On August 2, 2022, the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”) released its annual report for calendar year 2021 (the “Annual Report”). The Annual Report provides data concerning transactions filed with CFIUS in 2021, the first full calendar year following the introduction of the implementing regulations for the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”). Reflecting the increasingly routine nature of CFIUS, investors from a broad range of countries, including close U.S. allies, made filings, the Committee approved nearly 60% of transactions at the end of the 30-day declaration or 45-day notice review, and the Committee reduced the average period of time to accept a notice and initiate review. However, CFIUS continues to regulate transactions it believes presents national security risks: CFIUS imposed mitigation in 28 cases, and 11 transactions reviewed by the Committee were abandoned.
Below, we have summarized the key takeaways from the Annual Report:
- Increase in total number of filings from 2020. The overall number of covered transactions reviewed or assessed by the Committee (on the basis of a written notice or a declaration) increased substantially from 2020 (313 total) to 2021 (436 total), or by approximately 39%. In 2021, the Committee reviewed a total of 164 declarations and 272 notices regarding covered transactions, i.e. transactions that the Committee determined were subject to CFIUS jurisdiction. This marks the highest number of notices reviewed by the Committee since 2012.
- Investors from China and US-allied countries led the declaration and notice filings. Investors from Canada (22), Germany (11), Japan (11), and South Korea (11), Singapore (11), the United Kingdom (10), France (9), Guernsey (9), Australia (8), the Netherlands (6), and the Cayman Islands (6) submitted the highest number of declaration filings in 2021. Investors from China (44), Canada (28), Japan (26), the Cayman Islands (18), the United Kingdom (13), South Korea (13), Singapore (13), France (13), Israel (12), and Germany (10) submitted the highest number of notices in 2021. The number of notices filed by Chinese investors increased to 44 in 2021, more than double that in 2020. Only 17 notices were submitted by Chinese investors in 2020, a decline from the 25 notices submitted in 2019.
- Most declarations were cleared at the conclusion of the review period. Of the 164 declarations related to covered transactions, CFIUS concluded all action with respect to 120 declarations at the end of the 30-day review period.The Annual Report indicates that CFIUS cleared an all-time high of nearly 60% of cases by the end of either the 30-day assessment period for a declaration or the initial 45-day review period for a notice.
- Increased speed of notice acceptance. In 2021, CFIUS provided comments on draft notices within an average of 6.2 business days, and accepted formal notices within an average of 6 business days, down from 9.1 days in 2020.
- Most notices related to transactions in the Finance, Information and Services or Manufacturing sectors. In 2021, the majority of notices of covered transactions came from the Finance, Information, and Services sector (55%), followed by Manufacturing (28%). The remainder of covered notices came from the Mining, Utilities and Construction sector (12%), followed by the Wholesale Trade, Retail Trade, and Transportation sector (4%).
- The proportion of notices reaching the investigation stage of review stayed essentially level. The proportion of notices reaching investigation stage in 2021 was 48%, which represents only a small increase from 47% in 2020, and a small decrease from 49% in 2019.
- Most withdrawn notices were ultimately refiled.The Annual Report indicates that most withdrawn notices were ultimately refiled with CFIUS, and that only a small percentage of the total number of notices in 2021 were withdrawn and abandoned. In 2021, CFIUS approved the withdrawal of 74 notices. Parties withdrew 2 notices during the review phase and 72 notices after the commencement of the investigation period. In 63 of these 74 instances, the parties ultimately filed a new notice.
- The proportion of transactions subject to mitigation was similar to 2020. In 2021, CFIUS concluded action after adopting mitigation measures with respect to 26 notices of covered transactions (~10% of the 2021 notices, compared with ~9% in 2020). In addition, the Committee adopted mitigation measures to address residual national security concerns with respect to 2 notices that were voluntarily withdrawn and abandoned, and imposed measures to mitigate interim risk concerning 1 notice filed in 2021.
- Continued active monitoring of un-notified transactions. CFIUS has been actively reviewing non-notified transactions. In 2021, CFIUS identified 135 transactions that closed without being notified to CFIUS, an increase from 117 in 2020. CFIUS requested a filing in connection with eight of these non-notified transactions (~6%).
- Continued acquisitions of US critical technology companies. CFIUS reviewed 184 covered transactions involving investments in US critical technology companies in 2021. Investors from US-allied countries Germany (16), the United Kingdom (16), Japan (15), and South Korea (13) led in US critical technology company-related transactions reviewed by CFIUS. However, investors subject to heightened scrutiny also acquired interest in a significant number of US critical technology companies, including investors from China (10) and Russia (5).
Our prior blog post on CFIUS’ annual report for calendar year 2020 can be found here.