International Trade Law News

Published by Jacobson Burton Kelley PLLC

Mr. Fu Chengyu, Chairman and CEO of the China National Offshore Oil Corporation (CNOOC) Ltd., said Friday that his company is ready to participate in an investigation conducted by the Committee on Foreign Investment in the United States (CFIUS) if its offer to purchase Unocal is accepted by Unocal's board of directors.

According to Mr. Fu, CNOOC anticipated that its merger with Unocal would be reviewed by the CFIUS and they are fully prepared to participate in such a review. CNOOC indicated that it is ready to provide assurances to Unocal to address concerns relating to energy security and ownership of Unocal assets located in the U.S. CNOOC also stated that it is open to placing non-exploration and production assets under U.S. management through arrangements that CFIUS has approved in the past and are prepared to sell or take other actions with respect to Unocal's minority pipeline interests and storage assets.

The Exon-Florio provision of U.S. law (Section 5021 of the Omnibus Trade and Competitiveness Act of 1988, which amended Section 721 of the Defense Production Act of 1950) gives the President the authority to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under Exon-Florio to block a foreign acquisition of a U.S. corporation only if he finds:

(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and

(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.

Labels: CFIUS