CFIUS Annual Report Touts an Increase in Penalties and Efficiency in Transaction Reviews

The Committee on Foreign Investment in the United States ("CFIUS" or "the Committee") recently published its annual report, which provides data on reviewed transactions and a summary of notable developments in calendar year 2023. The report demonstrates CFIUS's continued robust use of mitigation agreements to oversee post-closing business activities of transaction parties, and includes a list of sample mitigation measures. The report also indicates increasing use of civil monetary penalties for violations of CFIUS regulations or mitigation agreements, a development that companies should consider when planning a transaction or carrying out obligations under an existing mitigation agreement.

Prior to 2023, CFIUS had imposed only two civil monetary penalties in its entire history. In 2023, CFIUS assessed four such penalties for breaches of material provisions in mitigation agreements. The Committee also issued its first-ever formal determination of noncompliance with mandatory filing provisions.

CFIUS received 109 declarations of covered transactions, the lowest number submitted since 2019—a decline CFIUS attributes to a decrease in global merger activity in 2023. In addition, the number of notices decreased by more than 18%. This drop is most significantly represented in a decline in voluntary filings. The share of mandatory filings slightly increased in 2023 to one-third of total filings as compared to under 29% in 2022 and 2021.

The Committee touted its improved efficiency, citing a reduction in the withdraw and refile rate for the first time in five years from 23% in 2022 to 18% in 2023. CFIUS also highlighted an increase in the number of transactions cleared in the initial review period (30 or 45 days depending on format) from 58% in 2022 to 66% in 2023.

CFIUS entered into 36 mitigation agreements in 2023 and was monitoring 246 mitigation agreements as of the close of 2023 through steps such as on-site compliance inspections; reviewing reporting from transaction parties and third parties; investigating potential violations; and overseeing remedial action.

Through this report, public remarks by senior officials, private sector outreach, and significant recent uses of and proposed enhancements to its penalty authorities, CFIUS has signaled an enhanced focus on monitoring and enforcement efforts. Parties should consider these trends, and CFIUS's augmented statutory authorities and policy role, in connection with transaction risk assessments and deal planning.