WEBVTT - Nippon, US Steel Sue Biden & Barr Steps Down 0:00:02.759 --> 0:00:07.000 This is Bloomberg Law with June Grosseol from Bloomberg Radio. 0:00:08.720 --> 0:00:12.479 Nippon Steele is standing firm on its plans to acquire 0:00:12.680 --> 0:00:17.080 US Steel, with both companies jointly filing a federal lawsuit 0:00:17.120 --> 0:00:20.520 against the Biden administration in a last ditch effort to 0:00:20.600 --> 0:00:25.160 preserve the nearly fifteen billion dollar merger. President Biden blocked 0:00:25.200 --> 0:00:29.000 the deal last week, citing a risk to national security, 0:00:29.400 --> 0:00:32.239 but the White House never explained how the deal with 0:00:32.280 --> 0:00:35.800 the Japanese company would threaten national security. 0:00:36.240 --> 0:00:43.840 This is about a domestically owned operated steel industry, and 0:00:43.920 --> 0:00:46.960 we're talking about for our national security, of course, but 0:00:47.040 --> 0:00:50.839 also our supply chain, a resilient supply chain, and so 0:00:51.080 --> 0:00:53.000 that's what the President wanted to focus on. 0:00:53.200 --> 0:00:56.640 The companies say that the review by Siphius, the Committee 0:00:56.720 --> 0:00:59.960 on Foreign Investment in the United States, was a sham 0:01:00.640 --> 0:01:04.360 and that Biden blocked the deal for purely political reasons, 0:01:04.760 --> 0:01:07.880 that is, to gain favor with union steel workers in 0:01:07.959 --> 0:01:11.920 Pennsylvania during his re election bid. The President had announced 0:01:11.920 --> 0:01:15.720 his opposition to the deal in March, before the Scifius 0:01:15.720 --> 0:01:20.000 review even began, and in April at the US steel Workers' 0:01:20.040 --> 0:01:24.560 headquarters in Pittsburgh. Biden made this promise to the union workers. 0:01:25.280 --> 0:01:28.360 US still has been an iconic American company for more 0:01:28.400 --> 0:01:32.400 than a century, and it should remain a totally American company, 0:01:35.600 --> 0:01:39.800 American owned, American operated by American union steer workers, the 0:01:39.800 --> 0:01:42.320 best of the world, and that's going to happen, I 0:01:42.400 --> 0:01:42.920 promise you. 0:01:44.680 --> 0:01:48.120 Joining me is John Kabilo, a Washington, DC attorney who 0:01:48.160 --> 0:01:54.559 specializes in cross border transactions. John. Since nineteen ninety, only 0:01:54.600 --> 0:01:59.040 eight other foreign transactions have been blocked by presidents, according 0:01:59.040 --> 0:02:04.200 to the Congressional rect Service, and here President Biden reportedly 0:02:04.240 --> 0:02:08.240 went against his top national security aids in blocking the 0:02:08.320 --> 0:02:12.160 sale to a Japanese company, even though Japan is a 0:02:12.200 --> 0:02:15.480 longstanding ally of our country. 0:02:15.560 --> 0:02:20.040 Right, it is extraordinarily rare for a president to formally 0:02:20.080 --> 0:02:24.040 block any investment via sytheist I think it's unprecedented that 0:02:24.120 --> 0:02:28.160 a president would block a transaction like this, an investment 0:02:28.240 --> 0:02:31.960 coming from an allied nation, a critical allied nation, and 0:02:32.000 --> 0:02:36.600 in particular where there's no clear national security threat posed 0:02:36.639 --> 0:02:37.880 by the investment. 0:02:38.400 --> 0:02:42.519 I'm confused about what Biden says is a national security threat. 0:02:42.600 --> 0:02:45.160 Is it a national security threat as you know the 0:02:45.200 --> 0:02:48.200 average person might see it? Or is it a threat 0:02:48.280 --> 0:02:50.040 to the domestic steel industry. 0:02:50.560 --> 0:02:53.560 That's a great question, and part of that gets at 0:02:53.720 --> 0:02:57.800 the evolution of pytheists over the years. You know, ten, fifteen, 0:02:57.919 --> 0:03:00.239 twenty years ago, things that were thought of as as 0:03:00.680 --> 0:03:05.200 quote unquote national security issues that really was a limited 0:03:05.240 --> 0:03:10.160 set of things, and it related to weapons, systems, and 0:03:10.560 --> 0:03:15.799 telecommunications networks in big pretty clearly strategic assets in the 0:03:15.960 --> 0:03:19.520 United States. It is true that the notion of national 0:03:19.600 --> 0:03:23.639 security has expanded some over time, and now it includes 0:03:23.680 --> 0:03:27.960 things like the personal data of US citizens. Certainly software 0:03:28.000 --> 0:03:31.720 and things like that have been lumped into this concept 0:03:31.760 --> 0:03:35.760 of things that can cause national security concerns. Steel itself 0:03:35.960 --> 0:03:41.040 obviously is useful to the military, but there's no evidence 0:03:41.320 --> 0:03:44.400 that in this transaction, Knepon Steel was going to do 0:03:44.480 --> 0:03:48.040 anything other than expand production in the United States and 0:03:48.080 --> 0:03:52.880 bring more investment and frankly better steelmaking technology into the 0:03:52.960 --> 0:03:56.600 United States. So it's hard to say that there's any 0:03:56.680 --> 0:04:00.880 sort of threat to steelmaking in the United States because 0:04:00.880 --> 0:04:04.160 of the transaction, And ultimately it looks like it boils 0:04:04.200 --> 0:04:08.800 down to just kind of a US centric notion that 0:04:09.200 --> 0:04:12.360 this company that's an iconic company in the United States, 0:04:12.640 --> 0:04:16.040 it should be owned by US persons and not owned 0:04:16.080 --> 0:04:19.560 by a foreign company. And that's really not at all 0:04:20.279 --> 0:04:22.720 what Syphius was set up to do. And so what 0:04:22.720 --> 0:04:25.640 we're looking at is the President is sort of abusing 0:04:25.680 --> 0:04:29.520 his authorities under Scythius to achieve a political outcome that. 0:04:29.600 --> 0:04:32.560 Sort of echoes some of the claims the steel companies 0:04:32.600 --> 0:04:36.720 are making in their lawsuit that argues that Biden violated 0:04:36.760 --> 0:04:40.279 the Constitution in blocking the merger. Tell us more about 0:04:40.279 --> 0:04:41.039 their arguments. 0:04:41.440 --> 0:04:44.840 So Syphius is an authority. It's under the Defense Production 0:04:44.920 --> 0:04:47.840 Act of nineteen fifty and its authorities were just expanded 0:04:47.880 --> 0:04:51.719 recently in twenty eighteen. But really what the law says 0:04:51.920 --> 0:04:55.720 is that first and foremost, the US is intended to 0:04:55.800 --> 0:05:00.680 have an open investment environment that allows foreign re investment 0:05:00.720 --> 0:05:03.919 into the United States. And what Syphius is empowered to 0:05:03.960 --> 0:05:08.719 do is review investments from foreign parties. Syphius has the 0:05:08.960 --> 0:05:14.400 ability to approve those transactions, but if a transaction may 0:05:14.680 --> 0:05:18.159 pose a threat to the US national security, then Syphius 0:05:18.160 --> 0:05:22.800 can negotiate conditions and require an investor to comply with 0:05:22.880 --> 0:05:26.440 whatever conditions it needs before it approves the transaction. Only 0:05:26.480 --> 0:05:30.240 in the rarest of circumstances. If there's a threat that 0:05:30.360 --> 0:05:33.039 is so great and CIFIUS can't find a way to 0:05:33.160 --> 0:05:35.599 solve the threat, then it goes to the president, and 0:05:35.640 --> 0:05:38.760 the president has the authority to block the transaction. And 0:05:38.800 --> 0:05:42.240 so with that is background, what the lawsuit essentially is 0:05:42.279 --> 0:05:46.719 saying is that the process and the requirements necessary for 0:05:46.800 --> 0:05:50.239 a president to block the transaction were never followed. Before 0:05:50.320 --> 0:05:55.600 Sophius even began to review the transaction, President Biden, vice 0:05:55.600 --> 0:05:59.599 President Harris, and Secretary Yellen had already gone public saying 0:06:00.200 --> 0:06:03.880 that the transaction should not go through, that US Steel 0:06:04.000 --> 0:06:08.240 needed to remain domestically owned, and I believe Biden even 0:06:08.240 --> 0:06:11.359 told the steel workers that he guaranteed that the transaction 0:06:11.520 --> 0:06:13.479 was not going to go through. And again, this is 0:06:13.520 --> 0:06:16.800 before the SCIFIAT process had started. And it's important to 0:06:16.880 --> 0:06:20.520 know that what the SIFIAS process does is it brings 0:06:20.800 --> 0:06:25.760 thirteen federal agencies together. They look at extensive information that's 0:06:25.760 --> 0:06:29.320 provided about the transaction by the parties. Every member agency 0:06:29.600 --> 0:06:33.279 on the committee has the ability to ask questions over 0:06:33.960 --> 0:06:38.040 a lengthy review process. So it's a detailed fact finding mission. 0:06:38.440 --> 0:06:40.880 And as they're doing fact finding, they're also sort of 0:06:40.920 --> 0:06:45.000 assessing what the national security issues might be first of all, 0:06:45.320 --> 0:06:47.680 and then second of all, if they do have national 0:06:47.760 --> 0:06:51.120 security concerns, how might they go about solving those concerns. 0:06:51.279 --> 0:06:54.039 And it really is a burdens and process for the parties. 0:06:54.320 --> 0:06:58.760 It's a detail oriented process, and kind of counterintuitively, it's 0:06:58.760 --> 0:07:02.320 also a constructive process. You know, Syphius is trying to 0:07:02.440 --> 0:07:05.560 find facts that are meaningful to it, but at the 0:07:05.560 --> 0:07:08.960 same time it's trying to figure out a path forward 0:07:09.080 --> 0:07:12.000 and then negotiate with the parties if it does have concerns. 0:07:12.440 --> 0:07:16.080 So again, understanding how that process works, and then knowing 0:07:16.120 --> 0:07:19.120 that before any of that had kicked off, the administration 0:07:19.320 --> 0:07:22.080 was sort of going around publicly saying that the transaction 0:07:22.120 --> 0:07:25.680 shouldn't go forward, I think fundamentally shows that they had 0:07:25.720 --> 0:07:28.720 no intention of sort of looking at the facts or 0:07:28.800 --> 0:07:33.600 following the requirements of the law. They had essentially looked 0:07:33.600 --> 0:07:36.280 at the transaction and knew that it was a political 0:07:36.280 --> 0:07:39.960 hot potato and recurrying favor with voters in a swing 0:07:40.000 --> 0:07:41.800 state by saying, you know, we're never going to let 0:07:41.800 --> 0:07:45.680 this go forward, but that's not what the law allows 0:07:45.720 --> 0:07:47.160 the president to do. 0:07:47.160 --> 0:07:50.960 The steel companies say that the Scythias panel sent a 0:07:51.040 --> 0:07:56.280 seventeen page letter of security concerns riddle with inaccuracies over 0:07:56.320 --> 0:07:59.280 the Labor Day weekend and only gave them one business 0:07:59.360 --> 0:08:04.600 day to response, And they claim that the Siphious staff 0:08:04.640 --> 0:08:10.320 were told not to offer counterproposals or engage in discussions that, 0:08:10.480 --> 0:08:14.560 on its face, if true, seems to support the steel 0:08:14.600 --> 0:08:16.280 company's arguments. 0:08:16.760 --> 0:08:19.080 I think that's right, and I think it's important to 0:08:19.200 --> 0:08:22.520 draw out that distinction, which is that the president did 0:08:22.560 --> 0:08:25.920 this to Knipon Steel and US Steel, and the President 0:08:25.920 --> 0:08:28.280 also did this Tocifius itself. You know, I think the 0:08:28.360 --> 0:08:31.720 career staff at Syphius, they are quite good at running 0:08:31.880 --> 0:08:35.880 their process. And so when you see things like a 0:08:36.040 --> 0:08:41.360 seventeen page letter that again allegedly was riddled with factual inaccuracies, 0:08:41.920 --> 0:08:43.840 that's not the type of thing that you would ordinarily 0:08:43.880 --> 0:08:45.800 see out of Pythias. And I think it would show 0:08:45.840 --> 0:08:48.680 you that Siphius was being ordered to do something that 0:08:48.720 --> 0:08:52.960 it really didn't have evidence or justification to do, and 0:08:53.040 --> 0:08:54.640 so they were sort of put in a position where 0:08:54.640 --> 0:08:58.280 they had to stretch to meet the directive from above. 0:08:58.960 --> 0:09:01.800 Where does it sit in that after this year long review, 0:09:02.600 --> 0:09:06.240 the Committee divided on the risks and failed to reach 0:09:06.280 --> 0:09:08.920 a decision about whether the deal should go forward. 0:09:09.280 --> 0:09:12.040 So the process kicks off by the parties filing a 0:09:12.120 --> 0:09:15.040 detailed notice to the Committee, and then over the course 0:09:15.040 --> 0:09:18.280 of the review period, which is typically up to ninety days, 0:09:18.640 --> 0:09:21.520 but it can be extended in tough cases voluntarily by 0:09:21.520 --> 0:09:24.920 the parties and with Sethius's consent. The point of that 0:09:25.120 --> 0:09:28.400 whole process is to provide the Committee with all the 0:09:28.440 --> 0:09:32.160 information that it needs to fully render a decision, and 0:09:32.200 --> 0:09:35.640 then if it does have concerns, there's time in the 0:09:35.679 --> 0:09:38.640 process for the Committee and the parties to engage in 0:09:38.720 --> 0:09:43.520 the negotiation around what conditions the Committee needs and what 0:09:43.559 --> 0:09:46.400 conditions the parties can comply with, so that then the 0:09:46.400 --> 0:09:49.640 Committee is in a position to approve a transaction. So 0:09:49.679 --> 0:09:51.720 at the end of ninety days, what the Committee ordinarily 0:09:51.800 --> 0:09:55.800 is looking to do is avoid referring anything to the 0:09:55.800 --> 0:09:59.040 President's desk, and the way that that's achieved is there's 0:09:59.080 --> 0:10:02.280 thirteen member ages season fifius. Nine of them are voting agencies. 0:10:02.480 --> 0:10:06.160 The agencies have to be in unanimity that the transaction 0:10:06.240 --> 0:10:08.960 should be approved, and so sometimes the agencies don't have 0:10:08.960 --> 0:10:12.080 any national security concerns, or other times there is a 0:10:12.120 --> 0:10:16.640 national security concern, but it's been solved with whatever conditions 0:10:16.640 --> 0:10:20.000 were negotiated with the parties. So it's only when they 0:10:20.080 --> 0:10:23.840 can't get comfortable with something and reach a unanimous conclusion 0:10:24.080 --> 0:10:27.480 to approve a transaction then they refer something to the President. 0:10:27.720 --> 0:10:31.200 And here the reports are that every agency was in 0:10:31.240 --> 0:10:35.320 favor of approval except for the US Trade Representative, So 0:10:35.360 --> 0:10:38.079 there was this sort of one holdout agency that was 0:10:38.080 --> 0:10:40.520 saying that they didn't want to approve the transaction. So 0:10:40.640 --> 0:10:43.760 in that case, when the committee is divided, that's when 0:10:43.760 --> 0:10:46.080 it goes to the President for final adjudication. 0:10:46.800 --> 0:10:50.720 That's interesting because the companies are also suing rival US 0:10:50.800 --> 0:10:56.040 steelmaker Cleveland Cliffs, It's CEO and the United steel Workers 0:10:56.120 --> 0:11:02.199 president alleging coordinated anti competitive and recketeering activities. And the 0:11:02.320 --> 0:11:07.920 lawsuit claims that the US Trade Representative got a private 0:11:08.080 --> 0:11:13.000 tour and fireside chat with the CEO and United steel 0:11:13.040 --> 0:11:17.440 Workers leadership at a Cliff's facility, and they alleged that 0:11:17.480 --> 0:11:21.760 the defendants improperly bought her loyalty. So that suits on 0:11:21.800 --> 0:11:25.199 a separate track. We'll see where that suit goes. Coming 0:11:25.280 --> 0:11:29.439 up next, President elect Donald Trump has said on truth 0:11:29.600 --> 0:11:34.199 Social I will block this deal from happening. Buyer beware. 0:11:34.679 --> 0:11:37.959 But could that change. I'm June Grosso and you're listening 0:11:38.000 --> 0:11:42.800 to Bloomberg. Nippon Steele, and US Steel jointly filed a 0:11:42.840 --> 0:11:46.320 pair of lawsuits in a last ditch effort to preserve 0:11:46.440 --> 0:11:51.120 their planned nearly fifteen billion dollar merger. The companies are 0:11:51.320 --> 0:11:55.160 arguing that SCIPHIUS, the Committee on Foreign Investment in the US, 0:11:55.520 --> 0:11:59.120 failed to consider the deal on national security grounds, and 0:11:59.160 --> 0:12:02.160 that Biden's or to block it was made for purely 0:12:02.240 --> 0:12:06.679 political reasons. I've been talking to John Kabilo, a Washington, 0:12:06.800 --> 0:12:11.880 DC attorney who specializes in cross border transactions. So, John, 0:12:12.160 --> 0:12:15.800 are the companies basically making a due process argument? 0:12:16.480 --> 0:12:18.920 Ultimately, they're making a due process argument, but I think 0:12:18.920 --> 0:12:21.440 there's also, at least in my view, there's also a 0:12:21.480 --> 0:12:24.760 substantive claim as well. But the due process argument is 0:12:24.800 --> 0:12:27.840 pretty straightforward and I think extremely compelling, which is the 0:12:27.920 --> 0:12:31.480 law sets forth this very detailed and robust process that 0:12:31.559 --> 0:12:35.120 has the involvement of, like I said, thirteen federal agencies. 0:12:35.480 --> 0:12:37.280 That process is there for a reason, and it's not 0:12:37.320 --> 0:12:40.280 so that you know before they've done any work at all, 0:12:40.720 --> 0:12:44.679 the president and other senior political officials can sort of 0:12:44.920 --> 0:12:48.040 go all over the United States and publicly say that 0:12:48.040 --> 0:12:50.319 that deal should never go forward. The fact that they 0:12:50.320 --> 0:12:54.080 were doing that for considering any of the evidence, considering 0:12:54.080 --> 0:12:56.800 any of the recommendations of the committee, that shows that 0:12:56.880 --> 0:13:00.599 they were engaged in political thinking. And so at the 0:13:00.679 --> 0:13:03.320 end of the day, you know, they took their sort 0:13:03.320 --> 0:13:06.960 of political motivations and they grafted it on to national 0:13:06.960 --> 0:13:11.400 security authorities. It can't be justified under a national security 0:13:11.679 --> 0:13:14.280 regime to take up political action. 0:13:15.280 --> 0:13:19.679 Presidents have brought authority to determine what constitutes a national 0:13:19.720 --> 0:13:25.320 security threat. Can the president's authority here be challenged successfully 0:13:25.360 --> 0:13:25.880 in court? 0:13:26.720 --> 0:13:28.840 This is the novel issue here, which is, you know, 0:13:28.920 --> 0:13:33.440 courts historically for centuries have deferred to the president on 0:13:34.040 --> 0:13:37.760 questions of national security, you know, the substantive decision making 0:13:37.880 --> 0:13:40.320 regarding what counts as a national security threat and what 0:13:40.360 --> 0:13:43.320 does not. So in that regard, the president does have 0:13:43.360 --> 0:13:46.000 broad authorities and it's hard to challenge them. But here, 0:13:46.440 --> 0:13:48.120 I think what the parties are saying is that the 0:13:48.160 --> 0:13:50.720 process itself was so flawed. They were denied their rights 0:13:50.720 --> 0:13:53.640 from the beginning and ultimately what the president was doing 0:13:53.920 --> 0:13:57.440 was not making a national security determination. What the president 0:13:57.520 --> 0:13:59.880 was doing was making a political determination. And so I 0:14:00.000 --> 0:14:03.000 I think that's the really interesting issue, at least in 0:14:03.040 --> 0:14:06.200 my mind, that the courts are going to have to consider, is, 0:14:06.640 --> 0:14:10.920 you know, when a president pretty clearly is engaged in 0:14:11.480 --> 0:14:16.000 political behavior but just claiming that it's national security decision making, 0:14:16.200 --> 0:14:18.400 what degree of difference does a court have to give 0:14:18.400 --> 0:14:21.680 the president in those situations? And I think that's a 0:14:21.840 --> 0:14:24.280 nuanced and a novel question in one where I think 0:14:24.320 --> 0:14:27.280 the parties may have more traction than if it were, 0:14:27.440 --> 0:14:31.920 you know, pretty clearly a standard national security type decision 0:14:32.640 --> 0:14:34.680 that maybe the parties didn't like or maybe they thought 0:14:34.680 --> 0:14:37.480 that the president was going too far. But I don't 0:14:37.480 --> 0:14:39.400 even think there was really much of an attempt to 0:14:39.440 --> 0:14:43.440 call this, you know, national security. This was economic nationalism, 0:14:43.560 --> 0:14:46.360 This was election year politics, This was all sorts of things, 0:14:46.400 --> 0:14:48.680 but it was not national security. 0:14:49.560 --> 0:14:53.040 Nearly a decade ago, there was a court challenge to 0:14:53.120 --> 0:14:57.840 the Scifius review process and the president's authority over foreign 0:14:57.880 --> 0:15:01.280 business deals that concerned a Chinese owned company, and a 0:15:01.320 --> 0:15:05.360 federal appeals court ruled that the company's due process rights 0:15:05.440 --> 0:15:09.080 were violated. By the Sifius review, but still the court 0:15:09.080 --> 0:15:13.480 didn't overturn President Barack Obama's order that the Chinese company 0:15:13.560 --> 0:15:16.520 had to sell. Does that case have relevance here? 0:15:17.480 --> 0:15:17.680 Right? 0:15:17.800 --> 0:15:20.480 That was a little different. I think that case is 0:15:20.560 --> 0:15:24.520 instructive in that, first of all, due process challenges can 0:15:24.600 --> 0:15:28.320 be successful when the Syfius process itself is corrupted. And 0:15:28.360 --> 0:15:32.320 so in that case, Fyfius pursued an action against a 0:15:32.440 --> 0:15:36.400 Chinese acquirer of wind farms that were next to military 0:15:36.440 --> 0:15:39.680 airspace that was used to train unman burial vehicles, and 0:15:40.240 --> 0:15:43.560 CFIUS issued an interim order very early in the process, 0:15:43.720 --> 0:15:48.400 and they ordered the deconstruction of windmills, They ordered that 0:15:48.520 --> 0:15:51.960 the acquirer not access the property. They ordered all sorts 0:15:51.960 --> 0:15:54.800 of extremely onerous things. And what the parties argued there 0:15:55.040 --> 0:15:58.600 was that essentially the order from Syphius was so onerous 0:15:58.720 --> 0:16:02.360 that it was equivalent of blocking the transaction. And really 0:16:02.440 --> 0:16:04.800 only the President of the United States has the authority 0:16:04.800 --> 0:16:07.880 to block a transaction. And so I think there they 0:16:07.960 --> 0:16:10.480 got a lot of traction on that angle, which was 0:16:10.520 --> 0:16:13.400 that there are limitations to what Syphias as a committee 0:16:13.400 --> 0:16:16.440 can do. And then additionally they got some traction on 0:16:16.560 --> 0:16:20.239 the notion that Syphius does have to provide some information 0:16:20.320 --> 0:16:23.720 about its decision making process when it's going to take 0:16:23.720 --> 0:16:26.920 an adverse action against the party. And then again when 0:16:26.920 --> 0:16:29.640 that process was rerun and when the decision was in 0:16:29.640 --> 0:16:34.760 Obama's hands, there was not a substantive way to challenge 0:16:34.960 --> 0:16:39.400 a president's decision on national security grounds. But the parties 0:16:39.720 --> 0:16:42.960 did make a lot of progress on the procedural violations. 0:16:43.720 --> 0:16:46.520 So do you think it's possible that a court would 0:16:47.200 --> 0:16:49.200 order another review by Syphius here? 0:16:49.520 --> 0:16:51.600 Yeah, I think it's possible that a court would order 0:16:51.640 --> 0:16:55.720 another review. It's clear that the process was corrupted from 0:16:56.200 --> 0:16:59.560 even before day one, and so in that regard, whatever 0:16:59.640 --> 0:17:03.400 sort of the maximal remedy for due process violations is, 0:17:03.760 --> 0:17:06.200 any court should provide that remedy, you know. And then 0:17:06.359 --> 0:17:09.320 I think the next question, which is, Okay, there's going 0:17:09.359 --> 0:17:12.040 to be a new administration in town. The next president 0:17:12.080 --> 0:17:16.000 has come out against this transaction. What happens there? And 0:17:16.240 --> 0:17:18.919 this is just sort of crystal ball talk here, but 0:17:19.160 --> 0:17:21.840 I do think that the parties are presented with an 0:17:21.840 --> 0:17:25.679 opportunity to actually reach some kind of a deal with 0:17:25.720 --> 0:17:27.800 the new administration. When you look at all of the 0:17:27.840 --> 0:17:32.120 commitments that Nipon Steel was willing to make to get 0:17:32.160 --> 0:17:35.920 the deal done. I think ultimately that transaction was really 0:17:35.960 --> 0:17:39.160 really good for the steel workers and for US deal, 0:17:39.720 --> 0:17:44.159 and for our domestic steel industry and for our supply 0:17:44.240 --> 0:17:48.160 chain security. I think that, you know, the parties may 0:17:48.240 --> 0:17:50.760 well be able to make a compelling pitch to the 0:17:50.800 --> 0:17:53.680 next administration and find a way to get a deal done. 0:17:53.800 --> 0:17:56.160 The next administration. You know, I think they pride themselves 0:17:56.200 --> 0:17:58.440 in finding ways to get deals done, and I think 0:17:58.480 --> 0:18:00.439 when they look at what's being off or they may 0:18:00.480 --> 0:18:01.919 find something very compelling in that. 0:18:03.320 --> 0:18:07.200 How long would it take for this lawsuit to go 0:18:07.280 --> 0:18:11.480 through the DC circuit and perhaps a request for Supreme 0:18:11.520 --> 0:18:15.280 Court review? Are we talking years or months? 0:18:15.560 --> 0:18:15.760 Yeah? 0:18:16.040 --> 0:18:19.399 Unfortunately, it could take quite some time. I wonder if 0:18:20.320 --> 0:18:23.280 a court may use sort of exodited authorities to order 0:18:23.320 --> 0:18:27.040 a new review or at least halt the block of 0:18:27.080 --> 0:18:31.560 the transaction to provide the parties with more time and 0:18:31.600 --> 0:18:34.119 more ability to negotiate with the new administration. 0:18:35.080 --> 0:18:38.600 And is there a chance that this might be accepted 0:18:38.680 --> 0:18:40.439 for review by the Supreme Court. 0:18:41.240 --> 0:18:44.160 There are some novel legal questions here that I would 0:18:44.200 --> 0:18:46.720 love to see in the hands of the Supreme Court, 0:18:47.160 --> 0:18:52.480 because I think it's really critical, really really critical, not 0:18:52.640 --> 0:18:57.159 just for the scipious process and not just for transaction parties, 0:18:57.160 --> 0:19:00.119 but I really think for everyone it's important that we 0:19:00.160 --> 0:19:03.560 come up with some idea that no president can just 0:19:04.359 --> 0:19:07.600 wave a wand and call something national security and then 0:19:07.680 --> 0:19:11.160 be exempt from all scrutiny. I think the traditional deference 0:19:11.280 --> 0:19:15.920 to the president on anything understood to be national security 0:19:15.920 --> 0:19:19.959 related is proper, but I think it also invites, and 0:19:20.000 --> 0:19:23.400 we've seen this incithius, that more and more things are 0:19:23.400 --> 0:19:26.760 being called national security, and at some point there's no 0:19:27.000 --> 0:19:30.880 check on a president that wants to call anything that's 0:19:30.880 --> 0:19:35.280 politically expedient national security. And I think it's really important 0:19:35.280 --> 0:19:37.399 that a court step in and say we have to 0:19:37.440 --> 0:19:40.240 have some guardrails, and Congress may need to act, but 0:19:40.480 --> 0:19:43.439 somewhere there needs to be an intervention that says that 0:19:43.640 --> 0:19:45.159 it's not a get out of jail free card, so 0:19:45.240 --> 0:19:47.399 to speak, that if you call it national security, you 0:19:47.440 --> 0:19:48.240 can do whatever you want. 0:19:48.880 --> 0:19:52.800 I've read this prediction that if this suit is successful, 0:19:53.320 --> 0:19:56.479 it would mean sweeping changes to the authority of the 0:19:56.640 --> 0:20:01.440 US government to vet foreign transaction. Do you agree with that? 0:20:01.880 --> 0:20:06.520 I don't see this suit as fundamentally rewriting the rules 0:20:06.520 --> 0:20:09.800 of Syphius. I think the actions of the President and 0:20:09.840 --> 0:20:15.199 the administration were so aberrant and so clearly objectionable that 0:20:15.400 --> 0:20:18.160 you can create a ruling in this case that applies 0:20:18.200 --> 0:20:22.320 to this case that doesn't rewrite the entire scipious process. 0:20:22.400 --> 0:20:25.560 It's possible to just say, hey, this process and its 0:20:25.600 --> 0:20:28.800 results need to have greater fidelity to the notion of 0:20:28.880 --> 0:20:32.879 national security and can't just be clearly a political tool 0:20:33.080 --> 0:20:36.679 or a tool used in clearly political context. And so 0:20:36.880 --> 0:20:39.520 I don't think it has to be a very broad ruling. 0:20:40.359 --> 0:20:46.200 And do you see any effects of this decision outside 0:20:46.280 --> 0:20:48.959 of this deal the big picture. 0:20:49.960 --> 0:20:52.639 Something that's personally troubling to me is that over the 0:20:52.680 --> 0:20:56.560 last five or six years, the US has gone to Europe, 0:20:56.600 --> 0:21:00.760 we've gone to Asia, and we've strongly incur in most 0:21:00.800 --> 0:21:06.119 cases successfully encourage other nations to stand up processes that 0:21:06.160 --> 0:21:09.960 are similar to Scythius. The animating factor there was that 0:21:10.000 --> 0:21:13.840 we wanted other countries to get tougher on investments from China. 0:21:13.920 --> 0:21:15.680 You know, it's always been in the back of my mind. 0:21:16.160 --> 0:21:19.239 US investment firms are the number one overseas investors and 0:21:19.280 --> 0:21:21.879 so we're sort of going around to other countries and 0:21:22.200 --> 0:21:25.040 asking them to implement these processes. They're going to burden 0:21:25.320 --> 0:21:28.760 US investors, but I think the policy thinking was that, 0:21:28.880 --> 0:21:31.280 you know, that was worth it. But now having encouraged, 0:21:31.480 --> 0:21:33.400 you know, all these other countries to set up Sithius 0:21:33.440 --> 0:21:36.600 like processes and then to have made the single worst 0:21:36.680 --> 0:21:41.080 decision in Sifia's history, and to make the single most 0:21:41.119 --> 0:21:45.840 transparently political decision in fifious history, I think just paints 0:21:45.880 --> 0:21:51.439 the entire exercise and undermines confidence in those countries that 0:21:51.480 --> 0:21:55.680 the US is sort of a reliable partner and certainly 0:21:55.800 --> 0:21:59.600 encourages similar behavior by those other countries. It's not a 0:21:59.640 --> 0:22:03.320 stretch all to imagine, you know, especially if we implement 0:22:03.440 --> 0:22:07.280 tariffs and you know, start potentially pulling back from NATO. 0:22:07.600 --> 0:22:10.840 It's really easy to foresee a situation where anti American 0:22:10.920 --> 0:22:16.680 sentiment rises, and you know, investments from American firms in 0:22:16.760 --> 0:22:19.920 other countries all of a sudden are nearly impossible because 0:22:20.359 --> 0:22:24.960 we've established as precedent that these regimes can be politicized. So, 0:22:25.200 --> 0:22:28.240 you know, I do worry significantly about the second order 0:22:28.240 --> 0:22:33.120 effects of this single decision. That is an awful decision. 0:22:33.800 --> 0:22:36.760 Well, see if the courts remedy it. Thanks so much 0:22:36.840 --> 0:22:40.240 John for being on the show. That's Washington, DC attorney 0:22:40.320 --> 0:22:45.680 John Kabilo, who specializes in cross border transactions. As far 0:22:45.720 --> 0:22:50.600 as the reaction in Japan, Japanese Prime Minister Shageru Ishiba 0:22:51.160 --> 0:22:54.840 was blunted, warning that spoiling the deal might hurt Japanese 0:22:54.880 --> 0:22:59.639 investment in the US. Ishiba was emphatic quote as for 0:22:59.720 --> 0:23:02.800 why when national security was cited as an issue, it 0:23:02.880 --> 0:23:06.880 must be clearly explained, otherwise future discussions on the matter 0:23:06.960 --> 0:23:10.240 will come to naught, and that it's an unfortunate fact 0:23:10.280 --> 0:23:14.919 that Japanese industry has voiced concerns about future investments between 0:23:14.920 --> 0:23:18.719 the US and Japan. We have to take this very seriously. 0:23:19.160 --> 0:23:22.040 Coming up next on the Bloomberg Law Show, the exit 0:23:22.080 --> 0:23:26.520 of the fed's top bank cup puts capital rules in jeopardy. 0:23:26.920 --> 0:23:31.919 I'm June Grosso and you're listening to Bloomberg. Federal Reserve 0:23:32.080 --> 0:23:36.080 Vice Chair for Supervision Michael Barr plans to step down 0:23:36.160 --> 0:23:39.800 from the role, avoiding a potential battle with President elect 0:23:39.800 --> 0:23:43.639 Donald Trump over his position and raising questions about the 0:23:43.680 --> 0:23:47.320 future of a landmark bank capital proposal. Joining me is 0:23:47.359 --> 0:23:51.199 an expert on the FED and financial regulation. Catherine Judge, 0:23:51.240 --> 0:23:54.480 a professor Columbia Law School, bar said it was a 0:23:54.600 --> 0:23:58.120 very tough decision, but he was concerned that staying would 0:23:58.119 --> 0:24:01.040 be a distraction for the institute. Do you think he 0:24:01.080 --> 0:24:02.080 made the right decision. 0:24:02.640 --> 0:24:06.400 I don't think he made the right decision. The concerns 0:24:06.760 --> 0:24:12.040 animating the decision are understandable. There was a lot of discussion, 0:24:12.800 --> 0:24:18.280 quite credible discussion, suggesting that the incoming Trump administration might 0:24:18.280 --> 0:24:21.760 have sought to remove him from his post as vice chair, 0:24:22.400 --> 0:24:25.720 And there is a difficult legal question about whether or 0:24:25.800 --> 0:24:28.520 not the Trump administration would have the facility to remove 0:24:28.600 --> 0:24:34.200