First interim relief decision under the National Security and Investment Act provides guidance for public law cases

On 7 February 2025 the Administrative Court published its reasons for refusing the first-ever request for interim relief in a fast-tracked judicial review concerning the National Security and Investment Act 2021 (NSI Act): R (FTDI Holding Ltd) v Chancellor of the Duchy of Lancaster [2025] EWHC 241 (Admin). The request was made as part of judicial review proceedings in which FTDI Holding Limited is challenging the final order issued on 5 November 2024 requiring it to divest its 80.2% shareholding in a Scottish semiconductor company due to national security concerns.

The court gave helpful guidance on the principles to be applied to applications for interim relief in public law cases, both generally and specifically in a national security context. 

Key Points

• The threshold test for whether a claim is meritorious enough to warrant interim relief is no different in public law cases than in other cases.
• However the special feature of public law cases is that, if all else is equal, it will take something compelling, such as a strong prima facie case, to tip the 'balance of convenience' in favour of interfering in the activities of a public authority which believes itself to be acting lawfully.
• Making a claim for damages under section 8 of the Human Rights Act 1998 (HRA) does not of itself amount to a concession that damages would be an adequate remedy such that interim relief is unnecessary.
• The courts may be reluctant to proceed by way of an undertaking by a claimant to compensate a public authority should its claim turn out to be wrong in national security cases, because money cannot compensate for detriment to national security.
• For future challenges under the NSI Act, the judgment underscores the high degree of deference shown by the courts to the government on national security matters. The court emphasised that a private interest would have to be very weighty to tip the balance against the public interest in national security.
• The court may expedite the hearing of the substantive judicial review claim. However, expedition of the final decision may in fact count against an application for interim relief.
• The significant commercial impact of a divestment order under the NSI Act was expressly recognised by the court. Although it refused to grant interim relief, it considered it likely that an expedited substantive hearing would allow the claim to be determined before any irrevocable step towards sale was required.

Background

The NSI Act introduced a new standalone investment screening regime in the UK. We covered the new regime in a previous briefing and the first final judgment on a challenge to a decision under the NSI Act in a recent blog and detailed briefing.

The NSI Act provides the Secretary of State with broad powers to call-in transactions for review on national security grounds up to six months from the date they became 'aware' of the transaction (subject to a longstop date of five years post completion), and to issue 'final orders' prohibiting an anticipated transaction or directing a person to dispose of assets they acquired in a completed transaction. These powers can also be used in respect of transactions completed prior to the date of entry into force of the regime (4 January 2022), provided completion took place on or after 12 November 2020 (when the legislation was first introduced to Parliament). In such cases the six-month deadline runs from either 4 January 2022 or the date on which the Secretary of State becomes aware of the transaction, whichever is later.

On 22 November 2023 the defendant issued a call-in notice to the claimant in respect of the acquisition of 80.2% of the shares in a UK semiconductor company on 7 December 2021, relying on the retrospective application of the call-in powers. The claimant is associated with a Chinese state-owned investment company, and potential national security risks were identified in relation to the transfer of UK developed technology and IP to China and the potential for the claimant's ownership to disrupt critical national infrastructure. The defendant was allegedly not aware of the transaction until 20 November 2023, although this is disputed by the claimant.

On 5 November 2024 the defendant issued a final order (the Order) directing the claimant to produce a plan for disposing of its shareholding in full. On 3 December 2024 the claimant filed a claim challenging the Order (and later included the call-in notice) and applied for interim relief in the form of an interim injunction or stay suspending the effect of the Order pending the determination of its claim.

The Challenge

The claimant's grounds of challenge allege that the defendant unlawfully:

1. did not comply with the requirements of service when issuing the call-in notice;
2. issued the call-in notice more than six months after becoming 'aware' of the transaction (on the basis that awareness of the officials in the Investment Security Unit should be attributed to the Secretary of State);
3. gave inadequate disclosure before his decision in breach of the requirements of procedural fairness;
4. gave inadequate reasons for the Order;
5. effectively expropriated the claimant's property in a manner not in accordance with the law and disproportionate to the national security aims, contrary to Article 1 of the First Protocol to the European Convention on Human Rights; and
6. acted irrationally by making the Order.

The defendant disputes each of the grounds and they will be determined after the final hearing, which is to "roll-up" both the permission and substantive stages of the judicial review in the interests of expediency. At this stage the court declined to comment on the strength of the grounds but proceeded on the basis that there was a realistic prospect that permission would be granted on one or more grounds.

General guidance on interim relief in public law cases

When facing an application for interim relief in public law, the starting point is the three-stage American Cyanamid test that applies in other contexts: (i) whether there is a serious question to be tried; (ii) whether damages would be an adequate remedy (for either party); and (iii) if not, whether the 'balance of convenience' rests with leaving the status quo alone (at risk to the claimant's purported interest) or intervening by way of interim relief (at risk to others' purported interests).

Usually, the merits threshold of 'serious question to be tried' is relatively low and coincides broadly with the test for permission to bring a judicial review challenge. In this case the defendant argued that in public law cases the threshold is whether the claimant has a 'strong prima facie case'. The court rejected this argument. It explained that the threshold is not, as a rule, higher in public law cases than in any other case. However, the court emphasised that it may revisit the strength of the case at the balance of convenience stage where, if all else is equal, it is likely to be in the public interest to allow a public authority to enforce the law or exercise powers in what it considers to be a lawful manner. To persuade a court otherwise may require something "very compelling", for example that the claimant has a strong prima facie case or evidence as to the gravity of the consequences that would follow without interim relief. That is the special feature of interim relief in public law cases. The court commented that the weight to be accorded to the public interest would depend on the context.

With respect to the adequacy of damages stage of analysis, the court provided helpful confirmation that the claimant's claim for damages pursuant to section 8 HRA did not of itself amount to a concession that damages would be a wholly adequate remedy, thereby making interim relief unnecessary. However the court stressed that damages do provide some protection for property interests, unlike liberty or privacy interests, which is relevant to the balance of convenience.

Guidance on interim relief in a national security context

Typically an applicant for interim relief will undertake to compensate the other parties if they turn out to be wrong and this goes to the question of whether damages would be an adequate remedy for the defendant. In this judgment the court considered that any detriment to national security was "plainly not" capable of being compensated through an undertaking in damages. 

As to the balance of convenience stage, the court reviewed authorities on interim relief in national security cases and reinforced that while it is ultimately for the court to decide where the balance of convenience lies between the competing private and public interests, it will show great respect to the judgment of the executive on the existence of and weight to be attached to a risk to national security. This means it may be difficult to find a private interest "sufficiently weighty to outweigh the public interest in national security".

The court also considered that the fact that it was expediting the case meant that it was likely (though not certain) that it will make its final decision before the claimant takes any irrevocable step towards divestment, which reduced the weight of the risk to the claimant's interests in the balancing exercise.

The balance of convenience was said to come down firmly against the grant of interim relief and, regardless of whether there was a serious question to be tried or a strong prima facie case, the court was clear that the interests of national security must prevail.

Interim relief was therefore refused.

Comment

This case confirms the long-established position that, although the legal tests are the same, in practice obtaining interim relief in public law cases (whether involving national security or otherwise) is more difficult. Nonetheless, as is often the case, even an unsuccessful application for interim relief can assist in obtaining significant expedition for the final hearing.

In terms of the implications for future challenges to decisions under the NSI Act, this case underscores the high degree of deference shown by the courts to the government on national security matters. However, it is only a judgment on the question of interim relief, not on the substantive grounds of challenge. Indeed, at this interim stage the court proceeded on the basis that there was a realistic prospect that permission for judicial review would be granted on one or more of the grounds of challenge raised. As such, judicial review remains a viable path for challenging decisions under the NSI Act, particularly if there is an argument as to procedural fairness or illegality (such as testing the correct interpretation of the legislation given this is a new regime). It will be interesting to see how the court deals with the grounds of challenge raised in this case, in particular the key question of when the Secretary of State becomes 'aware' of a transaction for the purposes of the six-month deadline for exercise of the call-in powers.

The broad statement from the court that an undertaking in damages is not sufficient to compensate detriment to national security is also likely to be applicable to future cases in the national security context. However, it is not particularly surprising or novel since there are many public law contexts where a cross-undertaking in damages is not considered appropriate or sufficient to compensate public interests.