A LANDMARK Bill brought forward in Parliament last November in order to strengthen the Government’s ability to investigate and intervene in mergers, acquisitions and other deals that could potentially threaten UK national security has now been granted Royal Assent.
The National Security and Investment Act protects the public from potential risks and bolsters the UK’s status as an attractive place in which to invest by providing more efficient clearance processes for relevant acquisitions and more certainty and transparency for investors and businesses. It’s described as “a proportionate response to modern developments” in international investment.
Further, the new legislation will also ensure that foreign direct investment projects can continue to boost jobs and stimulate the economy in every corner of the UK as the majority of deals will be able to proceed without delay.
Ahead of the National Security and Investment Act’s commencement, the Government will work closely with investors and businesses, including through a cross-sector Expert Panel, to ensure that they understand what’s new.
Business Secretary Kwasi Kwarteng said: “Nothing is more important than protecting our national security and this historic National Security and Investment Act will ensure that we’re better equipped to protect our citizens from the small number of foreign investors who seek to do us harm.”
Kwarteng continued: “The UK faces continued and broad-ranging hostile activity from those who seek to compromise our national security and that of our allies. If unchecked, such behaviour can leave Britain vulnerable to disruption, unfair leverage and espionage. It’s crucial that the Government has the tools at its disposal to combat these threats coming from ever-more determined overseas actors.”
According to Kwarteng, this landmark law not only significantly upgrades the nation’s decades-old investment screening powers, but also gives investors additional certainty and clarity as the nation enshrines its status as a global champion of free trade and investment.
In conclusion, Kwarteng observed: “We’re sending a crystal clear message to overseas investors. The UK is open for business, but if you seek to threaten the safety of the British people we will move to protect our interests.”
Updating current powers
The National Security and Investment Act updates the UK’s current powers in this area – which are almost 20 years old and don’t reflect those threats faced in the modern era – and bring them into line with those of its closest allies.
In addition to protecting the UK’s national security, the new measures are also designed to make the investment screening process simpler and quicker for investors and businesses, in turn affording them the certainty they need to do business here.
The UK is consistently placed as one of the leading destinations for foreign investment in Europe and around the world. This is thanks to the strength of its workforce, the degree of innovation exhibited and the lack of red tape. The Government is clear that the National Security and Investment Act will only strengthen the UK’s status as a recognised investment hub.
The National Security and Investment Act means that:
*the Government will be able to scrutinise, impose conditions on or, as a last resort, block a deal wherever there’s an unacceptable risk posed to Britain’s national security
*investors and businesses will have to notify a dedicated Government unit – namely the Investment Security Unit (more of which anon) – through a digital portal about certain types of transactions in designated sensitive sectors (among them Artificial Intelligence)
*the UK’s screening powers will also be extended to include assets like Intellectual Property as well as companies
*the majority of transactions will be able to proceed unhindered and investments will be screened much faster than the current regime
*transactions are expected to be assessed within 30 working days and often more quickly, with timelines set out in law for the very first time
*investors can also notify any transaction voluntarily if they believe it has implications for national security
*to ensure that no dangerous deal can slip through the net unchecked, in addition to mandatory notification for certain sectors, the Secretary of State will also have the power to ‘call in’ acquisitions in the wider economy which were not notified to Government but may raise national security concerns
International Trade Secretary Liz Truss said: “As a nation that has built itself on trade, enterprise and innovation, the UK remains one of the world’s most open, attractive and welcoming destinations for foreign investment. However, we will not compromise our national security. The National Security and Investment Act is designed to make the investment screening process slicker, simpler and quicker for investors and businesses, giving them the certainty they need to invest and do business here.”
Business Minister Paul Scully added: “Our powers in this area were last updated nearly 20 years ago. Change was clearly overdue and I’m delighted that we have achieved it. This historic Act will gild our status as an investment hub by modernising the screening regime such that it’s as simple and quick as possible for the majority of investors and businesses.”
Scully concluded: “The UK is very much open for business. Ahead of commencement, we will be working hand in glove with investors and businesses to help them understand what’s new so that their deals can proceed without any delay.”
The majority of acquisitions will require no intervention and will be able to proceed quickly and with certainty in the knowledge that the Government will not revisit a transaction once cleared unless false or misleading information was provided.
The regime is expected to commence towards the end of this year. Ahead of commencement, the Government will work closely with investors and businesses to help them understand what has changed. Special attention will be focused on those in sectors affected by mandatory notification, such as quantum technologies and space and satellite technologies.
Gerry Grimstone, the Minister for Investment, announced the creation of an Investment Council to act as an advisory body to the UK Government on foreign investment in order to improve and enhance the UK’s business environment for foreign investors.
Made up of private sector senior leaders from around the globe in a variety of industries – from technology and energy through to infrastructure and financial services – the Investment Council will cement the investor lens in the Government’s inward investment strategy.
The Council will operate alongside the recently formed Office for Investment, a new unit staffed by highly experienced individuals tasked to land high value investment opportunities in infrastructure, clean technologies and R&D.
For its part, the aforementioned Investment Security Unit will sit within the Department for Business, Energy and Industrial Strategy and provide a single point of contact for businesses wishing to understand the Act and notify the Government about transactions.
The Investment Security Unit will review transactions and co-ordinate cross-Government activity to identify, assess and respond to national security risks arising from foreign direct investment, thereby providing certainty for businesses that they will not be targeted and exploited by potentially hostile actors.
Under the Act, the Government must be notified if a person’s stake or voting rights in a sensitive acquisition surpasses the 25% benchmark.