"Foreign Investors Skip Government Review at Their Peril: U.S. District Court Dismisses Challenge to President's Authority"

On October 9, 2013, the U.S. District Court for the District of Columbia dismissed the first serious judicial challenge to the President’s authority to block foreign acquisitions that are deemed a threat to U.S. national security. The case, Ralls Corporation v. Committee on Foreign Investment in the United States was brought on behalf of Ralls, a Chinese-owned Delaware corporation, after it was forced to unwind its purchase of membership interests in several wind farm projects located near a sensitive Navy installation where drone training missions are conducted. The transaction had not been submitted for pre-acquisition review by the Committee on Foreign Investment in the United States (“CFIUS”), a multi-agency panel authorized by the Defense Production Act to assess transactions that present a potential threat to the national security of the United States.

This Stroock Special Bulletin discusses the Ralls transaction and litigation, the CFIUS review process, and four important lessons to be learned from the Ralls decision.