No doubt partially in the light of the Huawei 5G infrastructure furore of a while back, the Government a new National Security and Investment Bill is making its way through Parliament, which, if passed, will provide the Government with new powers to screen investments on national security grounds.
If the bill passes into law, it will mean a new level of analysis is required for any transaction involving foreign investment.
Currently, proposed investment transactions may come under scrutiny under a competition law-style process led by the Competition and Markets Authority. The new bill would create a separate national security investment screening regime, divorced from competition regulation.
Companies and other entities operating in sensitive sectors of the economy (civil nuclear; communications; data infrastructure; defence; energy; transport; artificial intelligence; autonomous robotics; computing hardware; cryptographic authentication; advanced materials; quantum technologies; engineering biology; critical suppliers to government; critical suppliers to the emergency services; military or dual-use technologies; and satellite and space technologies), will have to seek authorisation for specific types of transaction.
Separately, the Government wants to create a voluntary notification system to encourage notifications from parties who consider that their transaction or other acquisition may raise national security concerns.
The Government will also have the power to call in certain defined transactions or other events to undertake a national security assessment, whether or not they have been notified to the Government.
And, rather than being limited to acquiring interests in companies, the law is framed broadly to capture acquisitions of “qualifying assets”, meaning land; tangible property; and ideas, information or techniques having industrial, commercial or other economic value (including trade secrets, databases, source code, algorithms, formulae, designs, plans and drawings and software).
Importantly, there are no proposed lower limits or safe harbours for certain types of transaction or below a certain threshold.
There will of course be remedies to address risks to national security, sanctions for non-compliance with the regime and a mechanism for legal challenge.
The Government’s policy is to address national security risk. But the bill brings to an end the UK’s famously light touch regulation of foreign investment, bringing it more in line with other competitor countries. When it becomes law, the National Security and Infrastructure Bill will require anyone in the UK considering accepting foreign investment to consider the national security risks of that transaction.
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