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Legislation a key lawmaker introduced that would strengthen a controversial panel that reviews takeovers of U.S. companies by foreign investors was removed from a must-pass defense bill on Tuesday. Senate Banking Committee Chairman Richard Shelby, R-Ala., in July introduced a bill that would require the Committee on Foreign Investments in the United States, an interagency panel that reviews U.S.-foreign mergers for national security concerns, to submit its findings and recommendations to key congressional committees after its investigation is complete. Also, Shelby’s provision would require the panel to consider energy and economic security when reviewing mergers between U.S. and foreign companies. It would also require CFIUS to submit quarterly reports to Congress on all reviews. The measure, attached to a bill introduced by Sen. James Inhofe, R-Okla., was then added to a defense bill. Inhofe also introduced a standalone version as a backup should Shelby’s defense amendment be stripped. But Tuesday, Senate lawmakers passed the defense bill 98 to 0 without provisions introduced by Shelby or Inhofe, said Inhofe spokesman Ryan Thompson. Inhofe did succeed at including a much weaker provision that would require the administration to review CFIUS, examining whether the definition of national security should be expanded to include economic security. The provision also called on the administration to “discourage” foreign defense contractors from selling sensitive military technology to China. Thompson said Inhofe will continue to work toward expanding the purview of CFIUS, arguing that Congress should play a stronger role overseeing takeovers of U.S. companies by Chinese firms. Efforts to reform CFIUS grew out of distaste by some lawmakers over Lenovo Group Ltd.’s acquisition of IBM Corp.’s personal computer operations and an unsuccessful bid by CNOOC Ltd., a Chinese state-controlled oil company, for El Segundo, Calif.-based energy company Unocal Corp. Shelby’s provision also would increase the CFIUS initial review period to 60 days from 30 days and would allow House and Senate committees to order CFIUS investigations of proposed acquisitions by a state-owned foreign entity — even if CFIUS initially determines there are no national security concerns. Shelby’s spokesman Andrew Gray said Shelby would likely try to reintroduce the legislation as a standalone bill either later this year or next year. “Senator Shelby was clear that there were deficiencies in the way the CFIUS review process worked,” said Gray. Todd Malan, president of the Organization for International Development, said the decision by lawmakers to remove the CFIUS provision pleased him. He said the business establishment does not think fundamental changes are necessary in the CFIUS process. “There is an economic cost if we raise barriers to foreign investment that have nothing to do with national security,” Malan said. “We would chill the environment for investment.” Malan added that he expects CFIUS members to provide more transparency to members of Congress about ongoing reviews, so lawmakers can fulfill their oversight responsibilities. Copyright �2005 TDD, LLC. All rights reserved.

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