The National Security and Investment Act comes into force

The adoption and development of regulation governing foreign direct investment (FDI) and national security is a fast-increasing trend in jurisdictions around the world. In general, FDI regimes apply to transactions that involve (i) the acquisition of certain rights in a local entity or asset and/or (ii) certain sectors/activities deemed vital to public health, security or order. The new UK regime (the NSI Act) sets out a comprehensive level of scrutiny for investment: it has become one of the strictest regimes and thus involves a potential shift in risk profile for certain activities for businesses. The application of the NSI Act does not distinguish between foreign and domestic acquirers.

Businesses should note that certain aspects of the NSI Act (in particular the ability to ‘call-in’ deals for review) will apply retrospectively, from 12 November 2020. The NSI Act introduces a hybrid mandatory and voluntary notification regime. The mandatory regime applies to certain transactions in 17 key sectors, defined in the NSI Act, and requires such transactions to be notified for approval before they are implemented. The consequences of getting this wrong are serious: the transaction is void and there is potential for significant fines and even criminal sanctions. The voluntary regime will enable parties to submit transactions for approval where the mandatory regime is not engaged but the parties wish to obtain the certainty of Government approval.

The relevant Governmental body which oversees the new regime is the Investment Security Unit (ISU). The ISU has the power to call-in non-notified deals retrospectively where it considers national security issues might arise, but businesses are also able to contact the ISU for guidance as to whether the mandatory thresholds are met and/ or whether a call-in under the voluntary regime is likely.

In sum, compliance with the NSI Act (and FDI more generally) for relevant transactions is now a crucial and unavoidable additional regulatory requirement for businesses.

Please contact our team to discuss further how the NSI Act or any other FDI regimes may impact your business.