RiskWatch: Outbound Investment and National Security


18-minute listen

In this episode of the podcast, Vcheck Global spoke with Laura Black and Christian Davis of the law firm Akin Gump about the Biden Administration’s plans to regulate outbound investment to protect US national security and economic competitiveness interests that would screen and monitor outbound investment from the United States to ‘countries of concern’. 

Per the requirements of the 2023 Consolidated Appropriations Act and in light of the continued deterioration of US-China relations, the Departments of Treasury and Commerce submitted reports to Congress earlier in the year that described plans to regulate outbound investment to protect US national security and economic competitiveness. Future outbound investment regulation is expected to prohibit certain investments to ‘countries of concern’ such as China and be focused on key advanced technologies that could be used in a potential military conflict or are considered vital to the future economic competitiveness and supply chain of the United States. Regulated technologies would likely include semiconductors, quantum computing and artificial intelligence. It is also expected that outbound investment regulation would include the collection of information on investments through a notification process. 

The executive branch and Congress have been debating for well over a year whether to regulate or restrict certain kinds of outbound investment to China and other ‘countries of concern’. While the government has reviewed in-bound foreign investment for national security risk for nearly 30 years through the Committee on Foreign Investment in the United States (CFIUS), the growing national security concern about US capital supporting China and other countries’ technological advancement has made it increasingly likely that the US will implement an outbound investment screening regime, although the administration is not expected to create a CFIUS equivalent for outbound investment that would feature a thorough investment review process. 

Going forward, the government will likely have an expectation of compliance for private market investors who can start to incorporate national security-related checks into their pre-investment diligence process. Investors can proactively prepare for the coming regulation by ensuring they understand the technologies and ‘countries of concern’ that would be swept up in the regulation and whether foreign investments under consideration are within the scope of the restrictions or could be in the future. 

Key Highlights: 

  • 01:10 – Understanding why there is an increased consensus that there is a need for broader action to restrict outbound investment 
  • 03:10 – How deteriorating US-China relations are a driving factor in the push for an outbound screening regime 
  • 04:30 – The technologies and industries that would fall under any future regulation 
  • 05:04 – Outbound investment in AI as a national security concern 
  • 09:10 – Recommendations for investors on ensuring their due diligence efforts are compliant with outbound screening regulation 
  • 15:50 – Steps that the Departments of Treasury and Commerce can take to ensure future outbound investment regulation achieves its objectives 

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