CFIUS: Penalties

Penalties

Proposal release III. Overview
The system continues to be based on voluntary notices to CFIUS by parties to transactions, although CFIUS retains the authority to review a transaction of which it has not been voluntarily notified. The principal new development with regard to the procedures for filing notice to CFIUS is that the proposed regulations make explicit CFIUS's current practice of encouraging parties to contact and engage with CFIUS before formally filing.
In addition to these regulations, the Committee is preparing guidance on certain transactions, pursuant to section 721(b)(2)(E).
Consistent with the new authority provided by FINSA, the proposed regulations provide for penalties for breach of section 721 or of mitigation agreements or conditions.
The proposed regulations also provide that a mitigation agreement may include provisions establishing liquidated damages for violations of the agreement. (See Sec. 800.801.) Parties that receive a notice of the imposition of penalties will have the opportunity to appeal the imposition of the penalties to CFIUS.

Statute: Section 721(h)(3)(A) Penalties Authorized

(3) Content.

(A) provide for the imposition of civil penalties for any violation of this section, including any mitigation agreement entered into or conditions imposed pursuant to subsection (l);

Legislative history

Related Topic Pages

31 CFR 800.801 Penalties

(a) Misstatements; Omissions; False certifications

Any person who, intentionally or through gross negligence, submits a material misstatement or omission in a notice or makes a false certification under Sec. 800.402(k) or 800.701(c) may be liable to the United States for a civil penalty not to exceed $250,000 per violation. The amount of the penalty assessed for a violation shall be based on the nature of the violation.

(b) Violation of a mitigation agreement

Any person who, intentionally or through gross negligence, violates a material agreement or condition entered or agreed with the United States under section 721(l) may be liable to the United States for a civil penalty not to exceed $250,000 per violation or the value of the transaction. Any penalty assessed under this subsection shall be based on the nature of the violation and shall be separate and apart from any damages sought pursuant to a mitigation agreement under section 721(l), or any action taken under Sec. 800.601(b).

A mitigation agreement entered into under section 721(l) may include a provision providing for liquidated or actual damages for breaches of the agreement by parties to the transaction. The Committee shall set the amount of any liquidated damages as a reasonable assessment of the harm to the national security that could result from a breach of the agreement. Any mitigation agreement containing a liquidated damages provision shall include a provision that the Committee will consider the severity of the breach in deciding whether to seek a lesser amount than that stipulated in the contract.

(d) Committee determination required; Notice

A determination to impose penalties under paragraphs (a) or (b) of this section must be made by the Committee. Notice of the penalty, including a written explanation of the penalized conduct and the amount of the penalty, shall be sent to the penalized party by U.S. mail.

(e) Committee determination required; Notice

Upon receiving notice of the imposition of a penalty under paragraphs (a) or (b) of this section, the penalized party may, within 15 days of receipt of the notice of the penalty, submit a written statement of appeal to the Staff Chairperson, including a defense, justification, or explanation for the penalized conduct. The Committee will review the appeal and issue a final decision within 15 days of receipt of the appeal.

(f) Federal court jurisdiction

The penalties authorized in paragraphs (a) and (b) of this section may be recovered in a civil action brought by the United States in federal district court.

(g) Not exclusive

The penalties available under this section are without prejudice to other penalties, civil or criminal, available under law.

Proposal release
Section 800.801. This new section implements the FINSA requirement that the regulations provide for the imposition of civil penalties for any violation of section 721, including a violation of any mitigation agreement entered into or conditions subsequent imposed pursuant to section 721(l). This section extends civil monetary penalties to transactions entered into on or after the effective date of FINSA, October 24, 2007. In addition, paragraph (c) authorizes CFIUS to include in any mitigation agreement described in section 721(l) a liquidated damages provision tied to the harm to the national security that could result from a breach.

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