First judicial review under UK National Security and Investment Act rejected: lessons for future challenges

On 28 November 2024 the first judgment was published concerning a judicial review challenge under the investment screening regime introduced by the UK National Security and Investment Act 2021 (NSI Act). The challenge was brought by companies within the LetterOne Group (LetterOne) against the divestment order imposed in respect of the completed acquisition of UK fibre broadband provider Upp Corporation (Upp).

Although the claimants were unsuccessful, the judgment provides some useful insights into the decision-making process under the NSI regime, in particular in relation to remedies, as well as the approach to disclosure in a judicial review of an NSI final order. It also offers some helpful indications of possible areas of focus for future challenges.

Key takeaways

• The court granted permission for judicial review on the grounds of procedural fairness and alleged breach of human rights, but ultimately dismissed the challenge.
• Unsurprisingly, the court emphasised that assessment of national security risk is a matter for the Executive and not the judiciary, and the scope for intervention by unelected judges is limited, especially in respect of decisions taken personally by the Secretary of State with a high degree of democratic accountability.
• The court rejected arguments based on alleged irrationality, and was unpersuaded that the Secretary of State should have considered and/or used other statutory powers or that he took into account irrelevant considerations. It also concluded that the high threshold of Wednesbury unreasonableness was not even arguably met in this case.
• By contrast, the court confirmed that the questions of procedural fairness and the proportionality of an interference with human rights are questions for the court to judge for itself, rather than deferring to the judgment of the Secretary of State.
• It held that whilst fairness does not require "a never-ending dialogue", it may require the procedural provisions of the NSI Act relating to gathering of evidence and consideration of parties' representations to be supplemented by the common law in certain situations. That means it is open to parties in future litigation to argue other procedural points that do not appear explicitly in the NSI Act.
• On the question of whether the divestment order breached the claimants' human rights, the judgment includes interesting analysis of the powers to grant financial assistance under s.30 NSI Act. The court concluded that these powers extend to effectively granting compensation to parties affected by a final order and are sufficient to meet the requirement of a procedure for ensuring an overall assessment of the consequences of deprivation of property.
• The judgment reveals that the claimants successfully obtained a considerable amount of disclosure in the course of the judicial review proceedings, providing them with more detailed reasoning than they were given during the NSI review process. This included "open gists" of key documents including a technical comment paper produced by the National Cyber Security Centre and three assessments prepared for the Secretary of State regarding potential national security risks, the effectiveness of different remedy packages, and representations received.
• The description of the decision-making process set out in the judgment also provides some further practical insights into the NSI Act review process more generally (often criticised by deal parties for a lack of transparency and operating as a "black box"). It explains the key assessments relied upon by the Secretary of State and indicates that discussions around remedies may include multiple opportunities to make representations on a proposed remedy package (albeit this is not guaranteed and is unlikely to amount to a true negotiation in any event).

Implications for future challenges

Judicial reviews in a national security context are traditionally an area where the courts give the Government broad latitude and are unwilling to intervene in substantive policy and decision making. This judgment reflects that position. However, the court has engaged in detail with the points raised and has taken seriously its role as overseer of the process to ensure fairness and compliance with the law. This can be seen from the amount of disclosure that was obtained by the claimants during the litigation, and by the court's comments on being willing to supplement the legislative procedure where necessary to guarantee fairness of process.

Interestingly, the court turned its mind to the need for a procedure to assess the consequences of deprivation of property, including whether compensation is required for the Government's actions to be proportionate, and highlighted the provisions for financial assistance in the NSI Act as the route by which requests for compensation may be more directly made and challenged if they are refused. While the Parliamentary intention behind including powers to grant financial assistance appears to have been focussed primarily on granting assistance to a target company affected by a final order, the court's interpretation opens the door to future claims by acquirers and it will be interesting to see how these are dealt with in any future cases.

Please see our detailed briefing for more in-depth analysis of the High Court's judgment in this case, including the grounds of challenge, the approach to disclosure in judicial reviews under the NSI regime, and insights from the judgment into the decision-making process under the NSI Act.