Important CFIUS Update for U.S. Universities and Colleges

The U.S. Senate Foreign Relations Committee approved the Strategic Competition Act of 2021 (“Act”) on April 21, 2021. This bipartisan action indicates continued congressional consensus to address China’s global influence by helping U.S. companies with global supply chain diversification and management. The Act further states that it is U.S. policy to strengthen the domestic foundation by reinvesting in market-based economic growth, education, scientific and technological innovation, democratic institutions and other areas that improve the ability of the United States to pursue its vital economic, foreign policy, and national security interests.

Section 138 of the Act: “Review by committee on foreign investment in the United States of certain foreign gifts to and contacts with institutions of higher education. Amendments to Defense Production Act of 1950,” will utilize the Committee on Foreign Investment in the United States (“CFIUS”) to address two national security concerns: (1) access by foreign nationals or nations to critical technologies at U.S. universities or colleges; and (2) undue influence in academia.

If passed, this section will allow CFIUS to review the national security concerns surrounding certain gifts or contracts to federally funded universities and colleges when (1) any gift to an institution of higher education from a foreign person, or the entry into a contract by such an institution with a foreign person, if the value of the gift or contract equals or exceeds $1 million; or (2) the gift or contract relates to research, development or production of critical technologies and provides the foreign person potential access to any material nonpublic technical information.

It is possible that CFIUS could then impose conditions, as part of a national security agreement, on sensitive contracts and grants or even require the cancellation of the grant in order to mitigate national security concerns.