CFIUS Adds New Zealand to Excepted Foreign States List and Finalizes Additional Time for Allies to Secure Excepted Foreign State Status

With its addition to CFIUS’s excepted foreign states list (available here), New Zealand joins a short list of only three other countries also generally considered the closest U.S. allies: Australia, Canada, and the United Kingdom (“UK”). These same countries join the United States in the “Five Eyes” intelligence sharing alliance. Because CFIUS’s jurisdiction for less than controlling “covered investments” and “covered real estate transactions” contains exceptions where investors are from excepted foreign states (see 31 C.F.R. §§ 800.304(b), 802.302(a)), a country’s status on CFIUS’s excepted foreign states list benefits its investors by not subjecting them to CFIUS jurisdiction and scrutiny for certain investments and transactions. New Zealand earned a spot on CFIUS’s excepted foreign states list because CFIUS identified, among other factors, New Zealand’s intelligence-sharing relationship and collective defense arrangement and cooperation with the United States.

Under Treasury’s January 6, 2022 final rule, however, New Zealand’s status on the excepted foreign state list currently lasts only until February 12, 2023. Like the other countries named to the list before it, for New Zealand to maintain its excepted foreign state designation beyond February 12, 2023, CFIUS must make a determination that New Zealand has “established and is effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security.” 31 C.F.R. §§ 800.1001(a), 802.1001(a).

CFIUS is already making moves on these determinations. As announced in its January 6, 2022 fact sheet, CFIUS has determined that Australia and Canada have established and are effectively using robust processes to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security. Accordingly, Australia and Canada have each satisfied the criteria set forth in CFIUS’s regulations to qualify as both an “excepted foreign state” and an “excepted foreign real estate state.” See 31 C.F.R. §§ 800.1001(a), 802.1001(a). CFIUS has noted that Australia and Canada will remain on the excepted foreign states list absent further action from CFIUS. CFIUS has not yet announced a determination for the UK, whose National Security and Investment Act 2021 did not come into full effect until January 4, 2022.

Vinson & Elkins has extensive experience advising clients on the legal, policy, and practical dimensions of CFIUS reviews. We are well-positioned to assist clients in understanding how the new regulations may affect their mergers, acquisitions and investments. Visit our website to learn more about V&E’s National Security Reviews (CFIUS) practice.

If you have any questions concerning CFIUS reform or reviews, please contact the following Vinson & Elkins lawyers: Rick Sofield, David Johnson, Jeremy Marwell, or John Satira.