March 24, 2006

Senate bill seeks oversight of foreign takeovers

By Susan Cornwell

WASHINGTON (Reuters) - The head of the Senate Banking
Committee proposed on Friday to give Congress more oversight of
foreign acquisitions of U.S. companies, but stopped short of
saying lawmakers should have the power to veto deals.

The executive branch of the U.S. government currently
dominates the review approval process, a system that backfired
badly on the Bush administration when Republican lawmakers
objected to an approved contract under which an Arab company
was to manage operations at U.S. seaports.

After an uproar in Congress over the possible national
security implications of the Dubai Ports World deal, the
company this month said it would sell the U.S. assets it had
just acquired to a U.S. buyer.

Richard Shelby, an Alabama Republican who heads the
Senate's banking panel, set out draft legislation on Friday
that would require administration officials to report to
Congress that they are reviewing such proposed deals.

The leaders of both parties in both houses of Congress, as
well as heads of key committees, would be notified within 10
days of the start of a contract's review by the inter-agency
Committee on Foreign Investments in the United States (CFIUS).
The panel, which vets contracts for national security concerns,
normally completes it works within 30 days.

Shelby backed away from an option to let Congress overturn
deals that get CFIUS approval. The White House and the U.S.
business community opposed such a provision, saying it could
scare away foreign investment.

A spokesman said Shelby sought to balance lawmakers'
oversight, concerns for national security and "undue
uncertainty" that could discourage foreign investors.

The bill, to be voted on in Shelby's panel next week, would
require longer, 45-day CFIUS reviews of deals involving foreign
state-owned companies or "critical" U.S. infrastructure.

It would make the Defense Department the vice chair of
CFIUS. The panel is chaired by Treasury and has a number of
other departments represented, including Homeland Security and
State. The bill also makes the director of national
intelligence a formal member of the CFIUS panel.

David Marchick, a lawyer at Covington and Burling who has
represented companies seeking CFIUS approval, said there was
"relief" in the business community that Shelby had not proposed
a congressional veto over foreign takeovers.

"But it's still a very, very tough bill, that reflects the
very difficult political environment on Capitol Hill," Marchick
told Reuters.

Marchik said requiring 45-day reviews of deals that involve
"critical" U.S. infrastructure could affect most proposed
acquisitions considered by CFIUS.

Further, he said, the requirement that Congress be notified
of all proposed transactions just 10 days into the review would
create "a risk of greater politicization" of the process.

The draft bill says CFIUS should rank countries according
to their nonproliferation control regimes, ties with the United
States, and potential for transshipments of
militarily-sensitive technologies. These rankings would be
considered in all subsequent reviews.

There are other proposals on CFIUS already in Congress.
Sen. Susan Collins, head of the Senate Homeland Security
Committee and a Maine Republican, has called for the review of
foreign takeovers to be headed by the Department of Homeland
Security. Shelby opposes that idea, his spokesman said.

In the House, Missouri Republican Rep. Roy Blunt is working
on CFIUS legislation as well, but the Senate is expected to
move first. Rep. Duncan Hunter, a California Republican, has
introduced legislation to require U.S. ownership of all
infrastructure deemed critical to national security.