Some observers and Members of Congress have advocated for new or expanded national security review frameworks to examine transactions that may not be subject to existing procedures. Proposals in the 118th Congress include legislation that would require additional notification of outbound investment and expand the government's authority to review certain foreign investments in agricultural land and in agriculture-related U.S. businesses. In addition to policy debates about the merits of individual programs, creating or expanding national security systems can raise legal issues about the programs' structure and operations. This Legal Sidebar is the second installment in a two-part series examining legal frameworks authorizing the United States to regulate private commercial transactions to address national security risks. The first installment analyzes the legal frameworks governing export controls, sanctions administered by the Office of Foreign Asset Control (OFAC), the Committee on Foreign Investment in the United States (CFIUS), and sector-specific review bodies. This installment discusses legal issues that could arise from proposals to expand or create new review mechanisms.
Procedural Due Process
The Due Process Clause of the Constitution's Fifth Amendment requires, among other things, that the government provide a person deprived of a property right with notice of the government action and a meaningful opportunity to contest it. This requirement—known as procedural due process—can be relevant in legal challenges to national security reviews. For example, the U.S. Court of Appeals for the District of Columbia Circuit held that, before the President can order a company to divest an acquisition under the CFIUS process, due process requires the government to provide the affected company with the unclassified information on which it based its decision and an opportunity to respond. In challenges to designations on OFAC lists, by contrast, courts have concluded that the government's interest in national security outweighed litigants' needs for a pre-deprivation hearing and access to classified information supporting the designation.
Judicial Review
An issue related to due process is the extent to which those affected by national security review bodies' actions can seek judicial review. Some review bodies' decisions, such as OFAC licensing decisions, are considered final agency actions subject to judicial review under the Administrative Procedure Act (APA). The APA requires courts to give deference to agencies' decisionmaking while allowing courts to overturn agency actions that are arbitrary, capricious, or outside an agency's legal authority. Other statutes seek to limit judicial review of certain national security review bodies' decisions by exempting some decisions from the APA, requiring litigation to be brought in a specified court, or prohibiting judicial review altogether. Even the most restrictive of these provisions, however, have not completely foreclosed judicial review. In cases involving restrictive statutes, courts have adjudicated certain issues, such as whether the national security review bodies exceeded statutory authority (called ultra vires review) and whether they complied with judicially enforceable constitutional requirements, including procedural due process standards.
Extraterritoriality
Another consideration tied to the Due Process Clause is the extraterritorial scope of the review system. Statutes underlying national security review frameworks generally require some nexus between the transaction under review and a U.S. person or property interest. IEEPA-based sanctions, for example, apply to transactions involving U.S. persons or property subject to U.S. jurisdiction, and export controls apply to U.S.-origin goods, services, and technology or the direct product of those items. Apart from these statutory requirements, some courts have stated that the Due Process Clause imposes an overarching constitutional requirement for a link between the United States and the prohibited action. Not all courts, however, agree that this territorial constitutional constraint applies in every case.
Confidentiality
Government reviews of private commercial transactions can require a balance between the transacting parties' desire for confidentiality and the public interest in the process. Several national security review frameworks include confidentiality mandates, which differ depending on the legal paradigm. Some frameworks prohibit the government from disclosing parties' private information gathered during the review process unless an exception applies. CFIUS's legal authorities provide even stricter confidentiality by stating that materials submitted during its review process are exempt from the Freedom of Information Act absent an exception. To keep Congress informed, confidentiality requirements may allow disclosure to Congress and require periodic briefing and reports to relevant congressional committees.
Classified Information
The United States must often rely on classified information when making national-security-driven decisions, and some transaction review frameworks provide specialized processes for handling that information. For instance, 2018 amendments to CFIUS's statutory authorities added provisions governing the use of classified and other protected information deemed necessary to resolve the judicial proceedings.
Trade Agreements
Creating or expanding national security review programs could potentially implicate U.S. obligations under its trade agreements. Many bilateral and multilateral trade agreements state that they do not prevent parties from actions needed to protect "essential security interests," but the scope of this national security exception is the subject of significant debate, discussed in this CRS Legal Sidebar.
First Amendment
National security review systems can implicate the First Amendment's protections for freedom of speech and association—although the Supreme Court has frequently suggested that courts may give greater deference to the government in order to address national security issues. Some entities have made First Amendment claims under the theory that they were sanctioned for expressing a particular viewpoint or supporting certain causes. Most First Amendment challenges of this type have failed, but at least one federal appellate court held that an OFAC regulation that barred "coordinated advocacy" with an organization on a Specially Designated Nationals and Blocked Persons List violated the First Amendment's guarantee of freedom of speech. In 2021, the communications app WeChat obtained a preliminary injunction on First Amendment grounds that barred the Department of Commerce from implementing a Trump Administration executive order that would have largely prevented U.S. users from using WeChat. That executive order, which President Biden revoked, likely violated the First Amendment, according to the court, by closing a medium of public expression that was one of the only viable means for communication in some communities.
IEEPA Exceptions
When national security systems rely on the NEA and IEEPA, statutory exceptions to the President's transaction-blocking authority may be a point of consideration. Under IEEPA's exceptions, the President does not have authority to regulate or prohibit personal communications, medicine and humanitarian assistance, informational materials, and travel-related transactions. As discussed in this Legal Sidebar, during the Trump Administration, two federal district courts concluded that IEEPA did not provide authority to restrict access to the TikTok video-sharing app because TikTok's services could be considered personal communications or informational material. President Biden revoked the executive order on which those TikTok restrictions were based, but media outlets report that the Biden Administration continues to negotiate with TikTok on measures to address the government's national security concerns using the CFIUS process.