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UPDATE: FIRRMA Signed Into Law

August 14, 2018

An Eight-Part Introduction to the Foreign Investment Risk Review Modernization Act

UPDATE: FIRRMA Signed Into Law

 

by the FH+H International Trade & Transactions team
Contact one of our professionals here

 

The Foreign Investment Risk Review Modernization Act ("FIRRMA") was signed into law yesterday when President Trump signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019. 

Stay tuned this week as we prepare to release our fifth overview of FIRRMA's contents and its impact on the Committee on Foreign Investment in the United States' ("CFIUS'") jurisdiction and procedures.

In the meantime, we encourage you to review our previous analyses of FIRRMA's contents:


About the Authors

Jennifer S. Huber and Adam Munitz are Partners in FH+H's International Trade & Transactions Practice.  Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam position U.S. businesses for overseas growth and help foreign investors/acquirers and U.S. sellers navigate the CFIUS review process.

FH+H Of Counsel Mary Beth Long is the first-ever Senate confirmed female Assistant Secretary of Defense and worked directly with Secretaries of Defense Rumsfeld and Gates on the Department’s highest priority issues. As the Defense Secretary’s principle advisor on the Middle East, Europe and Africa, including Iraq and Afghanistan, Ms. Long represented the Department of Defense at the National Security Council and the White House, and with foreign Ministers of Defense. She has expertise in export compliance, securities regulations, and other regulatory regimes.

Additional information regarding the FH+H International Trade & Transactions Practice and previous representations can be found here.


The Most Expensive Legal Battles in History (Infographic)

August 13, 2018

Coughing Up the Cash in Court

Before filing a lawsuit, there are a few things you should consider, such as if you will be able to make the required time commitment and if you are mentally prepared for questioning. Another major factor is the price, which can widely vary from a small cost to hundreds of thousands of dollars.

The following infographic from Infographics Online explains how costly court can be with the most expensive legal battles in history.


6 Types of Lawyers (Infographic)

August 13, 2018

What Kind of Lawyer Are You?

Each person has their own unique personality. Our different characteristics mean that no one can be perfectly summed up by a single category or label, but we can look at personality-based groupings to think critically about our own strengths and weaknesses. 

According to a fun graphic by Chris Hargreaves, the concept of personality types is applicable to lawyers. The following graphic as well as more detailed descriptions can be found at the Business of Law Blog.

Which types best resemble you?

 


Understanding FIRRMA - Part 4: "Passive Investment" Redefined

August 06, 2018

An Eight-Part Introduction to the Foreign Investment Risk Review Modernization Act

Part 4: “Passive Investment” Redefined

 

by the FH+H International Trade & Transactions team
Contact one of our professionals here

 

Earlier this month, in anticipation of The Foreign Investment Risk Review Modernization Act’s (“FIRRMA”) impending passage, we provided an overview of the exceptions contained in FIRRMA for certain types of transactions that would otherwise be under the Committee on Foreign Investment in the United States’ (“CFIUS”) expanded jurisdiction. Since that time, the text of FIRRMA was finalized, and on August 1, 2018 FIRRMA was sent to the president as part of the National Defense Authorization Act for Fiscal Year 2019 (the “NDAA”). Over the next few weeks we will continue to summarize FIRRMA’s critical provisions as the president prepares to sign the NDAA and the Department of the Treasury begins drafting the implementing regulations. This week, we will focus on the manner in which FIRRMA adjusts the existing exception for “passive investments.” 

Under the existing CFIUS regulations, a transaction is not “covered” (i.e., is outside CFIUS’ jurisdiction) if it results “in a foreign person holding ten percent or less of the outstanding voting interest in a U.S. business (regardless of the dollar value of the interest so acquired), but only if the transaction is solely for the purpose of passive investment.”  31 C.F.R. 800.302(b). The regulations further indicate that “[o]wnership interests are held or acquired solely for the purpose of passive investment if the person holding or acquiring such interests does not plan or intend to exercise control, does not possess or develop any purpose other than passive investment, and does not take any action inconsistent with holding or acquiring such interests solely for the purpose of passive investment.”  31 C.F.R. 800.203.

Consistent with the existing CFIUS regulations, under FIRRMA an investment in a critical technology company or a critical infrastructure company that would otherwise constitute a covered transaction is exempted if it constitutes a passive investment. However, the definition of a “passive investment” under FIRRMA is significantly more restrictive than it is at present.  As an initial matter, in order for an investment to qualify as “passive” it must “not afford the foreign person—

          (a)  access to any material nonpublic technical information1 in the possession of the United States critical infrastructure company or United States critical technology company;

          (b)  membership or observer rights on the board of directors or equivalent governing body of the United States critical infrastructure company or United States critical technology company or the right to nominate an individual to a position on the board of directors or equivalent governing body; or

          (c)  any involvement, other than through voting of shares, in substantive decisionmaking relating to the management, governance, or operation of the United States critical infrastructure company or United States critical technology company.

Furthermore, the foreign person may “not have a material parallel strategic partnership or other material financial relationship, as described in regulations prescribed by the Committee, with the United States critical infrastructure company or United States critical technology company.”

Notably, FIRRMA eliminates from the definition of “passive investment” any sort of ownership interest threshold and, as such, the level of the foreign person’s ownership interest is not, in and of itself, relevant. FIRRMA does, however, open the door to a determination by CFIUS via the forthcoming implementing regulations that investments above a certain level will not be considered passive, regardless of the extent of the foreign person’s control over the critical infrastructure company/critical technology company.

Undoubtedly, FIRRMA’s proponents recognized that many investments in U.S. companies are indirectly made by foreign persons via an investment fund. Accordingly, FIRRMA makes clear that “an indirect investment by a foreign person in a United States critical infrastructure company or United States critical technology company through an investment fund that afford the foreign person (or a designee of the foreign person) membership as limited partner or an advisory board or committee of the fund shall be considered a passive investment if—

          (a)  the fund is managed exclusively by a general partner, a managing member, or an equivalent;

          (b)  the general partner, managing member, or equivalent is not a foreign person;

          (c)  the advisory board or committee does not have the ability to approve, disapprove, or otherwise control—

               i.  the investment decisions of the fund; or

               ii.  decisions made by the general partner, managing member, or equivalent related to entities in which the fund is invested;

          (d)  the foreign person does not otherwise have the ability to control the fund, including the authority—

               i.  to  approve, disapprove, or otherwise control investment decisions of the fund;

               ii.  to approve, disapprove, or otherwise control decisions made by the general partner, managing member, or equivalent related to entities in which the fund is invested; or

               iii.  to unilaterally dismiss, prevent the dismissal of, select, or determine the compensation of the general partner, managing member, or equivalent; and

          (e)  the investment otherwise meets the requirements [of the related section of the statute]. 

Conclusion

In reformulating the manner in which CFIUS will treat passive investments, FIRRMA closes, or at least narrows, a loophole that U.S. adversaries can use to circumvent CFIUS’ oversight. However, the implications of this modified approach for well-intentioned foreign investors, and their U.S. counterparts, will also be profound. As such, both sets of parties should carefully assess the updated CFIUS regulations, once published, before foregoing a CFIUS review on the basis of passivity. 

Up Next: We will examine the FIRRMA's creation of a “declaration” as a groundbreaking new filing mechanism.


1. FIRRMA indicates that the definition of “material nonpublic technical information” will be defined in the updated regulations but also makes clear that “the term does not include financial information regarding the performance of a United States critical infrastructure company or United States critical technology company.”


About the Authors

Jennifer S. Huber and Adam Munitz are Partners in FH+H's International Trade & Transactions Practice.  Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam position U.S. businesses for overseas growth and help foreign investors/acquirers and U.S. sellers navigate the CFIUS review process.

FH+H Of Counsel Mary Beth Long is the first-ever Senate confirmed female Assistant Secretary of Defense and worked directly with Secretaries of Defense Rumsfeld and Gates on the Department’s highest priority issues. As the Defense Secretary’s principle advisor on the Middle East, Europe and Africa, including Iraq and Afghanistan, Ms. Long represented the Department of Defense at the National Security Council and the White House, and with foreign Ministers of Defense. She has expertise in export compliance, securities regulations, and other regulatory regimes.

Additional information regarding the FH+H International Trade & Transactions Practice and previous representations can be found here.


FH+H Partner David Delaney Receives Certification from International Association of Privacy Professionals

August 02, 2018

Partner David Delaney, who is based in North Carolina’s Research Triangle, recently acquired the “Certified Information Privacy Professional, U.S. Private Sector” (CIPP/US) designation through the International Association of Privacy Professionals (IAPP).

The IAPP is a not-for-profit organization whose members reap rewards through shared information and resources related to data and privacy, with the goal of enhancing the privacy profession worldwide.*

Privacy certifications such as the CIPP/US provide people like Mr. Delaney “with the knowledge they need to help you meet your privacy program goals of reduced risk, improved compliance, enhanced brand loyalty and more,” according to the IAPP website.

In fact, the IAPP’s programs are the only credentialing programs in information privacy that are globally recognized.

“I have long viewed the IAPP as providing an essential function establishing standards of knowledge to apply to privacy issues. The CIPP/US certification process has expanded my knowledge base on data privacy and connected me with many technologists and other professionals addressing privacy issues in corporate, government, and non-sectors” Mr. Delaney said.

This ANSI/ISO-accredited certification enhances Mr. Delaney’s ability to serve the various data and privacy-related needs that a company may have.

Mr. Delaney's practice is focused on clients’ cyberspace needs, business issues (including data security, privacy, breach response, product development, contracts, internal, policies, and regulatory compliance), strategic risk management, corporate governance, and leadership programs.

Read more about Mr. Delaney here.

 

 

*CIPP/US is not a law-practice certification of expertise or specialization in North Carolina.


Managing Partner Tom Craig Prepares Client for Senate Testimony

August 02, 2018

Managing Partner Tom Craig provided legal counsel to an individual who was requested to provide testimony to the U.S. Senate Select Committee on Intelligence.

Mr. Craig effectively counseled and prepared the client for testimony.

FH+H’s Government Investigations team holds high-level security clearances and includes former Associates White House Counsel, former prosecutors, and former public defenders all with extensive experience defending against government investigations.

Read more about our Government Investigations Practice Group here.

 

NOTE: CASE RESULTS DEPEND ON A VARIETY OF UNIQUE FACTORS, AND DO NOT GUARANTEE OR PREDICT SIMILAR RESULTS FOR FUTURE CASES.


FH+H Team Negotiates Eight-Figure Subcontract for Design of US Army Vessel

August 02, 2018

FH+H attorneys, including Managing Partner Tom Craig and Senior Associate Marlena Ewald, successfully assisted a marine engineering and architecture firm in a complex intellectual property rights issue.

With the help of Mr. Craig and Ms. Ewald, the client was able to negotiate an eight-figure subcontract to design a new vessel for use by the US Army.

The FH+H Government Contracts team is able to guide contractors through a maze of applicable rules and regulations to enable corporate success. Read about the group here.

 

 

NOTE: CASE RESULTS DEPEND ON A VARIETY OF UNIQUE FACTORS, AND DO NOT GUARANTEE OR PREDICT SIMILAR RESULTS FOR FUTURE CASES.


FH+H Partner Quoted in Article “Trump Administration Neuters Nuclear Safety Board”

July 30, 2018

FH+H Partner Dave Jonas was quoted in a recent Santa Fe New Mexican and ProPublica article titled “Trump administration neuters nuclear safety board,” which discusses a new order from the Department of Energy that outlines limits on the Defense Nuclear Facilities Safety Board.

The board’s current ability to conduct oversight of nuclear facilities is not very regulated, so the new order outlines limits including “preventing the board from accessing sensitive information, imposing additional legal hurdles on board staff, and mandating that Department of Energy (DOE) officials speak ‘with one voice’ when communicating with the board,” according to the article.

Some individuals believe the new regulations put workers and the public in danger, including Robert Alvarez, who previously served as Senior Policy Advisor for the Secretary of Energy.

“We shouldn’t have to wait for something to blow up or catch fire in order to pay attention to a safety problem,” Mr. Alvarez says in the article.

Others, however, would prefer the board to be disbanded altogether. Sean Sullivan, who is a former chairman of the board, said it is a “relic of the Cold War and its oversight was redundant.”

Mr. Jonas, the only person ever to have served as General Counsel for both the National Nuclear Security Administration and the safety board, said there have been disagreements between the board and the DOE in the past, but the new order outlines such limitations that he expects a legal battle to break out.

“It’s a mess,” Mr. Jonas says in the article. “The defense board is going to end up getting a little less information” because of the increased regulation based on the new DOE order.

Read the full article here.


FH+H Partner Jack White Joins Pepperdine Law School Board of Advisors

July 23, 2018

Pepperdine University recently welcomed FH+H Partner Jack White as a member of its Law School’s Board of Advisors, where he will have the opportunity to contribute his personal and professional talents to the school.

“Board of Advisor members are recruited for their accomplishments within and service to their local, national and international communities,” according to the Board’s website.

From his history of service to his alma mater, it is clear Mr. White is highly deserving of this honor.

Mr. White attended the Pepperdine University School of Law after graduating from the U.S. Military Academy at West Point and serving for five years on active duty. At Pepperdine, Mr. White was an instrumental participant in multiple clubs and activities that benefitted the school.

Among other accomplishments, Mr. White won the National Institute for Trial Advocacy’s tournament of Champions and the annual Dalsimer Moot Court Competition and served as editor-in-chief of the Pepperdine Law Review. He also served as president of the Christian Legal Society and became a member of the Order of the Coif.

“I am honored to have been chosen for this position, and I look forward to helping students grow to be passionate and responsible attorneys through the institution that has given me so much,” Mr. White said.

Upon graduating magna cum laude from Pepperdine, Mr. White served as a law clerk at both the U.S. Court of Appeals for the Third Circuit and at the U.S. Supreme Court. He is currently a valued partner at FH+H, where he focuses his practice on employment matters, litigation, and counseling companies through growth.


Famous People You Did Not Know Were Lawyers (Infographic)

July 18, 2018

Law Is My Second Job

After graduating law school and passing the bar exam, some may dream of making a name for themselves in the legal industry. The following individuals probably hoped for the same success, but they ended up becoming famous for completely different reasons.

The infographic below from Online Paralegal Programs illustrates famous people you may not know practiced law.


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