A new US law will make acquisitions of American companies by foreign buyers more difficult and time consuming, according to lawyers.  The Foreign Investment and National Security Act of 2007, which was signed by President George W Bush during the summer and will come into effect next month, will give Congress the right to review takeovers by foreign buyers and the power to block them.

Inward investment has been overseen by a government agency, the Committee on Foreign Investment in the US, which is made up of the heads of 14 agencies, including the Secretaries of Defense and Homeland Security.

When the law comes into force, the committee will have to notify Congress each time it reviews a transaction. Senators and Congressmen will be allowed to intervene.  The agency will also have to increase its scrutiny of deals that include critical infrastructure – likely to encompass assets such as ports, toll roads, electricity generators and telecoms businesses – or where state-owned or controlled buyers are involved.

The legislation follows last year’s controversy when state-owned Dubai Ports World tried to buy container terminals at US ports as part of its worldwide deal with UK shipping group P&O. The committee had approved the deal but a subsequent political controversy led Congress to threaten to reverse the approval and DP World ultimately divested the assets.  Non-US bidders paid $220bn (€161bn) for American companies last year, more than double the previous year, according to data provider mergermarket.

Daniel Bushner, head of the US securities and M&A group for UK law firm Ashurst, said: “This will be an issue for the representation of sovereign funds. It is going to be especially sticky for the newer Chinese and Russian funds, which could face issues that will either delay deals or result in them being blocked altogether.”