Dubai or Not Dubai?: A Review of Foreign Investment and Acquisition Laws in the U.S. and Canada

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ABSTRACT

The proposed purchase of a British company that controlled several ports in the United States by Dubai Ports World could accurately be described as one of the most politically contentious acquisitions in U.S. history. The transaction raised questions not only about U.S. foreign investment laws but provoked national security concerns, as well. Similar issues were raised more recently during the acquisition of a share in Nasdaq by the Dubai stock exchange. In the same vein, Canada has seen similar issues arise during recent transactions involving domestic companies--most notably the acquisition of PrimeWest Energy by TAQA, the national energy company of Abu Dhabi. This Note attempts to address the efficacy of the foreign investment laws of both the U.S. and Canada in light of the political disputes that have surrounded a number of transactions in recent years. The Note concludes that the best result for both countries would be to maintain rigorous review standards while also establishing a climate favorable to foreign investment. To this end, this Note suggests the creation of Conciliation Committee, a bi-partisan legislative committee that would act as a mediator between the government and the parties to a contentious deal to ensure that all sides are satisfied and that the deal will ultimately go through.

TABLE OF CONTENTS

  I. INTRODUCTION

 II. THE U.S.: CFIUS AND THE EXON-FLORIO
     AMENDMENTS
     A. History of CFIUS and the Exon-Florio
        Amendments
     B. The Functioning of CFIUS Under
        Exon-Florio
     C. The Debate over Recent Additions to
        Exon-Florio and CFIUS

III. CANADA: THE INVESTMENT CANADA ACT
     A. Canadian Investment Before the Investment
        Canada Act
     B. The Investment Canada Act
     C. ICA in Practice Today

 IV. RECENT AND CURRENT CONFLICTS OVER THE LAWS
     A. The United States
        i. CNOOC
        ii. Dubai Ports World
        iii. NASDAQ
     B. Canada

  V. RECOMMENDATIONS
     A. Pros and Cons of New Approaches
     B. Option: The Creation of the "Conciliation
        Committee"

VI. CONCLUSION

I. INTRODUCTION

Weighing in at number one on the U.S. Fortune 500, with over 6,775 retail stores is the behemoth known as Wal-Mart. (1) The company has become an international force by not only as the number one retailer in both Canada and Mexico, but also by owning a 95% stake in the Japanese retail company SEIYU and opening stores in Asia, Europe, and South America. (2) Meanwhile, topping Forbes' list of the largest Canadian companies is Royal Bank of Canada (Royal Bank), with over $20.7 billion in sales in 2007. (3) Royal Bank has also seen its fortunes grow internationally, as the Bank now has offices in over thirty countries, including the United States. (4) While both countries are undoubtedly pleased to see their homegrown companies expand internationally, this development raises a question concerning the response of each country in the face of an international corporation looking to compete with or acquire a domestic business.

In both the United States and Canada, policies directed at foreign investments and acquisitions have long been a topic of contentious debate at a volume much louder than other countries. (5) Recent events in each country have reignited the debate over the proper legal response to a foreign company looking to invest in or acquire a domestic company. With national security concerns often on the forefront of people's minds, the debates have become more political and heated in recent years. These debates have raised a number of questions in both countries as to how these cases should be handled by the law.

This Note focuses on the recent laws that emphasize government review of foreign investment and, in particular, foreign acquisitions in both the United States and Canada. Part II starts by providing a brief historical overview of the U.S. …