On February 1, 2024, the U.S. Court of Appeals for the Eleventh Circuit granted a limited preliminary injunction enjoining enforcement against two Chinese national plaintiffs of a new Florida law (SB-264) that restricts certain foreign persons from owning real property on grounds that the plaintiffs have a “substantial likelihood” of prevailing in their argument that federal foreign investment regulation pre-empts the state law. This litigation over the 2023 Florida law, which comes at a time of increasing international investment into U.S. agricultural land and as Congress’ Select Committee on the Chinese Communist Party has called for greater federal regulation of agricultural land purchases, could have broader implications for the dozens of states that have imposed restrictions on foreign acquisitions of U.S. farm and forestry land.
The Eleventh Circuit held that plaintiffs have shown a “substantial likelihood of success” in arguing that Florida’s SB-264 was preempted by federal law, particularly the Foreign Investment Risk Review Modernization Act of 2018, 50 U.S.C. § 4564 (“FIRRMA”). That federal law grants the Committee on Foreign Investment in the United States (“CFIUS”) the authority to take action to address national security concerns arising from foreign investments, including certain real estate transactions. SB-264 prohibits persons from China (unless a U.S. citizen or permanent resident) from owning or acquiring any property in Florida regardless of the location. Chinese investors who acquired property prior to July 1, 2023 may continue to own or hold such property, but must disclose their ownership. In a concurring opinion, Judge Abudu also granted the preliminary injunction based on the Equal Protection Clause. Judge Abudu stated that SB-264 is a “blanket ban against Chinese non-citizens from purchasing land within the state” and “blatantly violates the Fourteenth Amendment’s protection against discrimination.” The Eleventh Circuit is expected to hear oral arguments on the merits of the case in April, which could result in a ruling during the course of this year.
The Eleventh Circuit litigation could have implications for other states that have enacted or are considering restrictions on foreign investment. Some 26 states have enacted laws that impact foreign investment. Such state measures have largely focused on certain foreign investors purchasing agricultural land of certain sizes or large tracts of land. For example, Alabama, Arizona, Arkansas, Idaho, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Pennsylvania, and Virginia have imposed varying restrictions related to foreign ownership of agricultural land. Some states restrict foreign ownership of any land exceeding certain acreage thresholds (e.g., above 500,000 acres in South Carolina). Other states, such as Hawaii, restrict any nonresident individual from acquiring an interest in public agricultural land.
Meanwhile, the Select Committee on the Chinese Communist Party has issued a series of recommendations aimed at countering challenges to U.S. national and economic security posed by China. The recommendations include expansion of the geographic area where CFIUS would have jurisdiction to review foreign investments in real property. The Select Committee’s recommendations echo legislation introduced in the House of Representatives last year to restrict the acquisition by “foreign adversaries” of land near sensitive sites. The Prohibition of Agricultural Land for the People’s Republic of China Act (H.R. 809) would prohibit persons from China from purchasing agricultural real estate in the United States and from participating in certain Department of Agriculture programs. The Protecting U.S. Farmland and Sensitive Sites from Foreign Adversaries Act (H.R. 4577) would grant CFIUS jurisdiction over all land purchases by investors from “foreign adversary” jurisdictions (Cuba, China, Iran, North Korea, Russia and Venezuela) and require mandatory CFIUS filings prior to such investors acquiring land near sensitive sites.
