National Security Creep in Corporate Transactions

66 Pages Posted: 7 Sep 2022 Last revised: 27 Nov 2023

See all articles by Kristen Eichensehr

Kristen Eichensehr

University of Virginia School of Law

Cathy Hwang

University of Virginia School of Law

Date Written: September 4, 2022

Abstract

National security review of corporate transactions has long been a relatively sleepy corner of regulatory policy. But as governments merge economic and national security, national security reviews are expanding in frequency and scope, causing numerous deals to be renegotiated or even blocked. This expansion of national security’s impact on corporate transactions—which this Essay calls “national security creep”—raises theoretical questions in both national security and contract law and has important practical implications for dealmaking and the economy.

This Essay makes several contributions. First, it provides an updated account of the national security review process for investments, which has changed substantially in recent years with the expansion of the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), the global diffusion of CFIUS-like processes, and U.S. moves to regulate outbound investment. Second, this Essay considers the theoretical impact of national security creep. It argues that the executive branch’s increasingly broad claims about what constitutes national security may cause judges to alter long-standing deference to the executive on national security issues, with implications for deal parties, the executive, and scholars who debate whether courts should treat national security as “exceptional.” It also argues that CFIUS’s temporally tentacular review authority upends well-understood contract theory that considers regulatory review to be an ex ante contract design cost. Finally, this Essay considers practical implications of national security creep and concludes with suggestions for how the executive, courts, Congress, and scholars should approach national security creep going forward.

Keywords: National security, CFIUS, Committee on Foreign Investment in the United States, Corporate law, Mergers & acquisitions, Investment, Deference, Contracts, FDI, Antitrust, TikTok, Economic Security, Economic Statecraft

Suggested Citation

Eichensehr, Kristen and Hwang, Cathy, National Security Creep in Corporate Transactions (September 4, 2022). 123 Columbia Law Review 549 (2023), Virginia Public Law and Legal Theory Research Paper No. 2022-64, Virginia Law and Economics Research Paper No. 2022-20, Available at SSRN: https://ssrn.com/abstract=4211540

Kristen Eichensehr (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Cathy Hwang

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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