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Last week, President Biden signed an Executive Order intended to enhance CFIUS’s ability to address emerging national security risks in its review of transactions.  According to the Biden Administration’s fact sheet on the Order, it elaborates on existing statutory factors and adds several additional national security factors for CFIUS to consider during its review process. The Order directs CFIUS to consider five specific sets of factors in its review:

– A given transaction’s effect on the resilience of critical U.S. supply chains that may have national security implications, including those outside of the defense industrial base.

– A given transaction’s effect on U.S. technological leadership in areas affecting U.S. national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies.

– Industry investment trends that may have consequences for a given transaction’s impact on U.S. national security.

– Cybersecurity risks that threaten to impair national security.

– Risks to U.S. persons’ sensitive data.

The law firm memos on the Order are starting to roll in and we’re posting them in our “National Security Considerations” Practice Area. This excerpt from Sullivan & Cromwell’s memo on the Executive Order summarizes its implications:

The EO adds an emphasis, already a topic of focus for the Biden Administration, on climate adaptation technologies, critical materials, and food security, to the enumerated factors to be considered by CFIUS. Fundamentally, however, other than this renewed emphasis, the content of the EO does not break new ground, as CFIUS already considers most, if not all, of these factors in its review of transactions.

The timing of CFIUS review generally should not be impacted, although it is possible that certain transactions that touch on the areas of focus specified in the EO could take longer to clear than they might have prior to the issuance of the EO. Even though the EO does not necessarily break new ground, the EO approach is novel in its recognition of the need to stay ahead of evolving risks and in its express and public recognition of these factors.

– John Jenkins