On the heels of releasing its 2023 Annual Report to Congress, the Committee on Foreign Investment in the United States (CFIUS) publicly announced six new penalties on parties that failed to comply with CFIUS requirements in connection with cross-border transactions. The penalties range from $100,000 to a staggering $60 million fine for T-Mobile’s alleged violation of the terms of a National Security Agreement (NSA), imposed as a condition of CFIUS’s approval of T-Mobile’s merger with Sprint.
These penalties mark a significant shift in the government’s enforcement posture and its signaling to the market regarding compliance. Indeed, in its nearly 50-year history, CFIUS previously issued only two penalties. Going forward, parties to cross-border transactions may fairly conclude that this shift portends a significant change in the cost-benefit dynamics of voluntary CFIUS filing decisions.
Specifically, with CFIUS increasingly using NSAs to manage perceived national security risks, increasingly relying on standardized NSA templates as a basis for negotiations, and closely monitoring NSAs for post-closing noncompliance, parties may find the costs of voluntarily submitting to a CFIUS review rising relative to the potential benefits of receiving CFIUS clearance.
