July 26, 2006

Lawmakers vote to tighten foreign investment rules

By Susan Cornwell

WASHINGTON (Reuters) - Both chambers of Congress on
Wednesday voted to tighten rules for approving foreign
takeovers of American companies, prompted by an uproar over the
Bush administration's backing of an Arab company's acquisition
of the operations of several major U.S. ports.

But a fight was brewing between the House of
Representatives and Senate, which passed different versions of
the legislation.

The Senate bill, passed by voice vote, would require the
U.S. government to spend an extra 45 days examining deals with
foreign state-owned companies for national security concerns.

This provision is included in the House version, which was
approved by an overwhelming majority. But some House members
oppose another part of the Senate bill that would require the
executive branch to notify Congress of proposed U.S.
acquisitions by a foreign company before they are approved.

Typically, approvals of foreign acquisitions are granted
within 30 days by the inter-agency Committee on Foreign
Investments (CFIUS) in the United States, headed by the U.S.
Treasury Department, unless national security concerns are

But CFIUS' decision in February to approve a $6.85 billion
deal that would have put Dubai Ports World in charge of
shipping operations in New York, New Jersey, Baltimore, Miami,
New Orleans and Philadelphia, without taking extra time to mull
the security implications, caused an outcry in Congress.

Following the political uproar, the United Arab
Emirates-owned company said it would sell the U.S. port assets.

Both bills stop short of giving Congress an explicit veto
of any deals. Business lobbyists said such veto power would
frighten foreign investment, which is linked to 5 million jobs.

The Senate measure requires the president to notify
Congress about pending acquisitions within 10 days of the start
of the review.

Now that both chambers have approved a CFIUS reform bill,
Senate and House negotiators will have to work out a final,
compromise version of the legislation.