CFIUS Ruling Provides International Investors Additional Rights
On July 15, 2014, the D.C. Court of Appeals (“D.C. Circuit”) issued an unprecedented decision in Ralls Corporation v. Committee on Foreign Investment in the United States (CFIUS), No. 13-5315, slip. op. (D.C. Cir. July 15, 2014) that if the President, pursuant to his powers under the Exon-Florio Amendment to the Defense Production Act of 1950 (“DPA”), deprives a non-U.S. acquirer or investor in the United States of its constitutionally protected property interests, the non-U.S. acquirer or investor must be accorded certain due process protections, including access to the unclassified evidence that CFIUS relies on during the review of the transaction, and rebut that evidence, before a potential transaction is blocked. The ruling may provide some enhanced procedural protections and leverage to the parties to the transaction undergoing a CFIUS review in preventing a transaction from being blocked because now the parties can obtain access to unclassified information used by CFIUS and try to rebut it. However, any resulting procedural changes are unlikely to affect the outcome of any CFIUS review process. Given the importance of this case, it is likely that the Department of Justice will seek an en banc hearing before the D.C. Circuit or successfully petition the Supreme Court to review the D.C. Circuit’s decision. Further, Congress may also take action to provide clarity on whether Congress intended for the statutory bar to judicial review in the Exon-Florio Amendment to preclude review of constitutional due process claims.