Foreign Business Gets a Bush Assist; Draft Order Would Limit Security Review of Overseas Investment

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A draft presidential order on foreign investment in U.S. companies would limit government security reviews and give more power to such pro-business agencies as the Treasury Department, The Washington Times has learned.

The draft order is opposed by the Defense, Justice and Homeland Security departments as contrary to the intent of a law created in response to the uproar that killed a bid by a United Arab Emirates company to operate several U.S. ports.

A memorandum submitted to Treasury by the opposing departments stated that the new legislation is "security focused" but that the draft executive order for the restructuring of the Committee on Foreign Investment in the United States (CFIUS) does not give their three agencies a formal leading role in conducting reviews or investigations.

According to a national security official involved in the debate, "under the proposed order, Treasury will reserve to itself the final power to approve or disapprove foreign acquisitions and mergers."

The national security official said the memorandum from the three security agencies is a consensus position that includes a list of 11 issues and recommendations that should be added to the executive order to "accurately reflect pro-security interests."

Copies of the draft presidential order and the memorandum outlining the three agencies' concerns were obtained by The Times.

The presidential order would provide implementing rules for the Foreign Investment and National Security Act of 2007, which President Bush signed July 26. The law was to go into effect on Oct. 24, but enactment has been delayed by debate over the order, which the president must sign.

The reform legislation grew out of last year's failed bid by Dubai Ports World to take over operations at six major U.S. ports. The Treasury-led CFIUS initially approved the deal, but it was canceled under pressure from Congress over concerns that terrorists could infiltrate U.S. ports. The law was passed with bipartisan support to tighten security reviews.

In the past, U.S. security agencies in CFIUS could mandate that a foreign purchase of a U.S. company be restricted through a written "mitigation agreement." Such agreements have put limits on foreign nationals holding director positions of U.S. subsidiaries, required vetting of foreign employees and put limits on access to sensitive U.S. technology.

"That executive order rejects the submissions of security agencies and makes potential mitigation agreements subservient to the CFIUS chairman, who represents trade agencies that have a much more liberal view of what should be permitted," the official said.

Mr. Bush defended the scuttled Dubai Ports World deal, and critics say he has used enabling regulations to counteract the intent of laws he signed but did not support while Congress debated them. …