New legislative proposals for UK national security regime

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On 11 November 2020 the UK government published its draft National Security and Investment Bill; available here. If enacted in its current form, the bill will provide the government with new stand-alone powers to screen investments, through a process divorced from competition regulation and to intervene in any transaction giving rise to a risk to national security.

The Bill requires entities investing in specified "sensitive sectors" of the economy to notify transactions to the Secretary of State for Business, Energy & Industrial Strategy, irrespective of deal size. Transactions subject to mandatory notification will not be able to close until clearance is granted. Where transactions do not fall within the mandatory regime, there would be a parallel voluntary notification system for deals which "may raise national security concerns". The government intends to retain a broad "call in" power, enabling it to pick out non-notified transactions for review.

Under the current terms of the bill, any transaction raising national security concerns, that closes on or after 12 November 2020, could be 'called in' for review after the bill becomes law. The government will have powers to impose remedies where deals are found to create national security risks and to administer sanctions for non-compliance with the regime.

The regime will apply in relation to investments in: UK entities (bodies corporate, partnerships, unincorporated associations or trusts); entities that carry on activities in the UK; or entities that supply goods or services to persons in the UK.  It also applies to acquisitions of land and intangible assets.

The government plans to apply the mandatory notification regime to certain transactions in the following sectors:

1. Advanced Materials

2. Advanced Robotics

3. Artificial Intelligence

4. Civil Nuclear

5. Communications

6. Computing Hardware

7. Critical Suppliers to Government

8. Critical Suppliers to the Emergency Services

9. Cryptographic Authentication

10. Data Infrastructure

11. Defence

12. Energy

13. Engineering Biology

14. Military and Dual Use

15. Quantum Technologies

16. Satellite and Space Technologies

17. Transport

The government is consulting on its proposed definitions for the types of target entity within each sector that would fall within the bill's mandatory regime. The consultation document can be found here. The consultation closes on 6 January 2021.

The draft legislation is unlikely to become law until well into 2021.