New Bill modernises government’s powers to intervene in potentially hostile foreign direct investment in energy

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A new Bill to modernise the government’s powers to investigate and intervene in potentially hostile foreign direct investment that threatens UK national security will be introduced by ministers today.

Under the National Security and Investment Bill, the government will be taking a targeted, proportionate approach to ensure it can scrutinise, impose conditions on or, as a last resort, block a deal in any sector where there is an unacceptable risk to national security.

Under the Bill, investors and businesses will have to notify a dedicated government unit through a single digital portal about certain types of transactions in designated sensitive sectors, such as energy, transport and defence sectors, to ensure it can investigate and take action to address any national security risks.

Business Secretary Alok Sharma commented on the Bill: “The UK remains one of the most attractive investment destinations in the world and we want to keep it that way.

“But hostile actors should be in no doubt – there is no back door into the UK.

“This Bill will mean that we can continue to welcome job-creating investment to our shores, while shutting out those who could threaten the safety of the British people.”

Assets in scope of the Bill are land, tangible moveable property, and (covering intellectual property) any idea, information, or technique with industrial, commercial or other economic value.

Things that are not in scope:

  • Transactions involving stakes of below 15% in entities unless such a holding (alone or in combination with other rights or interests) amounts to the acquisition of “material influence over the policy of the entity”
  • Transactions involving an existing holding in an entity of over 25% moving to a new level of 26-50%
  • Transactions involving an existing holding in an entity of over 50% moving to a new level of 51-74%
  • Transactions involving an existing holding in an entity of 75% or more, moving to a new level of 76-100%
  • Assets bought by consumers – e.g. personal computer software, mobile phones, GPS.

Examples of possible conditions that could be put on deals posing a risk to national security include altering the amount of shares an investor is allowed to acquire, restricting access to commercial information, or controlling access to certain operational sites or works.

Barring narrow exceptions, the government’s current powers are limited to mergers involving target enterprises with a turnover of £70 million or a combined share of supply of 25% or more.

Unlike the Enterprise Act 2002, the National Security and Investment Bill does not include minimum turnover and share of supply thresholds.

The government’s existing national security powers under the Enterprise Act 2002 will continue to apply while the Bill completes its passage so only transactions that do not meet the thresholds of that legislation are likely to be affected.

The new regime will apply to investors from any country, but will remain targeted and proportionate, so most transactions will be cleared without any intervention and foreign direct investment projects can continue to boost jobs and stimulate the economy across the UK, while ensuring the UK remains an attractive place to invest.

The Bill will also extend the government’s screening powers so they can interrogate the acquisition of sensitive assets and intellectual property, as well as the acquisition of companies.

Investments will be screened much more quickly than the current regime, assessing transactions within 30 working days – and often faster – with timelines set out in law rather than by the government on a case-by-case basis as is currently the case.

The vast majority of transactions 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 inaccurate information was provided.

The 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 Bill and notify the government about transactions.

The unit will also coordinate cross-government activity to identify, assess and respond to national security risks arising through market activity.

Earlier this week the Prime Minister Boris Johnson announced the creation of the Office for Investment, a new unit tasked to land high value investment opportunities in infrastructure, clean technologies and research and development.