United Kingdom

Overview: National security interventions

Public interest interventions and the new national security regime

Until recently there has been no dedicated regime for reviewing acquisitions by foreign purchasers in the United Kingdom on national security grounds. Instead, there is a power under the Enterprise Act 2002 (EA02) for the relevant Secretary of State to issue an intervention notice in respect of any transaction meeting certain thresholds (reflecting, for the most part, the thresholds used to determine whether the UK’s Competition and Markets Authority (CMA) has jurisdiction to review the transaction for merger control purposes) (the public interest or PIIN regime). Such an intervention may be issued at any time before the earlier of the CMA’s deadline for issuing a Phase I merger decision or the date on which the CMA issues a Phase I merger control decision. The Secretary of State may ultimately impose remedies to address any substantive public interest concerns, including potentially prohibiting (or requiring parties to unwind) a transaction.

The PIIN regime allows intervention only on the grounds specified in Section 58 EA02, which are:

  • national security;[2]
  • accurate presentation of news and free expression of opinion in newspapers;
  • media plurality;
  • maintenance of the stability of the UK financial system; and
  • maintenance in the United Kingdom of the capability to combat, and mitigate the effects of, public health emergencies.[3]

The Secretary of State may specify, by order, new grounds for intervention.[4]

The National Security and Investment Act 2021 (the NSI Act) introduces a new stand-alone regime empowering the Secretary of State for Business, Energy and Industrial Strategy (BEIS) to review acquisitions of entities and assets for UK national security purposes (the NSI regime). From 4 January 2022,[5] this will replace the PIIN regime insofar as concerns national security. New mandatory notification requirements will apply to relevant transactions completing on or after that date, and other transactions (including those that have already completed since 12 November 2020) may be called-in for review as of that date.[6] The NSI regime will be administered by the new Investment and Security Unit (ISU) (an operational unit within BEIS).

Transactions falling outside the scope of the NSI Act will continue to be capable of review under the PIIN regime insofar as they relate to media, the financial system or public health. In this guide, we focus on the national security regime as it will apply under the NSI Act.

Scope

The general scheme of the NSI regime is not limited to specific sectors but allows the Secretary of State to review transactions that she or he considers may give rise to a risk to the UK’s national security.[7] The NSI Act makes additional provision, however, for mandatory notification of certain transactions concerning target businesses that have activities within one or more of 17 sectors specified for this purpose under the accompanying notifiable acquisitions regulations.[8]

Jurisdiction and notification requirements

Transactions will be within the scope of the NSI regime whenever a ‘trigger event’ occurs in respect of a ‘qualifying entity’ or ‘qualifying asset’. For this purpose:

  • a ‘qualifying entity’ means, broadly, any entity that is not an individual and (1) is formed or recognised within the United Kingdom, (2) carries on activities in the United Kingdom, or (3) supplies goods or services to persons in the United Kingdom;[9]
  • a ‘qualifying asset’ means land, tangible movable property or ideas, information or techniques that have industrial, commercial or other economic value, provided that the asset is (1) situated within the United Kingdom (in the case of land or movable property only), (2) used in connection with activities carried on in the United Kingdom, or (3) used in connection with the supply of goods or services to persons in the United Kingdom;[10] and
  • a ‘trigger event’ includes any of the following (which are considered in the NSI Act to constitute acquisitions of control):[11]
    • in respect of a qualifying entity:
      • an increase in the percentage of shares or voting rights held by the acquirer from (1) 25 per cent or less to more than 25 per cent, (2) 50 per cent or less to more than 50 per cent, or (3) less than 75 per cent to 75 per cent or more;
      • an acquisition of voting rights in the entity that, whether alone or in aggregate with voting rights already held, enable the acquirer to secure or to veto any class of resolution governing the affairs of the qualifying entity; or
      • an acquisition of rights or interests that, whether alone or in aggregate with rights or interests already held, enable the acquirer materially to influence the policy of the qualifying entity (unless the acquirer already held interests or rights that enabled it to do so). The government expects this concept of ‘material influence’ to be interpreted in light of the approach taken under the UK merger control regime (but having regard to the context of the NSI Act)[12] and, as such, acquisitions of a 15 per cent stake, or potentially less, may in particular circumstances be sufficient to bring a transaction within the scope of the NSI regime;
    • in respect of a qualifying asset, an acquisition of rights or interests in relation to the asset that enable the acquirer to:
      • use the asset, or use it to a greater extent than prior to the acquisition; or
      • direct or control how the asset is used, or to do so to a greater extent than prior to the acquisition.

Importantly, this means acquisitions of minority interests (e.g., by a third party investor) could constitute trigger events, and parties considering such steps should always check whether they may be within the scope of the NSI Act. It is also notable that the government considers that intra-group reorganisations will be within the scope of the NSI regime.[13] Thus, any transaction in which an immediate controlling interest over an entity or asset changes hands might be reviewable, or even trigger a mandatory filing requirement, even if the trans­action is entirely intra-group and does not result in any change in the ultimate ownership of the entity or asset. This is an unusual position, differing in particular from the approach taken under UK merger control rules as well as a number of other foreign direct investment regimes, and will inevitably increase the number of technical filings made each year.

Mandatory notification will be required when a transaction involves an acquisition of ‘control’ (as defined above in the context of a trigger event but excluding the ‘material influence’ limb) over a qualifying entity (i.e., not a qualifying asset) that carries on specified activities in the United Kingdom in one or more sectors of the economy specified in regulations for this purpose (each a ‘specified activity’).[14] These transactions must be notified to the Secretary of State and clearance obtained prior to completion.

Under the notifiable acquisition regulations (NARs),[15] specified activities 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 technology;
  • suppliers to the emergency services;
  • synthetic biology; and
  • transport.

The NARs provide detailed lists and definitions of each specified activity. Given the specificity and often detailed nature of these categories, assessing whether a target’s activities fall within the scope of one of the specified activities will generally require active cooperation from the target. This will inevitably add a degree of uncertainty for potential buyers in less obvious cases, particularly in the case of an uncooperative target or when the opportunity for pre-bid due diligence is limited.

Voluntary notification will be available for, among other things, transactions that comprise trigger events in relation to qualifying entities that do not carry on specified activities. Submission of a voluntary notice will reduce to 30 working days (from six months or longer) the period in which the Secretary of State can decide to issue a call-in notice.

‘Call-in’ power

The Secretary of State will have the power to call in for review any transaction in which a trigger event has taken place or will take place in relation to a qualifying entity or qualifying asset, if the trigger event has given rise or may give rise to a risk to national security. This power will be exercisable at any time up to six months after the Secretary of State becomes aware of the transaction, provided this is also within five years of the relevant trigger event.[16]

Where a transaction has been the subject of a mandatory or voluntary notification, however, the Secretary of State must decide whether to issue a call-in notice within 30 working days of the notification being accepted by the Secretary of State. This is significantly shorter than the equivalent Phase I assessment under the PIIN regime (for which the timeline is, in effect, set on a case-by-case basis once an intervention notice has been issued, provided that any reference to Phase II must be made no more than four months from the date on which completion of the transaction is made public).

It is understood that the ISU will actively monitor markets for transactions that may give rise to national security concerns. In addition, the NSI Act grants the government extensive information gathering powers, enabling it to request any information necessary to inform an assessment of the national security risks of a transaction. This may include requesting information in circumstances where no notification has been submitted so as to enable the Secretary of State to determine whether to exercise the call-in power.

The ability to call in a transaction will apply to any transaction that completes on or after 12 November 2020, and the six-month period within which those transactions may be called in will not start until the NSI regime comes into force. The mandatory notification requirement will not apply to transactions completed before the NSI regime comes into force. As such, parties to deals that are in contemplation, or have signed but not yet completed, should already consider obtaining informal guidance from the ISU if there is any risk of a potential national security issue.

Per Section 3 of the NSI Act, the Secretary of State has published a statement of policy intent (also known as the Section 3 Statement) on the scope of the call-in power.[17]

Types of investors

The NSI regime is not explicitly targeted at specific categories of investor but applies, in principle, equally to investors of any kind. It is not dependent on an investor’s nationality or domicile, or the existence of trade relationships between the United Kingdom and any other country, and is applicable to both UK investors and foreign investors. In practice, concerns around ownership of UK businesses or assets by overseas entities might be taken into account by the Secretary of State when deciding whether to review a transaction and how to finally determine the investigation. Potential concerns may not always be in the public domain and will ultimately depend on prevailing views within the government.

During the development of the NSI regime, the government indicated that its focus would be on acquirers who are likely to be directly hostile to the interests of the UK’s national security or owe allegiance to others who are hostile. The government has stated that it is affiliation to hostile parties, rather than foreign ownership itself, that would be problematic and that, for example, state-owned enterprises, sovereign wealth funds or similar entities are not inherently more likely to pose a security risk, particularly if they have a history of passive or long-term investments or pursue long-term investment strategies.[18] Conversely, although trans­actions involving foreign acquirers may still be more likely to be called in than those involving UK acquirers, the government has confirmed that transactions involving UK acquirers will be subject to mandatory notification requirements and may be called in.[19]

Extraterritoriality

The NSI regime captures acquisitions outside the United Kingdom if the target meets the criteria of a qualifying entity or qualifying asset. These criteria effectively require a connection to the United Kingdom but, in certain circumstances, the NSI regime is capable of applying to transactions in which neither the target, the acquirer nor the seller has a direct presence in the United Kingdom (although the mandatory notification obligation applies only to acquisitions of qualifying entities carrying out a specified activity in the United Kingdom). Remedies orders, where relevant, may apply to a person’s conduct outside the United Kingdom if they are a UK national, an individual ordinarily resident in the United Kingdom, a body incorporated or constituted under the law of any part of the United Kingdom, or carrying on business in the United Kingdom.[20]

The government considers that acquisitions of entities or assets outside the United Kingdom are generally less likely to give rise to national security risks than those located within the United Kingdom and are therefore less likely to be called in. The level of risk to national security will generally be linked to the strength of the connection of the asset or entity to the United Kingdom.[21]

The government has also published guidance intended to assist parties in assessing whether overseas transactions will fall within the scope of the NSI Act.[22] The guidance addresses topics such as the circumstances in which the presence of staff or the transport of products into the United Kingdom will bring a business within the scope of the NSI regime, as well as how the government anticipates engaging with overseas parties. It also notes that, although the government may bring enforcement action against parties or transactions outside the United Kingdom, in some cases formal enforcement might not be plausible or desirable, and that, in such cases, the government might instead pursue alternative means of protecting UK national security, such as cutting out specified parties from its supply chains.

Commentary

In practice, deciding whether to make a voluntary notification is likely to depend largely on an assessment of the likelihood of the transaction being called in for review. When there is a potential risk to national security, it may be advisable to notify the transaction voluntarily in the interests of legal certainty, given the length of time during which the Secretary of State’s call-in power could potentially be exercised.

The government has chosen not to detail the circumstances in which national security is, or may be, considered at risk; the intention is to ensure that the NSI regime is ‘sufficiently flexible to protect the nation’, while also stressing that the NSI regime will not be used arbitrarily, reflecting the UK’s standing as an economy that is open to investment.[23] This is understandable, perhaps, given the inherent sensitivity and secrecy of national security interests and, in practice, seems unlikely to mark any significant departure from existing practice under the PIIN regime.

In its Section 3 Statement, the government indicates that the 17 sectors listed as specified activities in the NARs are also sectors it considers to be more sensitive as regards national security and as such, even when mandatory filings are not triggered, transactions in these sectors and related sectors are more likely to be called in for review.[24]

The Section 3 Statement also identifies the following key risk factors for its assessment of the likelihood of a risk to national security:[25]

  • Target risk: the nature of the target and whether it is being used, or could be used, in a way that poses a risk to national security. The government indicates that this is most likely to arise in transactions in or closely linked to the specified activities.
  • Acquirer risk: characteristics of the acquirer such as the sector, or sectors, of activity, technological capabilities and whether it has links to entities that may seek to undermine or threaten the interests of the United Kingdom. This would include having regard to the persons with ultimate control of the acquirer, any other interests already owned by them and any links to criminal or other illicit activities.
  • Control risk: the amount of control the acquirer gains of an entity’s operational business or future strategy, or control or use of an asset. It is noted that the Secretary of State is ‘less likely’ to have concerns based solely on the degree of control acquired.

As regards asset acquisitions, the Secretary of State expects to call in only rarely acquisitions of assets that are not in areas linked to the specified activities. Moreover, the Secretary of State expects to call in acquisitions of assets much less frequently than acquisitions of entities.[26]

Notwithstanding the above, there remains comparatively little guidance, and very little decisional practice (none under the NSI Act itself), by which parties might assess the call-in risk for any given transaction anticipated or carried out since 12 November 2020. This lack of clarity is particularly acute for parties assessing as yet unsigned transactions, who seek to assess the appropriate extent of due diligence and the question of whether conditions precedent or other contractual protections may be needed.

Parties are able to seek informal guidance from the ISU as to the application of the new regime to particular transactions, both prior to and after formal commencement of the NSI Act, and in the absence of more detailed guidance, it seems likely that investors will need to make use of this option.

The Section 3 Statement also raises a number of issues that may need to be addressed in the future, including:

  • the statement, in the description of control risk, that high levels of control ‘may enable parties to reduce the diversity of a market, or influence the market’s behaviour, in a way that may give rise to a risk to national security’. This appears to conflate the notion of control over an enterprise with that of market power;
  • the extent to which a single risk factor could be sufficient to prompt the issue of a call-in notice (the Section 3 Statement indicates that ‘[t]he Secretary of State expects that, when calling in an acquisition, all 3 risk factors will be present, but does not rule out calling in an acquisition on the basis of fewer risk factors’);[27] and
  • a general need for greater clarity as to how the regime might be applied in specific circumstances or to specific categories of transaction (e.g., acquisitions of land, financing transactions or equity underwriting).[28]

The review process

Where a mandatory notification is required under the NSI regime, this must be submitted to the ISU before the relevant acquisition of control has occurred. Voluntary notifications may be submitted from the point at which arrangements are in progress or contemplation which, if carried into effect, would result in a trigger event taking place in relation to a qualifying entity or qualifying asset (i.e., they need not be submitted prior to completion).

The government has published a draft template notification form setting out the information that would be required for a notification, though in view of the fairly high-level nature of the categories listed, it is likely that additional information will be required in most cases.[29] The Secretary of State may reject notifications on certain grounds specified in the NSI Act and, therefore, in practice a period of informal pre-notification contacts may be required to ensure that notifications are accepted.[30]

Once the Secretary of State formally accepts a notification she or he has 30 working days within which to decide whether to issue a call-in notice or to clear the transaction. If a transaction has not been notified, the Secretary of State may issue a call-in notice at any time up to six months after the Secretary of State becomes aware of the transaction, providing this is also within five years of the relevant trigger event.[31] Neither the NSI Act, the Section 3 Statement nor any published guidance indicate when the Secretary of State may be taken to have become aware of a transaction for this purpose.[32]

The Secretary of State has a further 30 working days from the issue of a call-in notice in which to review the transaction,[33] extendable by up to 45 working days (or longer with the agreement of the purchaser). If the Secretary of State considers that a transaction gives rise to national security risks and that it is necessary and proportionate to make a final order for the purpose of preventing, remedying or mitigating that risk, she or he may issue a final order for this purpose (and a further extension of the review period may be agreed with the acquirer if the Secretary of State is considering whether to make a final order, or its terms). The review period may also be paused in the event that the Secretary of State issues information requests[34] and will restart once the parties have satisfied the information request or once the deadline for doing so is reached, whichever comes first. Thus it will be possible for the review period to restart without the parties having provided the information requested and, while it remains to be seen how such cases will be assessed, parties are likely to be disadvantaged if they fail to provide information that would be needed to support a clearance decision.

Sanctions for non-compliance

A transaction completed in breach of the mandatory notification and clearance requirement will be void,[35] though in certain circumstances retrospective validation may be obtained.[36]

Completion in breach of the standstill obligation, or failure to comply with an interim or final order, can additionally result in fines of up to 5 per cent of worldwide turnover or £10 million (whichever is the greater), imprisonment of individuals for up to five years, and disqualification of directors for up to 15 years.[37]

In the case of voluntary notifications, or transactions called in without any notification being made, the Secretary of State has the ability to impose an interim order while the review is being conducted. Interim orders and final orders are enforceable by way of court order.[38] It appears likely that these interim orders will operate in a similar manner to the initial enforcement orders (IEOs) regularly imposed by the CMA when investigating the potential effects of a merger on competition. In the merger control context, the CMA routinely imposes broad IEOs prohibiting integration in completed mergers, and although doing so in anticipated mergers is less common, it is not unknown. It remains to be seen whether the Secretary of State will follow a similar approach in the context of the NSI regime.

Substantive assessment process and main evaluation criteria

The Secretary of State will assess whether the transaction has given rise, or may give rise, to a risk to national security. The government has not yet issued any guidance as to how it expects the substantive test to be applied under the NSI Act, and although the Section 3 Statement is informative to a degree, it is unlikely to provide enough detail for parties to assess the risk in a given trans­action. Matters affecting national security may not be known publicly and, therefore, it may be difficult for investors to rule out a risk that national security concerns might be identified and, thus, guidance in this regard is clearly desirable.

Moreover, although it may be expected that similar factors will be relevant to the Secretary of State’s consideration under the NSI Act as would be relevant to the consideration of national security matters under the PIIN regime, meaningful examples of historic decisions are sparse. From the limited published decisions, topics that have been potentially relevant to substantive assessment of national security under the PIIN regime have included:

  • protection of sensitive information and technology from unauthorised access;
  • maintenance in the United Kingdom of capabilities and services required by government entities;
  • preservation of supply chains (including ensuring that foreign export restrictions, intellectual property rights or similar cannot interfere with supplies to the United Kingdom); and
  • preservation of operational advantage.

It is to be expected that, with a more regular and numerous caseload, decisional practice under the NSI Act will quickly become more developed than under the PIIN regime, providing some much-needed clarity for investors.

Outcomes

The Secretary of State will have powers to clear a transaction, prohibit it or approve it subject to conditions. The lawfulness of these decisions will be appealable on judicial review grounds.[39]

Where required, conditions imposed to address national security concerns are likely to focus on access to sensitive sites, access to confidential information, supply chains, intellectual property transfer, compliance, monitoring and personnel.[40] Although the NSI Act itself does not specify what remedies might be appropriate, the 2018 National Security and Investment White Paper lists the following examples of potential remedies,[41] many of which reflect remedies that had been agreed or imposed under the PIIN regime, which the government subsequently indicated it intended to take forward:

  • Access condition: limiting access to a particular site operated by the acquired entity to certain named individuals.
  • Information/operations condition: only personnel with appropriate UK security clearances have access to confidential information or that only those personnel should be part of the operational management of the business.
  • Supply chain condition: a new acquirer retains an acquired entity’s existing supply chain for a set period.
  • Intellectual property condition: restricting the transfer or sale of intellectual property rights (to be tailored to the individual circumstances of the case and the national security risks identified).
  • Access condition: requiring that access to dual-use technologies and information about their design, materials, uses or supply chains be restricted to certain named individuals within the investor company or a third party associated with them.
  • Compliance condition: imposing supervisory measures, periodic reporting or other actions (to be decided case by case) that should be taken to ensure compliance with UK regulatory regimes.
  • Monitoring condition: requiring that a senior minister (or his or her representative) be given access to information on the company’s activities.
  • Personnel condition: requiring the acquirer to secure a senior minister’s approval for the appointment of any directors and other key personnel.
  • Structural condition: requiring the retention of UK staff in key roles at a particular sensitive site.
  • Proximity condition: requiring the relevant person (most likely a person with title, control or interest over the proximate site) to maintain such measures as a senior minister may specify (e.g., physical or personnel security, or restrictions on access).

In its impact assessment of the proposed measures, the UK government indicated that it envisages between 1,000 and 1,830 notifications to be made each year under the new regime,[42] with around 70 to 95 detailed national security assessments being undertaken each year.[43] Although these figures seem low, in comparison the UK government has intervened (by means of a PIIN) in just 14 transactions on national security grounds since 2003 (with two reviews ongoing at the time of writing). Notably, the government has said it anticipates that remedies will be imposed in around 10 transactions per year (i.e., very few transactions should merit the imposition of remedies).[44]

The approach taken by the Secretary of State when accepting undertakings to address national security concerns in the context of recent cases considered under the PIIN may offer some guidance as to the sort of remedies that may need to be negotiated. For example, in both Connect BidCo/Inmarsat and Advent/Cobham, it proved possible to address national security concerns by agreeing under­takings concerning the maintenance of strategic capabilities and protection of sensitive information. However, businesses should not assume that it will always be possible to agree remedies, nor that a proposal of remedies will avoid a full investigation, and the government will have the power to block (and potentially unwind) transactions as a last resort. Although no transactions have been formally prohibited on national security grounds under the PIIN regime (though parties have given undertakings to the Secretary of State that they will not proceed with a transaction), this should not be seen as providing any precedent for the new NSI regime, which is being introduced against a backdrop of increased global protectionism and a growing number of high-profile examples of deals being blocked under foreign direct investment regimes in other jurisdictions (e.g., Beijing Kulun/Grindr in the United States, Yantai Taihai/Leifeld in Germany and Cheung Kong Infrastructure/APA Group in Australia).

At present, there are no formal proposals for an NSI equivalent to the ‘under­takings in lieu’ process available in merger cases. The NSI Act does not make provision for such a process, and given the time limits for calling in a transaction (especially when parties have submitted a notification), the process might not be feasible in any event. Transactions that raise apparent concerns, therefore, appear more likely to be called in for detailed assessment than would be the case in an equivalent merger review.

Practical insights and strategic guidance for investors

Until the introduction of the NSI regime, there has been no formal notification process for foreign investments with the potential to raise national security concerns in the United Kingdom, beyond a merger notification. With the introduction of the NSI regime and, in particular, the Secretary of State’s call-in powers, investors will need to decide whether to take the risk of completing without clearance or to proactively make a voluntary notification. Experience with the CMA from the merger context may signpost a broader willingness in the United Kingdom to make more assertive use of review mechanisms and associated remedies options. In the context of the PIIN regime, the Secretary of State most recently accepted undertakings in Gardner Aerospace Holdings Limited/Impcross Limited,[45] which required the transaction to be abandoned.

In light of the significant sanctions that may be imposed for non-compliance, the potential breadth of the NSI regime and the lengthy look-back period for calling in a non-notified transaction, it will be important to consider early on in a transaction whether a target’s activities might be seen as ‘closely linked’ to a specified activity and, therefore, whether a voluntary notification would be prudent. In this regard, it is clear from the Section 3 Statement that the government has sought to retain significant discretion for the Secretary of State in determining when to use her or his call-in powers and to allow room for practice to develop over time. Although this is perhaps not surprising, it will bring at least initial uncertainty and, thus, it may be expected that parties and advisers will take a cautious approach in the early stages of the NSI regime, both around the mandatory notification requirements and with regard to transactions that might be called in after completion, and that there may be a significant volume of informal approaches and voluntary notifications being submitted, which might not be entirely necessary. A knock-on effect of this may be a relatively high number of transactions being made conditional on obtaining clearance under the NSI Act and, to some extent, the practical effect may be more akin to an entirely mandatory filing regime.

Although the government emphasises that the call-in power is not intended to be an arbitrary tool to limit foreign investment, its practical impact on foreign investment in the United Kingdom remains to be seen. There is a clear risk that the new regime may act as a deterrent, particularly in circumstances where, for example, the mandatory notification and standstill obligations, combined with a greater risk of detailed and more lengthy assessment for certain acquirers, could be enough to disadvantage some bidders in fast-paced auction processes. It may be hoped that, as a body of decisional practice emerges, any such uncertainty will reduce and, with it, any effects on investors.

Reform proposals

The introduction of the NSI Act marks the culmination of a government policy that has been developing for a number of years. Although it presents a significant change to the UK’s mechanisms for addressing foreign investments, arguably it does no more than bring the United Kingdom into line with other jurisdictions that have had these regimes for some time.[46]


Notes

1 Veronica Roberts is a partner, Tom Kemp is a senior associate and Marie Becker is a junior associate at Herbert Smith Freehills LLP.

2 Until 3 January 2022.

3 Note that under Section 42(3) of the Enterprise Act 2002 [EA02], the Secretary of State may also intervene on the grounds of a consideration that is not specified in Section 58 but that the Secretary of State considers ought to be so specified. Additional requirements apply for the Secretary of State to intervene on such grounds. We are not aware of any examples of interventions being made on grounds that were not already specified in Section 58 EA02.

4 EA02, Section 58(3).

5 The government announced in July 2021 that the operative provisions of the National Security and Investment Act 2021 [NSI Act] and the associated NSI regime would come fully into force on 4 January 2022. See the announcement at https://www.gov.uk/government/news/new-and-improved-national-security-and-investment-act-set-to-be-up-and-running.

6 NSI Act, Section 2(4).

7 id., Section 1(1).

8 Under NSI Act, Section 6(1).

9 id., Sections 5(1)(a), 7(2) and 7(3).

10 id., Sections 5(1)(b) and 7(4)-(6).

11 id., Sections 8 to 12. Further information on how to assess whether a trigger event has occurred is provided in Schedule 1 to the NSI Act.

12 See Department for Business, Energy and Industrial Strategy [BEIS], ‘National Security and Investment Act: prepare for new rules about acquisitions which could harm the UK’s national security’ (published 20 July 2021), available at https://www.gov.uk/government/publications/national-security-and-investment-act-prepare-for-new-rules-about-acquisitions/national-security-and-investment-act-prepare-for-new-rules-about-acquisitions-which-could-harm-the-uks-national-security.

13 id.

14 NSI Act, Sections 6(2), 13 and 14(1).

15 See the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021, available at https://www.legislation.gov.uk/ukdsi/2021/9780348226935.

16 In relation to a transaction for which the mandatory notification requirement was triggered but no filing was made, the five-year time limit will not apply.

17 National Security and Investment Act 2021: Statement for the purposes of section 3 (published 2 November 2021) [Section 3 Statement], https://www.gov.uk/government/publications/national-security-and-investment-statement-about-exercise-of-the-call-in-power/national-security-and-investment-act-2021-statement-for-the-purposes-of-section-3.

18 See, e.g., Section 3 Statement.

19 id., Paragraph 5.

20 NSI Act, Section 26(6).

21 Section 3 Statement, Paragraph 39.

23 Section 3 Statement, Paragraphs 4–6.

24 id., Paragraph 11–12.

25 id., Paragraphs 19–32.

26 id., Paragraphs 35–38.

27 id., Paragraph 21.

29 The draft template currently lists information in the following categories only: (1) parties’ contact details; (2) details of the transaction; (3) details of the activities of the target; (4) details of the acquirer’s group; and (5) any other information that the notifying parties consider may be relevant to the government’s consideration of the transaction.

30 NSI Act, Section 18.

31 id., Section 2.

32 In contrast, for merger control purposes, the EA02 specifies that the four-month time limit for making a Phase II reference commences either when notice of material facts about the arrangements in question is given to the Competition and Markets Authority, or the facts have been so publicised as to be generally known or readily ascertainable.

33 NSI Act, Section 14(9).

34 id., Section 24.

35 id., Section 13.

36 id., Section 15-17.

37 id., Sections 39 and 41.

38 id., Section 33.

39 id., Section 49.

40 See the government’s November 2020 response to the 2018 Consultation on the National Security and Investment White Paper, paragraph 159, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/935335/nsi-government-response.pdf.

42 It is noted that these figures were premised on the control threshold for mandatory notification being set at 15 per cent, rather than the 25 per cent provided for under the NSI Act.

43 National Security and Investment Bill Impact Assessment (9 November 2011), available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/934276/nsi-impact-assessment-beis.pdf.

44 id.

45 Gardner Aerospace Holdings Limited/Impross Ltd, Undertakings in Lieu (5 September 2020): see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/915946/gardner-decision-notice.pdf.

46 The government has indicated that it will keep the scope of the regime under active review.

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