Foreign investor scrutiny passes

The Baltimore Sun

WASHINGTON -- Nearly 18 months after a plan to sell port operations in Baltimore and other cities to Dubai Ports World ignited a furor, the House voted overwhelmingly yesterday to strengthen federal government review when "critical infrastructure" is transferred to foreign investors.

The legislation, which drew similarly broad support last month in the Senate, would formalize the process by which the Defense, Homeland Security and other departments screen proposed sales. It would expand the types of transactions that would trigger additional investigation and involve the director of national intelligence in the process. It also would require, for the first time, regular reports to Congress.

The measure, approved by a vote of 370-45, now heads to the White House, where President Bush is expected to sign it. Maryland's eight representatives voted in favor of the bill.

Maryland lawmakers have viewed the legislation through the prism of the Dubai Ports World controversy, which erupted last year after the Bush administration approved the sale of port operations in Baltimore, New York, Philadelphia and other cities to a state-owned firm from the United Arab Emirates.

Under pressure from Congress, Dubai Ports World, which was in the process of purchasing the global assets of the British Peninsular & Oriental Steam Navigation Co., agreed to flip the American elements of the deal to a U.S. company.

Some expressed concern that the episode would discourage foreign investment in the United States. But even with the controversy, new foreign investment rose to $161.5 billion last year, up from $91.4 billion in 2004, according to the Commerce Department's Bureau of Economic Analysis.

Rep. C.A. Dutch Ruppersberger said the measure approved by the House, the latest in a series of attempts to overhaul the review process since the Dubai Ports controversy, struck the right balance between economic interests and public safety concerns.

"What you have to do, with respect to port security, is make sure you balance security with the ability for the ports to be able to do business," said Ruppersberger, a Democrat whose district includes the port of Baltimore.

Attorney Lynn Charytan said the measure would clarify the work of the Committee on Foreign Investment in the United States - a panel made up of representatives of the Defense, Homeland Security, State, Treasury and other departments that reviews and investigates proposed deals.

"This puts a lot of rules around a process that was a lot more amorphous," said Charytan, who specializes in communication and national security issues. "There wasn't a lot of discussion about how those decisions were to be made and who had to sign off on it."

She said the legislation would highlight to senior U.S. officials "that they have to take a serious interest in basically all of the matters that come before them. ... You're really not going to casually pass through a review process and avoid an investigation without someone taking a hard look."

An investigation by the foreign investment panel led to the 2006 collapse of a deal involving an area high-tech firm. Israeli-based Check Point Software Technologies Ltd. abandoned a $225 million plan to purchase Sourcefire Inc., a Columbia firm that produces software that protects against hackers, shortly before the panel was due to conclude its inquiry. The decision came a month after the Dubai Ports World controversy erupted.

The measure approved by Congress has the backing of the Financial Services Forum, the Organization for International Investment, the Business Roundtable and the U.S. Chamber of Commerce, which said in a joint statement that it would "protect our national security and American jobs while restoring certainty to the ... process. Certainty and predictability are crucial for businesses and capital markets."

Rep. Elijah E. Cummings, who chairs a House panel that oversees port security, emphasized the strengthening of oversight.

"The review processes of the Committee on Foreign Investment in the United States are as much a part of our homeland security system as any scanner or radiation detector," the Baltimore Democrat said. The measure approved by Congress, he said, "is critical to ensuring that investments involving our ports do not pose any national security risks."

matthew.brown@baltsun.com

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