Kristen E. Eichensehr [*]

[Full text of this Article in PDF is available at this link]

I.   Introduction

In June 2021, Texas enacted the Lone Star Infrastructure Protection Act (LSIPA) to prohibit both companies and Texas governmental entities from entering into agreements relating to critical infrastructure with companies that have certain ties to China, Iran, North Korea, or Russia.[1] Spurred by concerns about a wind farm development by a Chinese company near a U.S. military installation,[2] the statute is intended—according to the bill sponsor—to “ban” the listed governments “from connecting physically/remotely into Texas critical infrastructure due to acts of aggression towards the United States, human rights abuses, intellectual property theft, previous critical infrastructure attacks, and ties to other hostile actions” against Texas and the United States.[3] In signing the bill, Texas Governor Greg Abbott noted, “this is the first law of its kind by any state in the United States,”[4] and the bill’s sponsor, Texas Sen. Donna Campbell, said “I hope that our federal government and all 49 [other] states will follow Texas’ lead.”[5]

What these statements and the LSIPA ignore is that the federal government already operates a statutorily established process for reviewing inbound foreign investment for national security concerns. For several decades, the interagency Committee on Foreign Investment in the United States (CFIUS) has reviewed investments and real estate transactions that raise national security concerns, taken steps to mitigate risks in particular deals, and occasionally blocked transactions through presidential action.[6] The emergence of a state-imposed control on foreign investment, like LSIPA, provides an opportunity to consider the preemptive scope of the CFIUS process, and even absent an express preemption provision, its preemptive scope is considerable. Although the LSIPA and the CFIUS process both aim to protect national security, where the two regimes overlap, the Texas statute poses an obstacle to the federal process and thus is subject to obstacle preemption.

That said, the Texas legislation raises interesting questions and suggests new opportunities to harness insights from the literature on cooperative and uncooperative federalism.[7] In particular, establishing mechanisms to channel states’ concerns and local knowledge into the CFIUS process could ensure that state and local officials’ legitimate security concerns can be addressed in ways less disruptive to and not preempted by federal national security reviews.

This Essay proceeds in four parts. Part I provides a brief overview of the LSIPA and CFIUS. Part II discusses major theories about the relationship between states and the federal government and situates the Texas statute within them, while Part III argues that the CFIUS process preempts at least some applications of the LSIPA on grounds of obstacle preemption. Part IV concludes by suggesting ways that states’ concerns about particular transactions­ might be incorporated into the CFIUS process.

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[*] Martha Lubin Karsh and Bruce A. Karsh Bicentennial Professor, University of Virginia School of Law. For helpful comments and conversations, I am grateful to David Fagan, Jean Galbraith, Jon Michaels, Saikrishna Prakash, Richard Re, and Paul Stephan. Special thanks are due to Kathryn Boudouris of the UVA Law Library for tracking down sources, to Joshua Goland for excellent research assistance, and to the editors of the Harvard National Security Journal for bringing the piece to publication.

[1] Lone Star Infrastructure Protection Act, S.B. 2116, 87th Leg., Reg. Sess. (Tex. 2021), https://capitol.texas.gov/tlodocs/87R/billtext/html/SB02116F.htm [https://perma.cc/6V6S-K7EV] [hereinafter LSIPA].

[2] Dr. Donna Campbell, Facebook (June 7, 2021, 5:39 PM), https://www.facebook.com

/DonnaCampbellTX/videos/today-governor-abbott-signed-the-lone-star-infrastructure-protection-act-into-la/222663576108748 [https://perma.cc/8LAU-DBRM].

[3] Tex. Sen. Rsch. Ctr., Bill Analysis: S.B. 2116, 1 (2021) https://capitol.texas.gov/tlodocs/87R/analysis/pdf/SB02116F.pdf#navpanes=0 [https://perma.cc/X87V-JKXK].

[4] Greg Abbott, Gov. of Texas (@GregAbbott_TX), Twitter (June 7, 2021, 4:30 PM), https://twitter.com/GregAbbott_TX/status/1401999906299170817?s=20.

[5] Campbell, supra note 2.

[6] See generally U.S. Dep’t of Treasury, The Committee on Foreign Investment in the United States (CFIUS), https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius [https://perma.cc/3A7L-4GNS] (last visited Nov. 6, 2021).

[7] See infra Part II.