Research On Covered Transactions Of U.S. Foreign Investment Security Review

Cross-border capital flows can boost employment,enhance production efficiency,and improve the industrial structure of host nations.To fully enjoy the benefits of foreign investment and promote investment facilitation,countries create an attractive business environment by signing investment agreements,formulating and implementing investment policies that encourage the inflow of foreign investment.But as there is an influx of foreign investment,host countries are gradually realizing that an open investment environment can also pose threats and risks to national interests.Through mergers and acquisitions,foreign investment can take over the management and operation of the acquired businesses,acquire their assets,technologies,and core information,and quickly grow their market share or even establish monopolies.Foreign investment will have a greater impact on the host country’s national security if it flows into key infrastructure,energy,or core technology sectors.In order to maximize the benefits of foreign investment inflows while mitigating the risks of foreign investment inflows,host nations have established foreign investment security review systems.Take the U.S.as an example,since the 1970s,the U.S.has established a comprehensive foreign investment security review system driven by both the investment cases and the global political and economic environment.However,with the enactment of FIRRMA,the U.S.foreign investment security review system has gradually deviated from its purpose of maintaining national security,and the great discretionary power of CFIUS and the broad and vague legislation have made foreign investment security review a tool for the U.S.to maintain its international dominance.This paper focuses on the scope of "covered transactions" in the U.S.foreign investment security review system.By analyzing the relevant provisions of "covered transactions" in the U.S.foreign investment security review system,this paper discusses the ambiguity of the scope of "covered transactions" in FINSA due to the lack of clear and objective standards.It is further argued that the enactment of FIRRMA has failed to improve the ambiguity of its scope,and has expanded the types of "covered transactions",making its scope not only ambiguous but also broader.This paper also argues that the review of "covered transactions" violates the MFN principle in the U.S and discusses whether the security exceptions can preclude the illegality of a "covered transaction" from the perspective of the BIT.Part Ⅰ introduces the definition of national security and the U.S.foreign investment security review system.First,the characteristics of the concept of national security are explained,and the meaning of national security is elaborated.Secondly,we explore the meaning of national security in the context of foreign investment by analyzing the national security-related expressions in relevant U.S.laws and policy documents.Finally,the development history of the U.S.foreign investment security review system is sorted out around controversial investment cases.Part Ⅱ analyzes the "covered transaction" in the foreign investment security review system.The term "covered transaction" is defined first,followed by a discussion of its legislative background and an analysis of how its definition has changed over time.Part Ⅲ discusses the vagueness and broadness of the term "covered transaction." The first part analyzes the scope of "covered transactions" in FINSA and discusses the ambiguity of its jurisdiction.The second part analyzes the changes in the scope of "covered transactions" in FIRRMA and explain that FIRRMA has expanded the scope of "covered transactions" without improving the ambiguity of the jurisdiction of FINSA.Finally,the ambiguity and breadth of the scope of "covered transactions" is further discussed by analyzing the strengthening of CFIUS’s review authority.Part Ⅳ discusses whether a "covered transaction" violates a U.S.BIT.First,it describes the content of the security exceptions in the U.S.BIT.Second,it analyzes the relationship between the security exceptions in the BIT and the "covered transaction" review.Thirdly,it is proposed that the "covered transaction" review violates the principle of most-favored-nation treatment in the U.S.BIT,and finally,it is discussed whether the security exceptions can exclude the illegality of the "covered transaction" review.Part Ⅴ proposes four strategies for dealing with Chinese investment in the United States based on the previous analysis of the scope of "subject transactions.These include actively seeking judicial remedies for foreign investment security reviews,promoting the negotiation of the U.S.-China BIT,establishing a risk assessment and early warning mechanism for U.S.foreign investment security reviews,and making full use of the existing mechanisms for U.S.foreign investment security reviews.