Yes, CFIUS can block a deal

[NOTE AND DISCLOSURE: THIS DISCUSSES PAST CFIUS ACTIONS, NOT PRESENT ONES.]

I'm a lover of acronyms, but before 2008 even I had never heard of the acronym CFIUS. It refers to the Committee on Foreign Investment in the United States, a committee that spans multiple U.S. government Cabinet departments. I learned about this because Motorola's sale of its biometrics unit was dependent upon CFIUS approval. In this case, CFIUS approval the deal.

But CFIUS does not just rubber-stamp its approval, and Huawei learned. After hearing objections from CFIUS on two prior deals (one involving Motorola), Huawei determined that its third proposal deal was out of scope for CFIUS.

Huawei elected not to notify CFIUS before consummating a $2 million acquisition of technology and employees from 3Leaf Systems, a small server technology firm located in Santa Clara, California. Huawei and its advisors reasoned that the purchase of discrete technology (including patents) and the assumption of less than a third of 3Leaf's employees did not constitute the acquisition of an ongoing "U.S. business," and, therefore, the acquisition fell outside CFIUS's jurisdiction under the Defense Production Act....The small size of the deal almost certainly played a role as well.

CFIUS, however, felt differently.

CFIUS determined that it did have jurisdiction, and, following its review, CFIUS informed Huawei that it must divest the 3Leaf assets and employees. After initially indicating it would reject CFIUS's findings and press its case with President Obama (who had 15 days under the statute to review CFIUS's recommendation), Huawei withdrew its objection and agreed to divest.