by Ryan Fayhee, Roy Liu, Tyler Grove, Anna Hamati, John Hannon, and Marcus Yu.

On October 20, 2022, the U.S. Department of the Treasury, as chair of the Committee on Foreign Investment in the United States (“CFIUS”), released the first-ever CFIUS Enforcement and Penalty Guidelines. CFIUS’s mandate is to identify and mitigate national security risks while maintaining the U.S.’s open foreign investment environment. Frequently it enters into mitigation agreements with parties to transactions; at other times it imposes mitigation conditions or orders (“CFIUS Mitigation”). These Guidelines provide the public with information on how the Committee assesses violations of the laws and regulations that govern relevant transactions, including violations of CFIUS mitigation agreements.

Specifically, the Guidelines describe three categories of conduct that may constitute a violation of an entity’s CFIUS obligations, the process the Committee generally follows in imposing penalties, and some of the factors it considers in determining whether a penalty is warranted and the scope of any such penalty, as well as the importance of self-disclosure of any conduct that may constitute a violation. The CFIUS authorizing statute, Section 721 of the Defense Production Act of 1950 (Section 721), allows CFIUS to impose monetary penalties and seek other remedies for violations of Section 721, the CFIUS regulations, and any mitigation orders, conditions, or agreements imposed by CFIUS. The Guidelines also highlight that CFIUS may use its subpoena authority to compel information from parties, and that CFIUS may also refer prohibited conduct to other U.S. government authorities, which may result in additional civil and/or criminal enforcement penalties depending on the nature of the misconduct. Continue reading →