National Security and Investment Bill: Briefing for Lords Stages
The aim of the National Security and Investment Bill is to reform how inward investment in the UK is investigated to ensure hostile governments or other entities do not use this to undermine the UK’s national security. The second reading of the bill is scheduled to take place in the House of Lords on 4 February 2021. This briefing provides a summary of the bill and its passage through the House of Commons.
The National Security and Investment Bill would give new powers to the secretary of state to “call-in” acquisitions, including takeovers, and to assess any risks to national security. The bill would remove existing business turnover thresholds, meaning small and medium-sized enterprises could be subject to a national security assessment under the new regime.
The bill would also establish a mandatory notification regime for certain sensitive sectors of the economy. Under this new regime, any acquisition would need to be registered with the secretary of state. The bill would also establish a voluntary notification regime, whereby parties to an acquisition not already covered by the mandatory regime would be able to notify the secretary of state about a potential risk to national security. The bill sets out the procedure for how national security assessments would be conducted and resolved.
The Government has argued these powers were necessary because of the resurgence of state-based threats to national security and the risk of UK businesses being controlled by entities with close ties to hostile foreign governments. It has argued the bill strikes the right balance between encouraging inward investment while protecting national security.
During its passage through the House of Commons, both Labour and the SNP supported the bill’s overall aim. However, both parties tabled amendments intended to increase parliamentary scrutiny over how the secretary of the state would use powers in the bill. This included a Labour amendment tabled during report stage setting out the criteria to be used by the secretary of state when making decisions about national security under the bill. Chair of the House of Commons Foreign Affairs Committee Tom Tugendhat tabled a similar amendment. He argued his amendment would improve clarity for businesses and investors about how the powers in the bill would be used. Labour and the SNP also tabled amendments at report stage intended to ensure the possible impact on businesses of the new regime were assessed and mitigated. None of these amendments were agreed.