National Security and Investment Act

The National Security and Investment (NSI) Act, which completed its passage through Parliament in April, will commence fully on 4 January 2022. This marks the biggest upgrade of investment screening in the UK in 20 years and brings the government’s powers in line with those of many other countries.

Ahead of the Act commencing, businesses and investors are urged to get ready for the changes by reading the published guidance to ensure a smooth transition to the new rules.

Bringing in new rules for investment screening is not a signal that the UK is reducing its appetite for foreign investment. It is an upgrade to the Enterprise Act 2002, to help cope with the demands of a modern economy. The Act is about ensuring investment in the UK can continue with predictability and transparency while protecting national security. It supports the UK’s world-leading reputation for being an attractive place to invest and improves the government’s ability to protect the UK’s national security.

The Act gives the government the powers to scrutinise and intervene in acquisitions of entities and assets that may pose risks to national security. All sectors are within scope of being assessed under the Act and some acquisitions of entities that carry out particularly sensitive work in 17 areas of the economy, such as in civil nuclear, quantum technologies, and defence, will have to notify and receive approval from the government before completing their acquisition. For other acquisitions of entities and of assets, any notification will be voluntary but notifying gives the benefit of a binding decision from the government on whether an acquisition will be called in for scrutiny.

The Investment Security Unit – a dedicated hub that sits within the business department – will run the investment screening and provide a single point of contact for businesses wishing to understand the Act and notify the government about acquisitions.

Once notified, the government will confirm whether a notification contains the necessary information. It then has 30 working days to decide whether to call it in for a more detailed assessment or to clear the acquisition.

Once the Act has commenced, if the government has not been notified of an acquisition that has occurred after the 12th November 2020 and it is within five years of the acquisition taking place, the government can issue a call-in notice for that acquisition within six months of becoming aware.

If an acquisition is called in, the government has 30 working days to assess whether any conditions are needed in order to address any national security risks. The government can extend this by another 45 working days if necessary, and the government and acquirer can mutually agree to further voluntary extensions. During this assessment, the government can impose interim orders (such as requiring the acquisition to halt until the assessment is complete). Most acquisitions are expected to be cleared without being called in.

Once a decision is reached, the government can clear the acquisition or, if necessary, impose conditions or block or unwind it through a final order. There are civil and criminal sanctions for non-compliance with the requirements of the Act. Any orders made by the government under the NSI Act may be challenged by taking the decision to judicial review.

The government are consulting on a Statement – known as the NSI Section 3 Statement - which sets out the expected use of government’s power to call-in acquisitions where there is a suspected national security risk. The consultation closing date is 11.59pm on Monday 30 August.

The Investment Security Unit can be contacted at investment.screening(at)beis.gov.uk for any queries ahead of commencement.

Find out more here.