Pentagon seeks scrutiny of big foreign deals

R. A. Hettinga rah at shipwright.com
Sat Apr 6 09:42:27 EST 2002


[The implications of this for cryptography are rather obvious, I think...
--RAH]

http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3S9LPANZC&live=true&tagid=FTDO9DHMZJC

Pentagon seeks scrutiny of big foreign deals
By Peter Spiegel in Washington
Published: April 5 2002 01:25 | Last Updated: April 5 2002 14:16


The US Defence Department wants all large foreign acquisitions of American
companies to be approved by a secretive national security committee, a move
designed to restrict access to sensitive US technology.

According to draft legislation written by the Pentagon and obtained by the
Financial Times, all deals with overseas buyers valued at more than $100m
would have to gain approval from the Committee on Foreign Investment in the
US, an obscure interagency panel chaired by the Treasury Department and
charged with ensuring foreign acquisitions do not violate US national
security.

The proposal, included in the Bush administration's draft of next year's
defence authorisation bill, was circulated within the administration last
week and has infuriated officials at departments outside the Pentagon -
particularly the Commerce and Treasury Departments - who were apparently
not consulted in the drafting of the measure.

"This is incredibly ironic, when this is the type of overly broad merger
review that the US has criticised the EU for," said one person familiar
with the dispute.

Currently, CFIUS depends on a system of voluntary reporting and reviews, on
average, less than 10 per cent of foreign acquisitions each year. But in
addition to requiring reviews of all deals of more than $100m, the
legislation would mandate CFIUS approval on deals where the US company has
had any Defense Department contracts valued at more than $1m over the past
three years. It would also force reviews of any deals involving foreign
firms owned or controlled by a national government.

There was no comment from the Pentagon, but according to insiders, the
Defense Department attempt ed to slip similar language into post-September
11 legislation several months ago but was foiled at the eleventh hour.

The latest effort is seen as much more likely to succeed, as it is
contained in a stand-alone bill for approval by Congress, which has been
increasingly acquiescent to Pentagon requests.

A year ago, CFIUS caused an embarrassing rift between the US and the
Netherlands after it held up Dutch group ASM Lithography's $1.2bn takeover
of American technology company Silicon Valley Group. It led the Dutch
foreign minister to warn of a "blemish" on US-Dutch relations, and ASM was
forced to sell off SVG's highly prized optics division before completing
the deal.

-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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