CFIUS has the last say — so far.

Ralls Corporation lost another round in its effort to block a government order forcing it to shed rights to four wind farms in Oregon that it bought from Greek Company, Terna Energy, in March 2012.

A federal district court judge in Washington rejected the company’s claim that it was denied due process in November.

She also declined to force President Obama to elaborate on the national security concerns that led him to block the sale. She said Ralls was not denied due process because it went ahead with the purchase of the four wind farms without making a CFIUS filing. CFIUS is an inter-agency committee that the US government set up to review acquisitions of US companies or assets by foreign buyers that have potential national security concerns. Careful foreign buyers make a filing with CFIUS before closing on transactions to make sure there are no national security issues. (For more background, “But I’m Canadian!” and Other CFIUS Dilemmas” in this issue starting on page 40.)

Ralls Corporation is a Delaware corporation owned by two Chinese nationals. The US Navy expressed concerns soon after Ralls closed on the purchase about the location of the one of the projects. Ralls agreed to move it to a different site. CFIUS then contacted Ralls and suggested it file a notice. It did so in June 2012. CFIUS decided after an initial review that an investigation was needed. At the end of the investigation, it made a report to the White House. On September 28, 2012, President Obama issued an order blocking the sale. The order required Ralls to remove everything from the sites within 14 days and divest the projects within 90 days. It also blocked the future use of any turbines made by Sany — a Chinese manufacturer — to any third party for use at the project sites. The two individuals who own Ralls also run Sany.

The order also blocked sale of the projects to any third party unless it complies with the same conditions.

The case is Ralls Corporation v. Committee on Foreign Investment in the United States. Ralls has filed an appeal.

Ralls is stuck now having to make a fire sale. It sued Terna in an attempt to undo the purchase and block Terna from selling land in Texas that Ralls pledged as collateral for the Oregon purchase, but that suit was also rebuffed. The suit was originally filed in a federal district court in Washington, DC, but the court dismissed it for lack of jurisdiction. Ralls then refiled the suit in federal district court in New York.

The failure to file with CFIUS has also proven costly for Terna Energy. Terna has had to spend money defending itself, and the effort may not be at an end. Aggrieved buyers usually try to find representations and warranties that may have been breached in connection with the sale.

This is the fourth time CFIUS has ordered closed transactions unwound. Special care should be taken with projects near US military installations.