On 14 October 2019, the UK Government announced plans to introduce new legislation to strengthen the Government’s existing powers to scrutinise and intervene in business transactions on the grounds of national security. The Queen’s Speech and background briefing notes confirm the UK Government’s plans to introduce legislation that creates:
A UK-wide notification system allowing businesses to flag transactions with potential security concerns to the UK Government for quick and efficient screening;
Powers for the UK Government to mitigate the risk to national security by adding conditions to a transaction or, as a last resort, by blocking a transaction. The UK Government will also be able to apply sanctions for non-compliance with these rules; and
A safeguarding mechanism allowing parties to appeal any decisions where necessary.
The Government intends the measures to apply UK-wide to businesses of any size and in any sector, and to cover scenarios involving the acquisition of an asset or a business, reflecting the Government’s desire to examine national security risks wherever and however they might arise. Whilst the background briefing notes do not expand that much further on the plans, they do confirm this Government’s intention to put foreign investment control firmly back on the agenda. Until now, Theresa May’s plans to introduce a new regime, and the fate of the July 2018 National Security and Investment White Paper (which we reported on here), had been uncertain. It is now probably safe to assume that the Government will build on the White Paper, which was widely commented on during consultation last year.
Since 2002, there have been 10 public interventions in transactions on national security grounds in the UK and the UK Government’s plans are consistent with steps that many of the UK’s allies are taking to update their foreign investment control regimes, including the USA, Germany and Australia. At this stage, whether the current Government will still be in place in several months’ time, or whether it can command a majority in Parliament to pass such legislation, is anyone’s guess, but the move does signal the continued relevance of this topic for the future legislative landscape of the UK.