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The US government has reserved the right to re-open its national security review of Alcatel’s merger with Lucent in the event that the companies fail to comply with some of the restrictions placed on the transaction.

Although the committee that vets foreign takeovers of US assets approved the merger between the French and US telecommunications equipment makers last month, the condition, re-vealed in a recent regulatory filing, underscores how significantly the environment for foreign deals has changed since the Dubai ports debacle this year.

Alcatel’s merger was approved by the inter-agency panel that reviews sensitive transactions, the committee on foreign investment in the US (Cfius), for 90 days before it was approved by George W. Bush.

Lawmakers have so far failed to pass legislation to reform Cfius, in spite of intense criticism of the committee’s approval this year of a takeover by a Dubai-controlled company of US port terminals – a deal that was later scrapped after Congress said the transaction posed a national security threat. The Bush administration has nevertheless increased its scrutiny of foreign deals, hoping to stave off a legislative fix.

In order to get approval for the deal, the companies entered into a national security agreement with the departments of justice, homeland security, defence and commerce that res-tricted Alcatel’s access to sensitive work done by Lucent’s research arm, Bell Labs, and the communications infrastructure in the US.

If the companies “materially fail to comply” with the terms of the national security agreement, the review of the deal may be reopened.

Experts say the agreement is the second time Cfius has imposed a condition that would allow the government to rescind its approval of an agreement, which is usually final. A similar pact, which was narrower in scope, was agreed after ST Telemedia’s purchase in 2003 of a majority stake in Global Crossing.

Todd Malan, who heads the Organisation for International Investment, which lobbies on behalf of foreign companies operating in the US, says the panel is setting a dangerous precedent because it leaves open the possibility that the entire deal could be unravelled.

“It is the certainty that is the inherent carrot in the [Cfius] system, and if you take away the carrot, you throw up all the incentives built into the system,” Mr Malan said.

■ European Commission concerns about a planned satellite deal between Thales and Alcatel and Italy’s Finmeccanica were legitimate but did not seem to threaten the deal, France said on Thursday, reports Reuters from Paris.

On Tuesday, the Commission launched an in-depth investigation into plans by Thales to take over Alcatel’s share of two satellite joint ventures with Finmeccanica saying the deal gave rise to competition concerns.

“We consider that these are legitimate concerns,” a defence ministry spokesman told reporters at a weekly news conference.

Copyright The Financial Times Limited 2019. All rights reserved.

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