New proposed regulations on FDI could affect Louisiana

According to the office of the governor, Louisiana is one of only three states to attract over $100 billion in foreign direct investment (FDI) activity in the past decade. For that reason, Louisiana should be paying attention to new federal regulations on foreign investment. On September 24, 2019, the Department of Treasury proposed two sets of regulations to fully implement the provisions of the Foreign Risk Review Modernization Act (FIRRMA). Prior to the enactment of FIRRMA on August 13, 2018, the Defense Production Act of 1950 authorized the President, acting through the Committee on Foreign Investment in the United States (CFIUS), to review mergers, acquisitions, and takeovers which could result in foreign control of any U.S. business, to determine the effects of such transactions on the national security of the United States. FIRRMA maintains CFIUS’s jurisdiction over any transaction which could result in foreign control of a U.S. business, and broadens the authority of CFIUS to address national security concerns arising from other foreign non-controlling investments and real estate transactions.

Now, the jurisdiction of the CFIUS is expanded to include four additional types of transactions: (1) the purchase or lease by a foreign person of certain real estate in the United States; (2) non-controlling “other investments” that afford a foreign person an equity interest in and specified access to U.S. businesses involved in certain critical technologies, critical infrastructure, or sensitive personal data; (3) any change in a foreign person’s rights if such change could result in foreign control of a U.S. business or an other investment in certain U.S. businesses; and (4) any other transaction, transfer, agreement, or arrangement, the structure of which is designed or intended to evade or circumvent the jurisdiction of CFIUS.

If enacted as proposed, the effect could be significant. The regulations would define "other investments" in "critical infrastructure” to include not only military installations and rail lines designated as part of the DOD’s strategic rail corridor, but certain water facilities, interstate oil and natural gas pipelines, and the top 25 U.S. maritime ports by tonnage, container, or dry bulk. Additionally, other investment in “sensitive personal data” includes identifiable data held by a U.S. business that: (a) “targets or tailors its products or services to sensitive U.S. Government personnel or contractors, (b) “maintains or collects such data on greater than one million individuals” or (c) “has a demonstrated business objective to maintain or collect such data on greater than one million individuals and such data is an integrated part of the U.S. business’s primary products or services.” Sensitive personal data also includes all genetic information as defined by HIPAA regulation.

The U.S. Department of Treasury is looking for comments from stakeholders and the public on the proposed regulation. The comment period extends through October 23, 2019. Given Louisiana’s dependence on foreign investment, the regulations should be reviewed and commented on by Louisiana businesses and public agencies alike. For questions about the regulations or public comment process, contact Saul R. Newsome at info@newsome-law.com