UK Government publishes revised sector definitions for mandatory notification under new national security screening regime

The UK Government has today published its response to the consultation on mandatory notification in specific sectors under the proposed new national security screening regime contained in the National Security and Investment Bill (NSI Bill). The NSI Bill is currently making its way through the House of Lords, and is expected to enter into force in autumn 2021.

A wide range of stakeholders had expressed concerns that many of the sector definitions originally proposed in the consultation document were drafted too broadly, and in many cases were not sufficiently specific to enable acquirers to identify whether a particular transaction would fall within scope of mandatory notification.

The Government has clearly taken these comments on board, and has now published revised definitions for each of the 17 sectors that represent a significant narrowing of scope in many areas.

We set out in this briefing an overview of the key changes made to each of the 17 sector definitions.

Important highlights include:

• Artificial Intelligence (AI): significantly narrowed to focus on three higher-risk applications: the identification of objects, people and events; advanced robotics; and cyber security. This is intended to provide greater clarity for businesses and investors, reduce the burden on industry, and support the Government’s ambition to grow the UK AI economy.
• Communications: narrowed to focus on public communications networks, services and associated facilities, with associated facilities being caught only if they are associated facilities by reference to a public electronic communications network or service which meets specified turnover thresholds. The Government has also indicated that it is actively considering a number of further amendments to this sector definition.
• Quantum Technologies: the scope of entities covered has been tightened in response to concerns that the original definition would have covered the majority of transactions relating to this sector, including the academic research community and associated supply chain sectors. The revised definition is focussed on capturing entities that develop or produce a quantum technology product.
• Synthetic Biology (formerly Engineering Biology): comprehensively revised to concentrate on synthetic biology, and tightened to make clearer the scope of entities covered. A number of activities are now also expressly excluded from the definition, including diagnostics (subject to certain exceptions), industrial biotechnology, the production of substances ordinarily consumed as food or used as feed, certain gene therapy, general services and cell therapy.

These revised definitions remain in draft form, and may be subject to further amendment prior to the NSI regime entering into force. The Government states in its response that it intends to carry out further, targeted engagements with the sectors to refine further the description of acquisitions that are subject to mandatory notification, prior to including the final definitions in notifiable acquisition regulations (which will take the form of secondary legislation).

The final sector definitions adopted in the regulations will also be kept under review, and may be updated in the future as needed, for example as the relevant technology evolves.

Please click here to read the full briefing.