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Biden’s New Mandate: Treasury Department at the Helm of Outbound Investment Limits

President Joe Biden has put pen to paper, releasing a fresh executive order that puts a pin in U.S. investments targeted at sensitive tech from ‘countries on our watch list’. What’s unique? This order is going to be orchestrated using a playbook set by the Treasury Department – marking a distinct shift from how foreign investments were traditionally overseen.

What’s on the Table?

  1. Targeted Tech Domains: The order puts boundaries on investments geared towards semiconductors, microelectronics, quantum computing, and AI – especially when we’re talking about nations like China.
  2. Clear-cut Rules: It’s not just about saying ‘no’. The order pushes for well-defined regulations that stop U.S. nationals from diving into specific transactions overseas which could potentially be a risk for national security. And if you’re an American investor and you’re eyeing some technology abroad? It’s going to need a check-in with the Treasury.
  3. A Guide to the Treasury’s Brainwaves: As Giovanna Cinelli from Morgan Lewis puts it, the order can be seen as a sneak peek into the Treasury’s train of thought. While the blueprint aligns with expectations, the devil, as they say, will be in the details.

Comparing Old with New

The rumor mill had it that the new order would echo the Committee on Foreign Investment in the United States (CFIUS). Traditionally, if a foreign investor wanted to make moves in the U.S., they’d knock on CFIUS’s door, waiting for the nod or a no-go based on national security implications.

However, Biden’s playbook changes the game. Jeremy Zucker from Dechert sums it up: U.S. investors will need to know the rules before setting foot in questionable territories. The aim? To tackle the sheer magnitude and diversity of U.S. overseas investments without getting swamped in the process.

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Have a Say

August 14 sees the Treasury Department issuing an Advance Notice of Proposed Rulemaking. Public opinions? They have 45 days to pour in. Zucker believes this window is crucial, especially for shareholders deliberating on definitions like “U.S. persons” and the finer aspects of “covered foreign person”.

Parsing Through the Lingo

According to David Plotinsky of Morgan Lewis, while some terms may sound familiar, the resemblance between the new regulations and CFIUS’s approach is fleeting.

Brendan Hanifin from Ropes & Gray points to the flood of inquiries: Will the order impact existing investments? His two cents? The regulations aim to look ahead.

However, Zucker raises an eyebrow at the U.S. playing solo. Pulling back from specific investments could leave a gap – one that other nations might be eager to fill. There’s a shared sentiment at global platforms like the G7 Summit, but it’s a balancing act. With China in the picture, David Plotinsky wonders how the scales might tip – will China dissuade U.S. investors or lure them in, despite the new barriers?

In the grand scheme, while the foundation is laid, there’s a lot that remains to be sculpted. As Hanifin aptly states, the landscape is bound to evolve from its current contours.

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