Businesses urged to prepare for new National Security and Investment Act
The new regime will permit the government to scrutinise certain types of acquisition
The government has urged businesses and investors to get ready for changes to the UK’s national security regime, set to commence on 4 January 2022.
The National Security and Investment Act is set to be the biggest shake up of the UK’s national security regime for 20 years. The Act modernises the government’s powers to investigate and intervene in mergers, acquisitions and other deals that may threaten national security.
The new regime aims to give investors more efficient clearance processes for relevant acquisitions, as well as more transparency about what types of deals the government could examine and the processes for doing so, providing certainty and clarity.
The government will be able to scrutinise and intervene in certain acquisitions made by anyone, including businesses and investors, that could harm the UK’s national security; however, the government says the regime will be “targeted and proportionate”. Screening powers will include assets like intellectual property, as well as companies.
The government may impose certain conditions on an acquisition. If necessary, the government may even seek to unwind or block it; however, it is expected this will only happen in the rarest of cases and the “vast majority of deals” will proceed without delay.
Investors planning an acquisition in one of the economy’s defined “sensitive areas” may need government approval prior to completion. The Act will also introduce a five-year retrospective power for the government to ‘call in’ acquisitions which were not notified to the government but may raise national security concerns. However, this will not apply in respect of acquisitions that took place prior to 11 November 2020.
The 17 defined sensitive sectors are: advanced materials; advanced robotics; artificial intelligence; civil nuclear; communications; computing hardware; critical suppliers to government; cryptographic authentication; data infrastructure; defence; energy; military and dual-use; quantum technologies; satellite and space technologies; suppliers to the emergency services; synthetic biology, and transport.
Businesses, investors and advisors will need to familiarise themselves with a range of guidance published by the government; more guidance will follow later in the year.
Business Secretary Kwasi Kwarteng said: “Protecting the UK’s national security is of paramount importance to this government. Now that our investment screening regime has been strengthened, the government will be able to take swift and decisive action against potentially hostile foreign investment.
“This robust regime will also make the investment screening process simpler and quicker for investors and businesses – giving them the certainty they need to do business in the UK – and I urge them to make sure they are ready for the changes coming into force on 4 January 2022”.
A dedicated hub that sits within the business department – the Investment Security Unit – will provide a single point of contact for those who need to know more about the Act and how to notify the government about transactions.
The unit will “review transactions and coordinate cross-government activity to identify, assess and respond to national security risks arising from foreign direct investment”. The government hope this will provide certainty for businesses that they will not be “targeted and exploited” by “hostile actors”.
Business Minister Lord Callanan said: “The UK has a world-class reputation as a leading destination for foreign investment and our National Security and Investment Act will only strengthen that reputation.
“This government has been clear all along: we are open to foreign investment, but we will not tolerate those who wish to threaten our national security”.
The government has said investments will be screened more quickly than the current regime, assessing transactions within 30 working days or less, with timelines now set out in law, rather than by the government on a case-by-case basis.
Minister for Investment Gerry Grimstone commented: “This Act bolsters our reputation with quicker, slicker scrutiny processes and more certainty and security for businesses to help attract high value, high impact investment”.
Interested parties can contact the hub using the email address firstname.lastname@example.org with queries.