The U.S. government is planning to ramp up its scrutiny of foreign investment in national-security-sensitive businesses and technology, which could affect the way some private equity funds deal with foreign investors.

The 2018 National Defense Authorization Act, passed in August, expanded the jurisdiction of the Committee on Foreign Investment in the United States to include a broader range of investments.

CFIUS, a multiagency body that includes representatives from the U.S. Departments of Defense, Treasury, Homeland Security, Commerce and others, has long had authority to review or block transactions that could lead a foreign buyer to acquire control of a business or location that could affect national security.

That mandate was often interpreted broadly by CFIUS, such as when it prevented a Chinese company from building wind farms near a U.S. Navy facility, but the new defense bill gives CFIUS even more authority, sweeping in investments that do not include “control” but enable foreign investors to access critical technology, critical infrastructure, or personal data.

“This is going to sweep a larger number of transactions into the ambit of CFIUS review, so it will be a challenge for investors,” said Priya Ayar, a partner at Wilkie Farr & Gallagher and a former acting general counsel of the Treasury Department.

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