Business Secretary Greg Clark has set out the detail of new powers designed to upgrade UK national security rules. Strengthened powers will bolster national security merger rules while maintaining openness to international investment. The proposals build on the UK’s robust mergers and takeovers regime and ensure that it keeps pace with new technologies and innovation. Measures put forward include new powers to scrutinise the purchase of assets such as Intellectual Property if they raise national security concerns.
The UK has a proud and hard-won reputation as one of the most open economies in the world. A large part of our economic success stems from the belief in open international trade and the nation’s support for foreign direct investment, with international investment creating 76,000 jobs last year alone.
An open approach towards international investment must include appropriate safeguards to protect national security – particularly so in a world where the threats faced by global economies are evolving – and in a small minority of investments there are national security considerations which should be scrutinised.
The National Security and Investment White Paper, announced on Tuesday 24 July, sets out how the Government will upgrade its powers to scrutinise investments and address the risks that can arise from hostile parties acquiring ownership of – or control over – businesses or other entities and assets that have national security implications.
Business Secretary Greg Clark said: “Britain is recognised the world over as one of the best places to do business, attracting investment that benefits communities and workers across the country. To retain this hard-won reputation, our mergers and takeovers rules need to be responsive to technological, economic and national security changes. These proposals will ensure we have the appropriate safeguards to protect our national security, while ensuring that our economy remains unashamedly pro-business and open to high levels of foreign investment in the future.”
Consistent with major partners and allies
The proposals are consistent with many of the UK’s major partners and allies around the world, including countries such as Australia, Japan, Germany and the United States, all of whom are similarly looking to upgrade their own powers. The proposals also reflect feedback from businesses and investors and will ensure the UK remains a leading open and liberal trading nation while protecting our national security.
Under the White Paper proposals, the Government will encourage businesses and investors to notify it ahead of transactions that might give rise to national security risks. The majority of transactions raise no national security concerns and the Government expects to quickly rule out national security risks in most cases, thereby allowing parties to proceed with certainty.
The White Paper proposes how the Government would be able to “call in” transactions that may give rise to national security risks to assess them more fully. This power would be economy-wide, reflecting the need for flexibility to address national security risks wherever they arise. Measures will also ensure that hostile parties or groups cannot circumvent UK rules by acquiring an asset, such as Intellectual Property, that has national security implications, rather than acquiring the business itself.
The remedies proposed by the Government include confirmation to proceed, approval subject to conditions and – in those rare circumstances where it’s the only available course of action – blocking or unwinding a deal where the transaction has already taken place
The Government believes that the proposed package of reforms strikes the right balance between maintaining the openness and attractiveness of the UK as a destination for inward investment and providing the Government with modernised powers that it needs to protect the country.