by reforming the cargo screening process and by appropriating more funds for port security problems. The Senate has recently held hearings on this bill, and it is likely to be brought up for a vote in the Homeland Security Committee in late April. In the House, comparable legislation — the SAFE Port Act — was introduced in March by Representatives Dan Lungren (R.-Calif.) and Jane Harman (D.-Calif.) The House Homeland Security Committee then held hearings on this legislation, and on March 30 the House Homeland Security Subcommittee on Economic Security unanimously approved the SAFE Port Act. It is expected that both the Senate and House will approve this legislation later in the Spring and send it to the President for his signature.

While these two legislative proposals are moving on a fast track through Congress, many other pieces of port-related legislation have been or will be introduced in this session of Congress. Likely to be most worrisome for those interested in liberal investment and trade policy is legislation being sponsored by Representative Duncan Hunter (R.-Calif.), Chairman of the House Armed Services Committee. He is expected to convene wide-sweeping hearings on this legislation later this Spring and his protectionist legislation, if enacted, could seriously impair the ability of foreign companies to invest or operate in the United States.   

If you have any questions or would like further information, please contact one of the Public Policy Group practitioners:

Alan Platt, Washington, DC – 202.887.3660, [email protected]
Mel Levine, Century City – 310.557.8098, [email protected] 

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.