Foreign investment issues

Investment restrictions

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

Certain United States industries, such as transportation, telecommunication and energy, have special federal restrictions on the percentage of foreign ownership and control. Certain states have additional restrictions on the foreign ownership of certain land. Foreign investment in the United States in US technology, infrastructure and data businesses with ‘critical technology’, ‘critical infrastructure’ or ‘sensitive personal data’ may be subject to mandatory clearance requirements with the Committee on Foreign Investment in the United States (CFIUS). Additional rules apply to certain ‘covered real estate’ in close proximity to military installations and ports. Even if the mandatory clearance rules do not apply, many parties choose to make voluntary filings with CFIUS to clear transactions and CFIUS reserves the right to review and potentially block or mitigate non-cleared ‘covered transactions’ (which may include controlling and non-controlling investments) that present national security issues. Bilateral investment treaties do not exempt foreign investors from these requirements, although certain countries (currently, Australia, Canada, New Zealand and the United Kingdom) and their investors may benefit from an exception to the mandatory CFIUS filing requirements.

From a US federal income tax perspective, non-US investors may have an aversion to participating in tax transparent investment structures, which would cause them to be treated as engaged in a trade or business within the United States and create a US tax return filing nexus. Additionally, an investment in a project or related entity may give rise to Foreign Investment in Real Property Tax Act withholding and related tax return filings, which again, may give cause to certain non-US investors to be resistant to investing in such project unless additional structuring is done to mitigate such withholding and return filing.

Insurance restrictions

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

Generally, project assets may be insured by foreign insurance companies; however, a federal excise tax may be assessed in connection with the premium payments under such policies.

Worker restrictions

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

Foreign workers must be in the United States under one of several federal visas, which visa status must be verified by the worker’s employer. Category eligibility is determined by the worker’s experience and qualifications within certain fields and may be limited by quotas.

Equipment restrictions

What restrictions exist on the importation of project equipment?

Project equipment may be subject both to import duties and restrictions depending upon its origin. Project equipment produced in whole or in part from forced labour is prohibited by statute from importation into the United States. Project equipment may also be subject to trade remedies that may impose additional duties or quotas on importation. Project equipment that infringes intellectual property rights may be subject to in rem exclusion orders. Project equipment may not be procured from certain specially designated national or blocked persons or from countries subject to comprehensive economic sanctions.

Nationalisation laws

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

Federal and state authorities have the sovereign power of eminent domain to take property for a legitimate public purpose with the payment of prompt, adequate and effective compensation protected by the US Constitution. There are no exemptions of a particular investment from this authority and investment treaties only require national treatment but not exemptions. In addition, the federal government has the authority to nationalise private property or issue directed orders prioritising supply under the Defense Production Act to private businesses in times of national emergency.

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30 May 2022