President Donald Trump on February 21, 2025 issued a National Security Presidential Memorandum titled the America First Investment Policy to provide guidance to executive departments in their review and decision-making with respect to foreign direct investment into the United States and outbound investments, particularly with respect to “foreign adversary” nations. This policy memorandum will jump-start the implementation of new priorities and allocations of resources in a number of critical national security functions related to inbound and outbound foreign investments.
Continuing the rapid pace of activity, on February 21, President Trump signed a new national security memorandum titled the America First Investment Policy. The reasons for issuing this memorandum were articulated by the White House in a separate fact sheet and include the following:
- Confirming that welcoming foreign investment is crucial for economic growth, job creation, and innovation
- Creating a “fast-track” process to facilitate greater investment from “specified allies” (not defined) and partners, with conditions that prevent investors from partnering with “foreign adversaries” in those areas.
- “Foreign adversaries” are defined in the Memorandum as China, including the Hong Kong and Macau Special Administrative Regions; Cuba; Iran; North Korea; Russia; and Venezuela
- Directing relevant agencies to “expedite environmental reviews for any investment over $1 billion”
- Reiterating the directions in Executive Order 14083 that the Committee on Foreign Investment in the United States (CFIUS) should “restrict Chinese investments in strategic US sectors like technology, critical infrastructure, healthcare, agriculture, energy, raw materials, and others”
- Indicating that CFIUS jurisdiction should be extended to “greenfield” investments
- Protecting US farmland and real estate near sensitive facilities
- Directing agencies, including CFIUS, to “restrict foreign adversary access to US talent and operations in sensitive technologies”
- Directing CFIUS to reconsider how and when it uses mitigation agreements; in particular, “rather than use overly bureaucratic, complex, and open-ended ‘mitigation’ agreements for U.S. investments from foreign adversaries,” the policy memorandum mandates that “mitigation agreements should consist of concrete actions that companies can complete within a specific time” and that “more administrative resources will be directed toward facilitating investments from key partner countries”
- Encouraging passive investments from all foreign persons, including noncontrolling stakes and nonvoting shares that do not confer any board representation, governance rights, managerial influence, substantive decision-making authority, or access to nonpublic technologies, technical information, products, or services (although other regulatory regimes may prohibit investment from such countries)
- Directing audits of foreign companies on US exchanges, based on reviews of their ownership structures
- Making foreign adversary companies on these exchanges ineligible for pension plan contributions
OUTBOUND INVESTMENT RESTRICTIONS
The memorandum provides further guidance relating to outbound investments, including:
- Establishing new rules to curb the exploitation of its capital, technology, and knowledge by foreign adversaries to ensure that only those investments that serve American interests are allowed
- Considering “new or expanded restrictions on US outbound investment to China” in sensitive technologies, including semiconductors, artificial intelligence, quantum, biotechnology, aerospace, and other areas that “support[] China’s Military-Civil Fusion (MCF) strategy”.
IMPLEMENTATION
The goals and policies identified in the America First Investment Policy memorandum will require a whole of government approach. Some of these priorities can be implemented by shifting the focus of current efforts (i.e., for transactions where the investor or acquiror is not from a foreign adversary, CFIUS resources can be steered toward ensuring that the investor’s activities are “in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices” of such foreign adversaries).
Others, however, appear to require legislative or other intervening actions. For example, the memorandum calls for a new CFIUS “expedited ‘fast-track’ process, based on objective standards, to facilitate greater investment from specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas.” Similarly, congressional action is likely needed to achieve the goals of expanding “CFIUS authority over ‘greenfield’ investments,” restricting “foreign adversary access to United States talent and operations in sensitive technologies (especially artificial intelligence),” and expanding “the remit of ‘emerging and foundational’ technologies addressable by CFIUS.” While not self-executing, we address some of the likely implications of this new national security memorandum.
IMPLICATIONS FOR FOREIGN INVESTORS
Foreign investors from US allies and partners will likely welcome several of these proposals. Notable among them are:
- Addressing what the memorandum calls “the use of overly bureaucratic, complex, and open-ended ‘mitigation’ agreements.” This section highlights points of particular consternation for foreign acquirors and investors, for example:
- CFIUS refusal to include termination or sunset clauses in mitigation agreements
- The introduction of expansive “form language” into National Security Agreements (NSAs)
- The use of expensive and cumbersome third-party monitors and auditors
- The use of sometimes vague and imprecise language in mitigation agreements, leaving the scoping of those agreements to shifting bureaucratic priorities
- Making clear that “passive investments” remain welcome:
- “The United States will continue to welcome and encourage passive investments from all foreign persons. These include non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decisionmaking, or non-public access to technologies or technical information, products, or services.”
- This section tracks closely the passive investment criteria in 31 C.F.R. 800.211(b), and thus appears to emphasize that US policy toward passive investment will not change as a result of this action
KEY TAKEAWAYS
While some time will be needed before the full impact of this policy is felt in inbound and outbound reviews, some effects seem apparent, including:
- The memorandum confirms that the US administration’s policy will continue to be that “Economic Security is National Security”
- The memorandum could cause a review and termination of open mitigation agreements, many of which suffer from the exact “bureaucratic, complex, and open-ended” characteristics the policy seeks to address
- CFIUS recently touted the growing mitigation numbers as a measure of accomplishment, but the new policy likely seeks to change that perspective and see mitigation agreements as more limited in scope and timing
- Foreign adversaries’ investments will be less welcome, unless they are truly passive
- Current CFIUS regulations place passive investments outside CFIUS jurisdiction in most cases, and the memorandum seeks to confirm the continued vitality of those provisions
- While the memorandum encourages capital inflows from trusted US allies and partners, it also emphasizes that restrictions will “ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of the PRC and other foreign adversaries”
- This language suggests that CFIUS will likely take a more favorable view towards foreign investment by US allies and partners that do not have substantial ties to China or other adversaries, prioritizing these reviews, and even investors from traditionally friendly nations may face more rigorous screening if they engage in co-investments, supply chain dependencies, or technology transfers with Chinese entities
- The memorandum contemplates the use of sanctions under the International Emergency Economic Powers Act. Such sanctions could be used by the US administration to address imminent national security risks where waiting for regulatory updates is not possible
STAY INFORMED
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