In a turn of events that confounded many legal experts and may embolden foreign companies seeking to make potentially sensitive investments in the US, the US government has entered into a settlement with a Chinese company that took it to court over the process used to force the company to dispose of four wind farms near a restricted US military base in Oregon.
Under the settlement with the secretive Committee on Foreign Investment in the US (CFIUS), Atlanta-based Ralls Corp, a subsidiary of the Chinese global conglomerate SANY Group, will still have to dispose of the properties, as ordered by US president, Barack Obama. However, it may sell them to a buyer of its own choice – an Atlanta physician of Chinese origin, according to CCTV America, a branch of the Chinese state broadcaster.
In addition, the settlement, which has not been made public, stated that Ralls and SANY “are welcome to submit further transactions and investments to CFIUS for review”, CCTV reported, noting that CFIUS had already approved Ralls’ acquisition of windfarms in Colorado and Texas.
While the settlement left much of the status quo in place, legal experts considered Ralls to have scored a coup when a US appeals court ruled in 2014 that the company had a constitutional right to see and rebut the unclassified evidence on which CFIUS based its order to sell the Oregon wind farms – even though Mr Obama's decision itself was beyond review.
Stephen Heifetz, a partner in the Washington, DC-based law firm Steptoe & Johnson, who formerly represented the department of homeland security on CFIUS, said Ralls secured an important procedural victory with the case. He believes CFIUS may have agreed to settle fearing that its broad powers might have been undercut by court decisions restraining its authority if it continued the litigation.
Ralls’ problems arose partly from its failure to apply for CFIUS approval before buying the Oregon windfarms. “We counsel clients that they need to look at all the facts and circumstances, and when in doubt about whether an acquisition touches on national security, filing with CFIUS is the way to go,” Mr Heifetz said.
George W Hicks, who represented Ralls in the appeals court as a partner in another Washington, DC-based law firm, Bancroft, said the settlement was “a very fair and welcome outcome for Ralls. I think it means that companies that want to invest in the US will be treated equally and fairly with respect to their due process rights under the Constitution and federal law,” Mr Hicks said.