The U.S. Committee on Foreign Investment in the United States releases Annual Report for 2022

We highlight below ten key takeaways from the Report:

• The total number of filings in 2022 increased only slightly compared to 2021.  CFIUS reviewed 286 notices (long-form filings), an all-time record, and 154 declarations (short-form filings), for a total of 440 overall filings in 2022. In comparison, CFIUS reviewed 272 notices and 164 declarations in 2021, for an overall total of 436 filings.     
• Canada remained the top acquirer home country for declarations filed. Canada continued to hold the top spot for declarations filed with 22 declarations in 2022, the same number filed in 2021. From 2020 to 2022, Canada filed a total of 64 declarations, followed by Japan (47), Germany (34), and the United Kingdom (30). South Korea, Singapore, and France are not far behind with 26, 24, and 23 declarations filed respectively.  Chinese declarations remained low (5), likely continuing to reflect the market’s recognition that CFIUS is unlikely to clear Chinese investments through the declaration route. 
• Singapore unseated China from the top spot in terms of notices filed.  Notably, Singapore surpassed China as the country from which the most notices were filed in 2022.  Of the 286 notices reviewed in 2022, 37 notices (roughly 13 percent) involved Singaporean investments. This was a significant jump for Singapore compared to the 10 notices it filed in 2020 and the 13 notices it filed in 2021. China filed 36 notices in 2022, a notable decrease compared to the 44 notices filed by China in 2021. Canada held third place with 17 notices, with Japan following as a close fourth with 15 notices. The large number of notices filed by China in 2022 (coupled with the low number of Chinese declarations in 2022) suggests that (i) Chinese investors continue to strongly favor notices over declarations and (ii) because CFIUS clears a majority of the transactions that it reviews, even in an era of significant U.S.-China geopolitical tension, some Chinese investments can pass CFIUS muster.   
• CFIUS “cleared” far fewer declarations and nearly doubled its requests for notices.  Of the 154 declarations submitted in 2022, about 58 percent were “cleared” (i.e., CFIUS notified the parties that it had concluded all action after completion of its 30-day declaration assessment), down from 73 percent in 2021. For declarations filed in 2022, CFIUS also increased  its requests that parties file a notice with CFIUS. In 2022, CFIUS requested that parties to 50 declarations file a notice (32 percent), compared to 30 declarations (18 percent) in 2021.  With the implementation of the Foreign Risk Review Modernization Act of 2018 (“FIRRMA”) and the introduction of the declaration process, the public’s expectation had been that the number of declarations filed and the number of declarations cleared within the 30-day assessment period would steadily rise as CFIUS staff and parties gained more experience with the new process. CFIUS clearing fewer declarations and requesting more notices in 2022 could prove to be  statistical anomalies or the beginning of a trend, but these two metrics bear monitoring.        
• More transactions proceeded to an investigation.  In 2022, the percentage of  notices that proceeded from a review to an  investigation was 57 percent, a notable increase from 48 percent in 2021. These investigations also took longer to complete in 2022. For cases that proceeded to an investigation in 2022, on average, CFIUS closed these cases 80.5 calendar days after it formally accepted the notice, compared to 65 calendar days in 2021.  The increased length of CFIUS investigations reinforces the point that – for planning purposes – parties should expect that CFIUS’s review/investigation could last three months.
• CFIUS imposed mitigation in a significantly greater number of cases. In 2022, CFIUS adopted mitigation measures and conditions with respect to 52 cases, a significant increase from 31 such cases in 2021. For 41 distinct notices filed, CFIUS adopted mitigation agreements (23 percent of all distinct notices filed). CFIUS imposed other conditions (e.g., conditions memorialized in a letter between CFIUS and the parties) in 11 other cases. The Report also identified illustrative examples of mitigation measures CFIUS imposed  in 2022 that were not listed in the 2021 Annual Report, such as reporting obligations to notify CFIUS of changes to data storage locations or restrictions on recruitment/hiring. The increased numbers of transactions mitigated likely reflects continued heightened scrutiny of a variety of transactions, including ones related to supply chain security, as well as the increased staffing of CFIUS member agencies that has given them greater capacity to closely review transactions and monitor compliance with mitigation agreements.  
• CFIUS’s non-notified transaction inquiries shift to recent transactions.  In recent years, CFIUS has increasingly devoted significant resources to non-notified/non-declared transactions (transactions for which filings were not made but for which CFIUS initiates an inquiry).  In 2022, the number of non-notified/non-declared transactions for which CFIUS initiated an inquiry fell significantly – 84 in 2022 compared with 135 in 2021 and 117 in 2020. In the Report, the Committee notes that this decrease reflects a change in focus from prior years, when CFIUS concentrated on  transactions that were completed prior to the implementation of FIRRMA. The Report states that CFIUS’s non-notified transaction inquiries have now shifted focus to “more recent foreign investments” that might be subject to CFIUS’s jurisdiction and that might raise national security concerns, with pre-FIRRMA inquiries now accounting for one percent of “the Committee’s [non-notified transaction inquiry] work.” In 2022, 11 non-notified transactions (11 percent) resulted in a request for a CFIUS filing, an increase from prior years (6 percent in 2021).  Given CFIUS’s shift in focus to recent transactions and the Report’s separate acknowledgment that CFIUS will continue to “increas[e] staff resources dedicated to monitoring and enforcement activities,” we expect that CFIUS will be able to devote greater resources to scrutinizing transactions that are pending or have only recently closed.
• Withdrawn notices reached a record level.  In 2022, parties to transactions reviewed by CFIUS withdrew 88 of 286 notices (approximately 31%, compared to 27% in 2021). In 68 of these instances, the parties refiled their transactions.  In 12 of the transactions that were not refiled, the parties withdrew the notice and abandoned the underlying transactions for national security reasons (i.e., because CFIUS informed the parties that it was unable to identify mitigation measures that would resolve its national security concerns or because CFIUS proposed mitigation measures that the parties chose not to accept). These 12 transactions represent approximately 4% of the total transactions reviewed by CFIUS in 2022, compared to approximately 3% in 2021. Each year, CFIUS continues to identify transactions that ultimately result in the parties abandoning the transaction, so parties should assess at an early stage the risk that CFIUS will effectively block the transaction or require mitigation that is unacceptable to them. The number of withdrawals and re-filings for 2022 also reflects that from a timing standpoint, if parties to a transaction are ultimately required to negotiate a mitigation agreement with CFIUS, there is a material risk that the CFIUS review process will extend beyond 90 days.

• CFIUS highlights CFIUS executive order.  The Report highlights President Biden’s E.O. 14083, “Ensuring Robust Consideration of Evolving National Security Risks by [CFIUS],”  issued in September 2022. According to the Report, the E.O. “sharpened the Committee’s focus on several national security risk factors,” including supply chain security and resiliency, U.S. technological leadership, aggregate industry investment trends, cybersecurity, and sensitive data. 

• Few declarations and notices involved covered real estate transactions.  Out of the 286 notices and 154 declarations that CFIUS reviewed in 2022, only one notice and five declarations were filed under CFIUS’s real estate regulations. The low numbers of real estate filings continued despite high-profile press reporting in 2022 of state and local government and Congressional concerns about Chinese acquisitions of certain U.S real estate.  Partly in reaction to these concerns, in May 2023, CFIUS issued a proposed rule expanding the number of U.S. military sites that might implicate CFIUS’s real estate jurisdiction. 

Next steps

For further information or assistance regarding transactions potentially subject to CFIUS’s jurisdiction or general CFIUS trends, please contact any of the listed Hogan Lovells attorneys.

Authored by Brian Curran, Anne Salladin, Zachary Alvarez, Patrick Miller, and Cassady Cohick.