Louis Lehot and Christopher Swift Discuss Shift in U.S. Foreign Investment Paradigm

30 August 2023 IFLR News

Foley & Lardner LLP partners Louis Lehot and Christopher Swift are quoted in the IFLR article, “Biden executive order changes foreign investment paradigm,” offering their assessment of President Biden’s recently issued executive order restricting investment in national security technologies and products in countries of concern.

The new order bans investments in key technological sectors including artificial intelligence, quantum computing, and advance semiconductors while also requiring U.S. citizens to disclose certain transactions involving foreign parties.

“The novelty in the new executive order is the imposition of a regime to review outbound rather than inbound investments, which is currently being done through CFIUS [Committee on Foreign Investment in the United States],” said Lehot. “The regime purports to regulate the flow of capital outside the U.S. and into China. The other novelty is that it attempts to regulate both investments and expertise, which will be a challenge to implement.”

“This is one of the few areas where Congress and the executive branch are fully aligned and where there is little substantive difference between the Democratic and Republican parties, so it is reasonable to expect future developments as well as a broadening of the scope of industries and technologies prioritized for review,” Swift explained. “However, even when there are clear executive orders and implemented regulations, the U.S. national security community tends to develop novel interpretations that push the boundaries of what the law appears to require. It’s important for investors to keep this in mind and work with experienced legal counsel rather than just following the headlines.”

“For those already invested in China, the executive order as publicly announced offers some relief, as it does not purport to regulate prior investments in China nor does it call for divestment,” added Lehot.

Swift commented that China tends to take a reciprocal approach in situations like this, however, he concluded that, “There is a degree of mutual dependency here, and even if China and the U.S. both intend to go the wrong way, this conscious decoupling is complicated and uncomfortable for both of them.”

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