Behind the acceptance of the hottest Trinity case,

2022-10-18
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Behind the acceptance of the Trinity case: Chinese enterprises' investment in the United States is maturing

behind the acceptance of the Trinity case: Chinese enterprises' investment in the United States is maturing

China Construction machinery information

Guide: Rawls, a subsidiary of China's Trinity Group, sued Obama in the U.S. court, which is a landmark event under the trend of Chinese enterprises' greatly deepening the depth and breadth of investment in the United States. This also marks the gradual maturity of Chinese enterprises' investment in the United States. February 22nd, 2013

Rawls, a subsidiary of China's Sany group, sued Obama in the U.S. court, which is a landmark event under the trend that Chinese enterprises have greatly deepened the depth and breadth of investment in the United States. This also marks the gradual maturity of Chinese enterprises' investment in the United States

on February 22, 2013, the U.S. court decided to formally accept the case of Rawls company suing U.S. President Barack Obama, but rejected some appeals. The judge asked Obama to provide a reply before March 28 to clarify whether the presidential decree he signed in 2012 violated the provisions of the fifth amendment to the U.S. Constitution, "deprivation of property without due process"

Rawls is an important enterprise in China's construction machinery manufacturing industry, and an affiliated enterprise of Sany group established in the United States. In March, 2012, it acquired four wind power projects of another American company located near a military facility in Oregon. On September 28, 2012, US President Barack Obama issued a presidential decree rejecting the acquisition of Rawls. On October 1st, 2012, Rawls sued President Obama, CFIUS and Geithner, the then chairman of CFIUS, in the U.S. District Court of Columbia

Rawls filed a lawsuit in the U.S. court to request judicial review of President Obama's order and the two executive orders issued before CFIUS. BASF will cooperate with Jilin Province, Changchun City and Economic Development Zone in two aspects. It is a landmark event under the trend that Chinese enterprises have greatly deepened the depth and breadth of investment in the United States

in recent years, with the rapid expansion of the field and scale of Chinese enterprises' investment in the United States, the number of transactions involving U.S. national security factors is also gradually increasing. According to relevant official statistics, from 2005 to 2011, the number of Chinese enterprises' investment transactions in the United States subject to CFIUS review showed an increasing trend year by year. In 2005, only one transaction of Chinese acquirer was reviewed by CFIUS, and in 2011, 10 transactions were reviewed by CFIUS, which is the sum of the four years from 2005 to 2008. At the same time, the proportion of transactions reviewed by CFIUS in the whole year is also rising. In 2011, CFIUS transactions reviewed by the acquirer for China accounted for about 9%. The national standard stipulates that the experimental speed is 200mm/min, and some market equipment is 10~500mm/min, second only to Britain (22.5%) and France (12.6%), surpassing Canada, Japan and other countries. To some extent, this reflects that Chinese enterprises' investment and M & A in the United States are undergoing qualitative changes. So, how to view the significance of Rawls' lawsuit

first of all, this is the first time since 1990 that the president of the United States has formally vetoed mergers and acquisitions in the United States by foreign investors on the grounds that it may endanger the national security of the United States, in accordance with the authorization of section 721 of the defense products act. Coincidentally, the acquirer of the foreign M & a transaction rejected by the U.S. president in 1990 is also an enterprise from China. The US president's veto of foreign mergers and acquisitions in the US is a low probability event, but it all happens to Chinese enterprises. Does it mean that Chinese enterprises are the target of the US national security review

the national security review system in the United States has been criticized by foreign investors for its relatively low transparency. This, of course, is related to the fact that the transaction under review may involve sensitive information about the national security of the United States. At the same time, many transactions involve major sensitive business information of listed companies, which may have an impact on the market, and the relevant information also needs to be kept confidential. Therefore, the specific standards of CFIUS national security review have always been shrouded in a thick fog. From the public information, it is difficult to see the real reasons and considerations of CFIUS' relevant decisions

for example, according to relevant official statistics, CFIUS reviewed a total of 737 transactions in the seven years from 2005 to 2011, of which 55 were withdrawn by the applicant (accounting for about 7.5%), and the country of the acquirer of these withdrawn transactions has not been known through public channels. Statistics also show that the majority of transactions reviewed by CFIUS (more than 90%). However, whether the acquirer has adjusted the transaction in order to reduce the possible national security risks of the transaction at the request of CFIUS, and there is also a lack of publicly available information to judge. Existing studies generally believe that the correlation between CFIUS decision and acquirer's country is not very high. Many transactions of investors from allied countries of the United States have been "made difficult" by CFIUS, while mergers and acquisitions in the United States by acquirers from some other countries have successfully passed the Cfius review. Of course, the decision-making process of CFIUS is also a political process, and there is the possibility of being affected by political factors in a specific period

secondly, the lawsuit request of Rawls company, that is, to require the U.S. court to conduct judicial review of the presidential decree and CFIUS directive, is extraordinary. Article 721 of the U.S. Defense Products Act, which is the main legal basis of President Obama's order, clearly stipulates that the president enjoys extensive executive power in maintaining national security. The president's decision under section 721 is final and not subject to judicial review by the United States courts. The president is only responsible to Congress for the exercise of relevant discretion. Therefore, it is unknown whether the U.S. Court has jurisdiction over the case, whether it will carry out judicial review of President Obama's order, or even declare the presidential order invalid. Judging from the recent media reports on the results of the first hearing of the case, Rawls' chances of winning the case are not significant. Regardless of the final outcome of the case, the case has certain positive significance for deepening foreign investors' attention to the openness, transparency and accountability of the decision-making process of the U.S. national security review

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then, how should Chinese enterprises deal with the U.S. national security review system with considerable uncertainty and low transparency? For Chinese enterprises investing in the United States, they should not hesitate and miss the M & a opportunity window because the transaction may involve U.S. national security factors; nor should they take chances and try to avoid the U.S. national security review. The national security review process may delay the progress of the transaction and increase the transaction success However, the safe harbor principle of the U.S. National Security Review System (transactions that have been reviewed and approved by the U.S. president or CFIUS, i.e. obtaining the safe harbor status, are not subject to re examination in principle except for special circumstances such as false statements by the applicant) and the traceability principle (even if the transactions have been completed, CFIUS can also review, and if they may endanger the national security of the United States, the acquirer can be forced to sell relevant assets, etc.), The cost of evading national security review is high, and the gains often outweigh the losses

Chinese enterprises investing in the United States should deepen their understanding of the U.S. national security review system, strengthen the awareness of national security review risk prevention, and improve the level and ability of national security review risk management. In M & A investments that may involve national security sensitive factors, take the initiative to apply to CFIUS for national security review, and actively communicate with CFIUS to reduce transaction uncertainty. Recently, the widely reported transactions of CNOOC's acquisition of Nixon and Vientiane group's acquisition of American battery manufacturer a 123 are all successful cases of Chinese enterprises managing the risk of national security review in the United States. According to a recent report by the financial times, Rawls has also actively adjusted its national security review risk management strategy for investment in the United States. Rawls' Wind Power M & a project in Colorado, the United States, with an amount of US $80million, although the transaction ostensibly did not need to apply for national security review, Rawls took the initiative to apply for and successfully passed the national security review of CFIUS. This also marks the gradual maturity of Chinese enterprises' investment in the United States

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