Draft of 2025 NDAA wants foreign investment study

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Proposed language in this piece of policy legislation would direct the Defense Department to study reporting requirements of foreign investments in commercial companies, private equity and venture capital funds.

Final passage is still months away, but House lawmakers have released a draft for the 2025 National Defense Authorization Act that includes a requirement for the Defense Department to study and report on foreign capital investments.

That language would direct DOD to hire a federally-funded research-and-development center to study commercial companies backed by private equity or venture capital funds, as well as the level of foreign investment in those funds.

DOD entities also will be part of the study, including the Defense Innovation Unit and National Security Innovation Capital. Those organizations collaborate with emerging commercial companies to bring innovation into DOD.

The study would look at the best practices organizations use to require reporting on foreign investments and the risks those investments can pose.

DOD is looking to harmonize reporting practices across the department and perhaps across all of the federal government.

The potential risks posed by foreign investment in commercial companies can come in several forms.

For example, foreign investors can gain access to sensitive technology investments. There are risks of technology transfers if the investor is linked to Russia or China, according to a Government Accountability Office report from 2019.

DOD would hire a research organization within 60 days of the 2025 NDAA’s passage and report back to Congress within 270 days.

The report will be unclassified, but may have a classified annex.