New FDI regime in the UK with immediate effect

The government has introduced a new National Security and Investment Bill to Parliament, which will overhaul the regime for reviewing transactions on national security grounds in the UK.

The new regime will be “pro-active” immediately: whilst it will not be possible to notify deals for clearance under the new regime prior to formal commencement of the final Act, once the Act comes into force the government will have powers to call in any deal that falls within the scope of the new regime which is completed any time from 11 November 2020 onwards.

The government first made clear its intention to introduce a new review framework in its July 2018 White Paper, but the Bill deviates from the White Paper framework in a number of important ways, with potentially significant implications for investors.

Key features of the Bill include:

• Transactions in scope – The proposed regime would apply to investors from any country, and there will be no minimum target turnover or market share thresholds. The key question is simply whether there is an acquisition of “material influence” in a company, assets or intellectual property which potentially gives rise to national security concerns (subject to certain exceptions for transactions involving an increase in an existing shareholding).
• Intervention on grounds of national security – The focus of the Bill is on intervention on grounds of “national security” (rather than a broader “national interest” test which had reportedly been under consideration). National security is a concept which is increasingly broadly defined and clearly goes well beyond simply defence-related interests. However, the government has stated that it will not extend to allowing intervention for “broader economic reasons”.
• Mandatory notification in some sectors – In a significant departure from the voluntary notification regime proposed in the White Paper, the Bill requires mandatory notification (to a new dedicated government unit via a digital portal) for at least some transactions in 17 specified sectors: civil nuclear; communications; data infrastructure; defence; energy; transport; artificial intelligence; autonomous robotics; computing hardware; cryptographic authentication; advanced materials; quantum technologies; engineering biology; critical suppliers to Government; critical suppliers to the emergency services; military or dual-use technologies; and satellite and space technologies. Transactions covered by the mandatory notification requirement which proceed without obtaining clearance will be void.
• Power to call in transactions in other sectors – In other sectors, notification will be voluntary. However, the Bill includes a retrospective “call-in” power allowing for post-completion review of any non-notified transaction. In practice, this may lead to a significant number of “failsafe” notifications being made.

For further information, see the e-bulletin prepared by our competition, regulation and trade team. We will be publishing a more detailed briefing on the bill in due course.