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House and Senate agree on foreign investment review process

House and Senate negotiators reached agreement late Monday on legislation expanding the power of U.S. regulators to review, and even block, foreign investment deals that could pose a national security risk.

Attached to a must-pass defense authorization package, the Foreign Investment Risk Review Modernization Act of 2018 expands the scope of review by the interagency Committee on Foreign Investment in the United States, while also streamlining the review process.

The Senate passed its version of CFIUS reform on June 18, followed by the House on June 26. A legislative conference committee worked out the final version.

The final version extends the CFIUS review period to 45 days from 30 days, with the possibility of one exception, and allows for filing fees.

A key change from current CFIUS practices that were last updated in 2007 is a more risk-based approach to reviews, with a focus on investments from "countries of special concern."

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said in a statement that the changes will avoid "massive government overreach" while addressing emerging national security needs and "keeping America's doors open to investment."

Private equity and venture capital firms were concerned that any changes not harm passive foreign investment in the states, and that the updated review process not cause delays. Groups representing those industries are evaluating the final agreement, which has not been published yet. A final House vote is expected this week, with Senate action to follow.

Mr. Hensarling said in the statement that the final agreement spares U.S. firms with no nexus to national security, and eliminates ownership and dollar amount thresholds as triggers for CFIUS jurisdiction. It also restricts using CFIUS review of critical infrastructure to specific systems and assets that are likely to be of importance to national security.