Senators differ on plans for overhaul of foreign investment oversight

Senate Homeland Security and Governmental Affairs Chairwoman Susan Collins, R-Maine, Monday introduced bipartisan legislation to demolish the executive branch committee that approved the Dubai Ports World purchase, setting up a conflict with Banking Chairman Richard Shelby, R-Ala., over how the process should be overhauled.

Shelby plans to mark up his own legislation to revamp the Committee on Foreign Investment in the United States the week of March 27, when Congress returns from its St. Patrick's Day recess.

Collins' bill would abolish CFIUS and create a process steered by the Homeland Security Department. It is perhaps the most sweeping of a spate of proposals introduced in the past two weeks aimed at improving national security reviews of proposed investments.

Collins' bill -- co-sponsored by Homeland Security and Governmental Affairs ranking member Joseph Lieberman, D-Conn., and Sens. Norm Coleman, R-Minn., Daniel Akaka, D-Hawaii, Lindsey Graham, R-S.C., and Jim Talent, R-Mo. -- replaces CFIUS with a new body called the Committee for Secure Commerce.

The Homeland Security Department would chair the panel, while the Defense Department and Treasury Department would hold vice chairmanships. Other agencies would be appointed at the discretion of the president.

But a spokesman for Shelby called the Collins bill a "fundamentally wrong approach."

Shelby's opposition might pose a major hurdle for Collins' bill, because the Banking Committee has primary jurisdiction over CFIUS issues.

"The notion that CFIUS should be chaired by the Department of Homeland Security or any agency other than Treasury demonstrates a lack of understanding on how dependent on foreign investment the United States is, how the current review process operates, and how that process can be improved without incurring the law of unintended consequences," a Shelby spokesman said.

Shelby believes that Treasury should continue to manage the process in the interest of "an appropriate balance between economic policy and national security concerns," the spokesman said. Homeland Security officials also were key players in the approval of the Dubai Ports World deal that rained criticism on CFIUS to begin with, which the Shelby spokesman called "worrisome."

Through a spokeswoman, Collins responded that GAO has already noted, in a September 2005 report, that the effectiveness of the current system is limited because Treasury, as the panel's chairman, narrowly defines what constitutes a threat to national security.

Shelby is drafting his own CFIUS overhaul bill, which the spokesman said will likely include the advice of Democrats on the Banking panel. Sens. Evan Bayh, D-Ind., and Christopher Dodd, D-Conn., have floated their own CFIUS reform proposals.

In one similarity to Collins' bill, Shelby's legislation likely will make a 45-day investigation mandatory for all transactions that involve foreign government-owned entities -- closing the so-called Byrd amendment loophole. Also like most of the bills to date, Shelby's bill will include new congressional notification requirements.

Meanwhile, business groups launched a counter-attack Monday against far-reaching reforms to the current CFIUS process they claim would undermine U.S. interests.

A broad coalition of business trade groups sent House and Senate lawmakers a list of seven principles they said reform proposals should honor. The groups included the Business Roundtable, National Association of Manufacturers, and the Emergency Committee for American Trade.

The principles signal opposition -- albeit indirectly -- to some popular proposals that are or are likely to become a part of CFIUS reform legislation. On CFIUS organization, the groups wrote that the current CFIUS structure, "chaired by Treasury, represents an appropriate mix of security, diplomatic, trade and investment agencies."

The groups wrote that the statutory language governing CFIUS reviews, which refers to transactions that relate to U.S. "national security," should remain broad.

"It may be counterproductive to redefine the scope of the investment review process, which actually could limit the issues that the U.S. government can review," they wrote. Collins proposed adding language to the statute that officials should look at "homeland security" specifically as a factor in reviewing proposed transactions.

The letter also called for CFIUS reviews to be "objective, fact-based and analytically rigorous," which one business source said refers to keeping decisions out of the political process. Shelby's legislation might provide a way for Congress to block pending transactions by a joint resolution of disapproval by both chambers.