House Dems push new security regulations on foreign investment

House Democrats are moving quickly to approve legislation in response to last year’s controversy surrounding a United Arab Emirates-based company’s attempted takeover of several U.S. shipping ports, but may be headed for a clash with a Republican presidential candidate and Senate Democrats.

House Democrats are moving quickly to approve legislation in response to last year’s controversy surrounding a United Arab Emirates-based company’s attempted takeover of several U.S. shipping ports, but may be headed for a clash with a Republican presidential candidate and Senate Democrats.

Leaders of key House and Senate committees are expected to forge ahead with rival bills similar to those approved last year when both chambers were under Republican control.

Congress was unable then to reconcile differences over how to update rules governing the Committee on Foreign Investment in the U.S. (CFIUS), an interagency panel led by the Treasury Department that reviews foreign investment deals for national-security threats. CFIUS approved Dubai Ports World’s acquisition of a British company that operated several U.S. ports, sparking vibrant debate one year ago this month.

Privately, House Financial Services Committee Chairman Barney Frank (D-Mass.) has told supporters of the House bill that his goal would be to move legislation to the House floor immediately following the President’s Day recess, according to business sources. This would allow House Democrats to say they had moved legislation responding to the Dubai Ports deal early in their majority tenure.

Frank currently is working on a manager’s amendment to bipartisan legislation approved unanimously by the House in 2006 and reintroduced in January by Reps. Carolyn Maloney (D-N.Y.), Joseph Crowley (D-N.Y.), Republican Whip Roy Blunt (R-Mo.) and Rep. Deborah Pryce (R-Ohio), two business sources said.

On the floor, the bill is expected to be considered under an open rule that would allow amendments, and Frank has indicated some misgivings regarding amendments from the Republican side. For example, Rep. Duncan Hunter (R-Calif.), a presidential candidate and vocal critic of the Dubai deal, voted for last year’s House bill under some pressure from leadership. He might be more inclined to offer amendments while pursuing a presidential bid, particularly with Democrats running the House, one lobbyist said.

A spokesman for Hunter on the Armed Services Committee, Josh Holly, said Hunter would not make a decision on whether to seek amendments until he saw a committee-approved bill. Holly indicated Hunter would be watching to see if the House bill is updated to reflect Hunter’s concerns about the recent merger between France’s Alcatel and U.S.-based Lucent Technologies, which includes a subsidiary that has done defense work.

CFIUS approved the Alcatel-Lucent merger last year, but imposed certain conditions on it that business groups said set a bad precedent, since they would allow the government to unravel the deal in the future.

Business groups want Congress to approve CFIUS legislation because they hope it will counter actions taken by the administration in the wake of the Dubai Ports controversy. CFIUS investigations have increased in the last year, and the administration is imposing more conditions on deals it approves, according to the president of the Organization for International Investment, Todd Malan. In testimony at a Financial Services hearing this week, he said the CFIUS bureaucracy went into a “hyper-cautious” mode in the wake of the ports scandal that could decrease foreign investment in the U.S.

In the Senate, Democratic presidential candidate and Banking Committee Chairman Chris Dodd (D-Conn.) told The Hill he intends to move a bill quickly. He also suggested it would look similar to the legislation approved by the Senate in 2006 that was opposed by the U.S. Chamber of Commerce, Business Roundtable, Organization for International Investment and other groups representing U.S. multinationals.

Dodd, whose presidential campaign is seen by business as a potentially complicating factor in the debate, said his committee would consider modifying last year’s bill, but said it may make more sense to consider changes during a conference with the House.

“I don’t know if any changes have occurred since last fall that would warrant any changes to the bill,” he said. “My intent would be to get it up and out of the committee pretty quickly.”

In a statement, Dodd spokesman Marvin Fast described Dubai-based management of ports as “another case of the outsourcing of our critical infrastructure and security.” He said Dodd had worked closely with Banking leaders on last year’s bill, which he described as greatly improving the government’s process for reviewing and authorizing foreign investment in the U.S.

Similarly, Sen. Charles Schumer (D-N.Y.), who helped lead Democratic criticism of the CFIUS approval of the Dubai Ports World deal, expressed support for the Senate bill opposed by business.

“I thought the bill last year was pretty good,” Schumer told The Hill. He said there might be some small changes, but predicted the business community would “calm down” once it realized the legislation is not leading to a slowdown of foreign investment. Schumer added that he has heard few complaints about the Senate bill.

In an interview, Crowley said his sense from business is that it would be better to do nothing than to pass the Senate bill. Maloney agreed that business groups prefer the House bill, which she described as carefully balancing national security with economic security. She said Dodd and other senators might change their views if they hold hearings on CFIUS, and indicated differences could also be addressed in conference.

If Dodd wants to move the 2006 Senate bill to expedite the process and address differences in a conference, Crowley suggested it would be possible to get a final bill. If it indicates the Senate view on policy, however, he said it would be difficult to get a final bill approved.

Dodd acknowledged some business criticism of the 2006 Senate bill, which, unlike the House bill, allowed initial reviews to be stretched to 60 days and required that certain congressional committees be notified of a CFIUS review once one is launched. 

Business groups argue this could politicize reviews, and the executive director of the Emergency Committee on American Trade, Cal Cohen, said it could also serve as a roadmap showing other countries how to block U.S. investments in their countries. The House bill only allows 30-day reviews, and does not notify congressional committees until after the conclusion of a second-stage investigation, held only for deals that trigger serious national-security concerns.