February 21, 2023

CFIUS Recognizes United Kingdom, New Zealand as Excepted Foreign States

Holland & Knight Alert
Antonia I. Tzinova | Robert A. Friedman | Mackenzie A. Zales


  • The Committee on Foreign Investment in the United States (CFIUS) announced that New Zealand and the United Kingdom have established and are effectively utilizing robust procedures to screen foreign investments for national security risks and therefore satisfy CFIUS' excepted foreign state and excepted real estate foreign state requirements.
  • With this decision, all remaining Five Eyes countries (the two new designees, plus Canada and Australia) participating in an intelligence-sharing partnership with the U.S. have achieved the distinction, which means certain qualifying investors from these states will be excepted from CFIUS' expanded jurisdiction over non-controlling investments and real estate transactions, as well as mandatory filing requirements.
  • This Holland & Knight alert reviews the implications of New Zealand and the U.K. receiving CFIUS' excepted foreign state designation.

Following enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), the Committee on Foreign Investment in the United States (CFIUS) updated its regulations to include three significant changes:

  • expanded jurisdiction beyond "control" transactions to include certain non-controlling investments in critical technology, critical infrastructure and sensitive personal data companies (so-called "TID U.S. businesses")
  • mandatory filing requirements for certain sensitive transactions
  • expanded CFIUS jurisdiction that includes certain real estate transactions

FIRRMA also included a preferential exception for certain excepted foreign states and their investors demonstrating robust procedures to screen foreign investments for national security risks (for states) and satisfying certain stringent requirements for board composition, shareholder nationality and compliance with laws (for investors). When the exception applies, qualifying foreign investors are exempt from CFIUS' expanded jurisdiction for non-controlling investment and certain real estate transactions, as well as the mandatory filing requirements. As a preliminary threshold for using the exception, the home country of the foreign investor must qualify as an excepted foreign state under 31 C.F.R. Part 800 or an excepted real estate foreign state under 31 C.F.R. Part 802 (both referred to as an EFS).

Effective Feb. 10, 2023, the U.S. Department of the Treasury has determined that the United Kingdom and New Zealand qualify for EFS status. As further explained in a Treasury Department press release, the action ensures those countries' continued EFS status under CFIUS regulations. To designate a country as an EFS, CFIUS evaluates whether the country has established and is effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the U.S. on matters relating to investment security. With this action, all remaining Five Eyes countries are treated as EFS entities by CFIUS. Importantly, with respect to the U.K., the CFIUS determination covers only the U.K. and Northern Ireland and does not include the British Overseas Territories or the Crown Dependencies.

Businesses considering availing themselves of the benefits of being an excepted foreign investor should remember that not all investors from an EFS automatically qualify for the status. The CFIUS regulations contain a stringent set of requirements for qualification that look at, among other things, board composition, shareholder nationality, place of organization/nationality, principal place of business and compliance with certain laws and regulations. Moreover, for at least three years after a transaction closes, an excepted investor must continue to meet these criteria. Meeting the onerous requirement can be challenging, which ultimately reduces the utility of the exception.

Holland & Knight encourages businesses organized in an EFS with any questions on this rule or the CFIUS process to reach out to a member of the firm's CFIUS Team.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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