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Enforcement Edge
May 4, 2021

New Bill Continues Crackdown on Foreign Influence on US Research

Enforcement Edge: Shining Light on Government Enforcement

A bill introduced in the Senate in April (Strategic Competition Act of 2021, Section 138) seeks to subject US universities’ foreign grants, contracts and gifts to increased oversight by the Committee on Foreign Investment in the United States (CFIUS). 

CFIUS is an interagency committee that reviews foreign investments in the United States. It has the authority to restrict foreign investments it deems pose a risk to US national security. Under the new legislation, CFIUS will have wide latitude to investigate certain foreign funding received by US higher education institutions. 

The new bill is part of a recent government-wide effort to limit foreign influence on and access to US scientific research, particularly efforts on behalf of China, which remains the “biggest single source of overseas money to universities.” The Department of Justice has promoted these efforts as the “China initiative,” which has resulted in several high-profile criminal prosecutions, such as those of Harvard chemistry professor Charles Lieber and MIT engineering professor Gang Chen.

Section 117 of the Higher Education Act already requires many colleges and universities to disclose to the Department of Education if they receive at least $250,000 in total funding from a single foreign source. The proposed legislation will additionally require reporting of such funding to CFIUS and will permit CFIUS review of gifts or contracts that:

  1. are at least $1 million in value, and 
  2. either:
    • relate to research and development of “critical technologies” and provide the foreign person access to “material . . .technical information” that is restricted on the basis of national security and is not in the public domain, OR
    • include a restriction or condition (such as an agreement to employ a faculty member or establish a research center) that would give the foreign entity the power to decide important matters affecting the recipient. 

Recipients of the category of gifts or contracts pertaining to “critical technologies” will also be required to proactively submit information about the funding to CFIUS for review. 

The proposed legislation has been criticized by many in the US higher education world. The American Council on Education has warned that the proposal could “severely hinder” international research collaborations. An open letter to the Senate Foreign Relations Committee from several coalitions of US universities critiqued that the “sweeping provision...would require expensive and time-consuming reviews of a wide range of university gifts and contracts against unknown and ill-defined criteria by an agency not designed or equipped to carry out this task.” The coalitions also raised concerns that vagueness in the requirements will divert donations and collaborations to non-US institutions to avoid the red tape and risk of rejection. Rich DeCapua, president of the Global Alliance for International Student Advancement, agrees, noting that though the legislation is “meant to make us more competitive with China,” it could actually “make[] us less competitive with other countries because of the view of the unwelcomeness of the United States.”

The bill passed the Senate Foreign Relations Committee on April 21, 2021, and is being sent to the House for review. For more information regarding this bill and related issues, please contact the authors or Arnold & Porter’s White Collar Defense & Investigationsgroup.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.