On July 8, 2024, the U.S. Treasury Department’s Office of Investment Security announced a proposed rule that would expand the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) over transactions by foreign persons involving real estate in the United States. While CFIUS has jurisdiction over all acquisitions by foreign persons of US businesses, CFIUS also has authority to review acquisition of real estate unconnected with a US business where that real estate is proximate to designated military installations. The proposed rule expands the scope of that jurisdiction out to 100 miles from certain military bases. Comments on the proposed rule will be accepted for 30 days following the date of publication in the Federal Register.
The proposed rule would add 59 military installations across 30 states to the list of installations around which CFIUS has jurisdiction and make other changes that would expand and clarify the scope of its jurisdiction over real estate transactions, in particular by:
- Expanding CFIUS’s jurisdiction over real estate transactions to include those within a one-mile radius around 40 additional military installations;
- Expanding CFIUS’s jurisdiction over real estate transactions to include those within a 100-mile radius around 19 additional military installations;
- Expanding CFIUS’s jurisdiction over real estate transactions between 1 mile and 100 miles around eight military installations already listed in the CFIUS regulations;
- Update the names of 14 military installations already listed in the CFIUS regulations to allow for the relevant sites to more easily be identified; and
- Update the location of seven military installations already listed in the current CFIUS regulations to allow for the relevant sites to more easily be identified.
This proposed expansion of CFIUS jurisdiction over real estate transactions takes place against the backdrop of US states seeking to impose their own restrictions on foreign investment in real estate or agricultural resources. While the CFIUS real estate rules do not create mandatory filing requirements (mandatory filings are limited to certain US business involving technology, infrastructure and personal data), they do expose investors to the regulatory risk of CFIUS second-guessing land acquisitions, absent a prior CFIUS clearance. CFIUS diligence will as a consequence become a more common aspect of real estate transactions.
Author
Rod Hunter
Rod Hunter, a partner in the Washington, DC office, regularly advises on U.S. foreign investment regulation, including reviews conducted by the Committee on Foreign Investment in the United States (CFIUS) and procedures relating to mitigation of foreign ownership, control or influence (FOCI) under national industrial security regulations. He previously served as Special Assistant to the President for National Security Affairs and senior director for international economics at the National Security Council (NSC), the White House office that coordinates trade policy and supervises CFIUS. A recognized expert in the field, he has served as an expert witness on CFIUS in civil litigation and has testified before Congress during the legislative process leading to recent amendments to CFIUS’ authorizing legislation.
Author
Sylwia Lis
Sylwia Lis is a partner in the Washington, DC office. She has extensive experience advising clients on national security reviews of foreign investments, including representation before the Committee on Foreign Investment in the United States (CFIUS). Sylwia also advises companies on US law relating to exports and reexports of commercial goods and technology (EAR), defense trade controls (ITAR), and trade sanctions (OFAC) - including licensing, regulatory interpretations, M&A due diligence and regulatory notifications (DDTC/ITAR notification process), compliance programs and enforcement matters.
Author
Justin Becker
Justin Becker is a partner in Baker McKenzie's Trade Secrets practice, based in Washington, DC. Prior to joining the Firm, Justin worked at another international law firm in their Global Arbitration, Trade and Advocacy group.
Justin advises clients in an array of anti-dumping and countervailing duty issues, including investigations and reviews before the Department of Commerce (DOC), the International Trade Commission (ITC), and Section 301 and Section 232 investigations before relevant US agencies and offices in the Executive branch. He has appeared before the US Court of International Trade, the US Court of Appeals for the Federal Circuit, and has argued before a Chapter 19 NAFTA panel. Justin is also on the 2024 USMCA Dispute Settlement Panels Roster (on behalf of the United States).
In addition to his work on trade remedies and unfair competition cases, Justin also counsels US and foreign clients on national security and international legal issues, including national security screening mechanisms such as the Committee on Foreign Investment (CFIUS) in the United States.
Author
Lise S. Test
Lise Test is an of counsel in the Firm’s International Trade Group in Washington, DC and practices in the area of international trade regulation and compliance — with emphasis on US export control laws (Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR)), trade sanctions, and anti-boycott laws. Ms. Test advises clients on issues relating to product classifications, licensing, regulatory interpretations, risk assessments, enforcement actions, internal investigations and compliance audits, as well as the design, implementation, and administration of compliance programs.
Ms. Test works regularly with companies across a wide range of industries, including the pharmaceutical/medical device, telecommunications, manufacturing, and technology sectors. She joined the Firm as a summer associate in 2007 and became a full-time associate in 2008. Prior to joining Baker McKenzie, Ms. Test served as a lawyer at the Danish Ministry of Defence.
