WASHINGTON (Reuters) – U.S. President George W. Bush on Thursday signed legislation to bolster oversight of acquisitions of U.S. companies by foreign firms, a move to address national security concerns about several deals raised by Congress.
The new law requires regulators to spend more time vetting deals, holds regulators more accountable for their actions and keeps Congress better informed about the Committee on Foreign Investment in the United States (CFIUS), which reviews deals.
The CFIUS panel is charged with determining if acquisitions would harm U.S. national security. The interagency group is led by the Treasury secretary and includes the departments of Commerce, Defense, Justice and State.
Despite some concerns that additional scrutiny could chill foreign investment into the United States, the legislation eventually won the support of the U.S. Chamber of Commerce and the Organization for International Investment (OFII), which represents foreign companies that have U.S. operations.
Reform legislation was introduced last year after critics in Congress said CFIUS did not take enough time to consider the security implications of the sale of some key U.S. port operations to Dubai Ports World.
Dubai Ports, which is government controlled sparking some of the concerns raised by lawmakers in Congress, later relinquished the port operations it had purchased to American International Group Inc.
Treasury Secretary Henry Paulson, who helped shape the bill through regular meetings with lawmakers during its development, emphasized that only a small proportion of foreign transactions were ever likely to be subjected to scrutiny.
“Importantly, the new law maintains CFIUS’ narrow focus on transactions that raise national security concerns,” Paulson said, adding that he wanted to underline the fact that the United States welcomed foreign investors and was not trying to discourage them.
It was welcomed by industry groups.
“This bill restores certainty to the national security reviews of foreign acquisitions of U.S. companies that has been unstable since the DP World controversy over 18 months ago,” said Todd Malan, president & chief executive of OFII.
In 2006, CFIUS examined 113 deals worth more than $95 billion, a 73 percent rise over the previous year, according to a study release earlier this year. Seven of the 2006 deals faced extended investigations and two required approval by Bush.