In the course of due diligence over Ralls and the transaction in question, attorneys in New York discovered that the wind farms were close to a sensitive military zone; however, Ralls, in its acquisition of project companies and the farms, did not voluntarily notify CFIUS on this issue. They thus judged that a CFIUS investigation might be intrigued over Ralls and suggested Ralls submit a prior notification to CFIUS. Their suggestion was dismissed by Ralls’ US attorneys.
To protect the client’s from negative consequences of a possible CFIUS investigation, the New York attorneys, in drafting transactional agreements between the client and Ralls, made clearly-defined liability clauses for fear of breach of contract. Therefore, when CFIUS’s review over Ralls’ acquisition of the wind farms started and the transaction was eventually banned, Dacheng’s client was able to exit the proposed transaction unaffected and got compensated accordingly for termination of the deal.