The U.S.’s new export restrictions over certain biological equipment software could have a major impact on life science companies, universities and research organizations, and could present significant foreign investment screening hurdles, law firms said. While the restrictions were issued multilaterally and will only seek to stop certain software exports that can be exploited for biological weapons purposes, firms warned that the new restrictions could still be difficult to manage.
Brian Egan joined Skadden Arps as a partner in its Council on Foreign Investment in the U.S., National Security and International Trade Group, the firm announced. Egan, who joins the firm from Steptoe & Johnson, formerly served as the senior-most lawyer at the State Department and the White House's National Security Council. At Skadden, Egan will advise on “all aspects of export controls,” and will counsel clients on CFIUS reviews and foreign investment matters, the firm said.
Jonathan Wakely was promoted to partner in Covington & Burling's practice on foreign investment and national security issues, with a focus on transactions before the Committee on Foreign Investment in the U.S., the firm said. Wakely regularly represents clients before CFIUS and other national security-related matters, the firm said.
The Committee on Foreign Investment in the U.S. needs significant revisions to fix its unbalanced, secretive reviews, which fail to hold member agencies accountable and are damaging the U.S. investment atmosphere, said Stephen Heifetz, a former CFIUS official. Heifetz said CFIUS may be unnecessarily driving away foreign investment with the threat of national security reviews, which can take more than a year to resolve and sometimes don’t provide reasonable justifications to the parties involved.
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The Biden administration plans to revisit its phase one trade deal with China and will continue closely scrutinizing Chinese investments that seek to acquire sensitive U.S. technologies, senior officials said this week. The officials, speaking about the U.S.’s monthslong review of its China trade relationship, said China hasn’t met its phase one purchase commitments and stressed that all of its trade tools “are on the table” as they look to enforce the deal.
While too early to declare a success, the U.S.-European Union Trade and Technology Council has set both sides on a path toward tangible progress on more export controls and investment screening collaboration, experts said. During the inaugural TTC meeting last week, the U.S. and EU agreed to develop “convergent” export controls and share more information to catch malign foreign investments (see 2109290083), which could result in meaningful changes within the next year, the experts said.
Although the Committee on Foreign Investment in the U.S. allowed Magnachip Semiconductor Corp. to refile its proposed acquisition by Beijing-based Wise Road Capital (see 2109160037), the deal seems highly unlikely to pass CFIUS scrutiny, trade lawyers said. Finding pathways to mitigate the national security risks identified by CFIUS will be extremely challenging, they said, particularly as the U.S. increases its focus on stopping China from acquiring advanced semiconductor equipment.
The Committee on Foreign Investment in the U.S. granted a request from Magnachip Semiconductor Corp. and Wise Road Capital to withdraw and resubmit their initial CFIUS filing, Magnachip said in a Sept. 14 filing with the Securities and Exchange Commission. This will allow the two companies more time for “further discussion” with CFIUS about potential pathways to mitigate the national security risks CFIUS had identified in the merger. CFIUS’s new review period for the merger began Sept. 14 and will conclude no later than Oct. 28, the committee told Magnachip in a Sept. 13 letter. CFIUS may extend the review period if warranted.
The Biden administration is likely to increase export controls and sanctions enforcement in the next few years, Gibson Dunn lawyers said during a webinar this week. They also said the administration is likely to pursue enforcement in creative ways, including sometimes through disclosures with the Committee on Foreign Investment in the U.S.