Members of the House Financial Services Committee have reintroduced a bill that would tighten the process that foreign companies must undergo when planning to acquire a U.S. company. The committee plans to consider amendments next week, one year after the Bush Administration was criticized for allowing Dubai Port World to acquire a company that controlled six U.S. ports.

The bill’s lofty goal — weighing national security concerns against a level playing field for foreign companies looking to buy U.S. businesses — won’t be easy. Last year, Rep. Barney Frank (D-Mass.), now chairman of the committee, successfully pushed the legislation through the House but was unable to reconcile it with a similar Senate measure before the 109th Congress ended its term. “The process for vetting foreign investment must not become so unwieldy, or so uncertain, that valuable foreign investment is needlessly discouraged, hampering growth,” said Rep. Carolyn Maloney (D-N.Y.), the lead sponsor of this year’s bill, during a hearing on Wednesday.

With that ideal in mind, Clay Lowery, an assistant secretary at the Department of the Treasury, noted that the bill could be tweaked to lighten the bureaucratic load that some companies would endure while being vetted for security risks. As it stands, said Lowry, the bill grants more power to the office of the director of national intelligence, and it gives that office a mandate to spend more than 30 days on an acquisition-related threat assessment — in addition to a separate investigation that could last from 20 to 75 days.

According to financial-services advocates who spoke at the hearing, Congress needs to ensure that the legislation doesn’t compel the hundreds of foreign acquirers that buy U.S. companies every year to endure this process of assessing national-security risk. And the legislation should not extend to every government-owned entity simply over concerns of another DP World, said Robert Nichols, president and chief operating officer of the Financial Services Forum. Nichols used the example of the Canadian-owned Ontario Teachers Pension Fund, which recently bought several U.S. ports and, according to Nichols, would not warrant a review for national-security risk. But under the new legislation, he maintained, the transaction could have been tied up for 90 days, hurting its chances to compete fairly against a U.S. acquirer.

Indeed, delays are a major concern of business advocates. According to a recent study by the National Foundation for American Policy, an increase in filings with the agency responsible for assessing merger-related security risks has led to initial investigations exceeding the 30-day limit. That agency — the Committee on Foreign Investment in the United States (CFIUS), overseen by the Department of the Treasury — received 113 filings in 2006, compared with 65 in 2005. Last year, seven CFIUS initial investigations exceeded 30 days.

The increase in filings is largely due to last year’s controversial acquisition by Dubai Port World, a company based in the United Arab Emirates, of P&O, a U.S. company that controlled six U.S. ports. Although DP World ultimately ceded control of the ports, protests rang loud and clear in Congress, which had taken no part in CFIUS’s approval of the deal.

The new legislation would expose Congress to more of CFIUS’s activities, and it would require a signature from the secretary or deputy secretary of the Treasury during the early stages of an investigation. This provision was also criticized by Lowery, who said it would focus too much of senior officials’ time on routine cases. “The main focus my secretary and the deputy secretary should have is on those transactions of the highest concern,” he maintained. “This would be a slight adjustment in the bill, but the highest-level officials would still be involved in what’s going on.”

Steve Bartlett, president and chief executive officer of the Financial Services Roundtable, asked Congress to delete a provision that could keep CFIUS-approved transactions open to further scrutiny by a federal agency, through a so-called evergreen rule. In his written testimony, Nichols asserted that this would lead to re-opening and re-evaluating cases. “A hospitable foreign investment environment requires procedural predictability and legal certainty,” Nichols wrote. According to Lowery, the evergreen provision would be used very rarely.

Since last year, CFIUS has made several changes to its process; the committee now briefs Congress on any case that required action, and it briefs senior policy officials on every case. CFIUS has also given the director of national intelligence a more formal role by providing him with more information about the committee’s activities.