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Hastings Law Journal

Abstract

Since the passage of the Exon-Florio Amendment in 1988, foreign investors face the new risk that their acquisition of a controlling interest in a business located in the United States may be blocked or subject to divestiture on national security grounds. Under the proposed regulations implementing the Exon-Florio Amendment, the President, .acting through the Committee on Foreign Investment in the United States, retains broad discretion in determining whether foreign ownership of a particular business threatens U.S. national security.

This Note argues that the undefined national security standards found in the Exon-Florio Amendment and the proposed regulations to implement it create a foreign investment review procedure that intertwines policy and adjudicatory decisions, in turn making the process vulnerable to political manipulation. The author suggests that a future Administration that does not support continuance of the traditional open door policy toward foreign investment may actively use the Exon- Florio Amendment to protect economic interests that only tangentially are related to the U.S. defense industrial base. Such use of the Amendment could conflict with U.S. international treaty commitments and the constitutional due process rights of foreign investors.

As a solution to these potential conflicts, this Note recommends proposals for developing a more definitive national security standard that lessens the current foreign investment uncertainty and separates policy decisions from adjudicatory ones. These proposals are presented against the backdrop debate over the merits of foreign investment and the U.S.'s traditional open door policy and the need to balance these issues in developing a policy that protects the U.S. defense industrial base.

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