LENS Essay Series: “How Critical Is “Critical”?: Holding CFIUS Accountable Under FIRRMA’s Expansion”

Do you know what “CFIUS” means?  “FIRRMA”?  Duke Law student Jesse Ruth does, and in the newest installment to LENS’s online Essays on Law, Ethics and National Security Series, he’ll explain what these legal tools are, and why they are so important to ensure foreign direct investment in the U.S. won’t threaten America’s national security.

As you will see, Jesse expertly leads us through some complex legal environs, and does so with clarity.  His essay, How Critical is “Critical”?: Holding CFIUS Accountable Under FIRRMA’s Expansion,” explains that despite a recent overhaul of the law, there is still work to do to ensure the legal tools meant to protect U.S. security don’t become twisted into counter-productivity.  Reading this one article will go a long way in bringing you up-to-date on this vital issue.

Jesse’s essay is especially timely since the case study he’s chosen to illustrate, as he puts it, “the tangible, deleterious effects that an expanded CFIUS” can have, focuses “on the bio-pharmaceutical industry, one which is not traditionally considered to implicate national security concerns.”

Jesse, who is a 2L with much law school terrain yet to navigate, nevertheless shows his awesome potential as he recognizes the too-often underappreciated connection of globalized business investments/acquisitions to America’s national security.

Again, to read the full essay just click on the titleHow Critical is “Critical”?: Holding CFIUS Accountable Under FIRRMA’s Expansion.   (Additionally, you can find it and the other fascinating essays in the series here).

Here’s his abstract to this truly important essay:

Foreign direct investment (“FDI”) in the United States spurs innovation, creates jobs, and attracts talent from around the world. FDI also gives foreign investors access to sensitive intellectual property, trade secrets, and control of companies producing products with dual military and civilian applications. The United States has long struggled to balance a liberal FDI policy with national security concerns. These competing interests led President Ford to establish the Committee on Foreign Investment in the United States (“CFIUS”) in 1975.

In the fifty years since, CFIUS has become a potent interagency committee providing the Executive with a flexible means to confront national security threats arising out of FDI. In 2018, the Foreign Risk Review and Modernization Act (“FIRRMA”) overhauled CFIUS but left key definitions of critical infrastructure and national security nebulous and propagated a review process that grants immense discretionary power to the Executive, subject to little meaningful oversight.

This Paper urges that firmer definitions of critical infrastructure and national security are needed to guide CFIUS into a new generation of FDI and global security threats. Part I highlights CFIUS’ linear evolution in response to contentious proposed transactions connected to politically sensitive countries, with each development leaving CFIUS more powerful. Part II dissects FIRRMA’s expansion of CFIUS’ authority and identifies opportunities for politicization that its ambiguous language created. In light of this vulnerability, Part III argues that a standard of judicial review of Executive action is needed to ensure CFIUS’ focus does not needlessly stray from the national security realm to the political domain. Finally, Part IV serves as a case study of the tangible, deleterious effects that an expanded CFIUS has had on the bio-pharmaceutical industry, one which is not traditionally considered to implicate national security concerns.

This Paper concludes by calling for statutory reform to cure the ambiguities that plague FIRRMA and threaten to turn CFIUS from a precision instrument into a bludgeon that has a dramatic chilling effect on innovation and investment within the American economy.

About the author:

Jesse Ruth (J.D. 2022) is a second-year law student at Duke University School of Law. He grew up in Los Angeles, CA, and graduated magna cum laude from Brandeis University with a dual B.A. in International and Global Studies and East Asian Studies in 2016. Jesse was an investment management and corporate paralegal in the Boston office of Ropes & Gray before coming to Duke Law and will be returning to Ropes for his 2L summer. He is President of the Duke Law & Economics Society and serves as Notes Editor for Volume 32 of the Duke Journal of Comparative and International Law.

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