National Security and Investment Bill — House of Lords, 2021-04-15
Topic: Mixed Topics
Andrew Lansley (Conservative, Centre-right): My Lords, it is a privilege to open proceedings on Report. I want to say generally that Members across the House, on all sides, are supportive of the principles of the Bill. It has been clear that all the amendments tabled have the intention of trying to make it as clear, effective and workable as possible, and—as we will discuss later—to make sure that there is proper accountability and transparency in the proceedings. Several of my noble friends have tabled amendments in that spirit. I know that Ministers in charge of the Bill have responded in kind with a willingness, even in the past few days, to supply additional material on how the workings of the national security and investment regime will be made more transparent and clear to those it affects, who are substantial in number I come to one of the issues in the two amendments in this group, both in my name, which relate to the interaction between the national security and investment regime and the export control licensing regime. Amendment 1 relates to the exercise of the call-in power by Ministers. Amendment 37 relates to the making of interim and final orders by Ministers. I start with the first amendment I quoted the 2018 White Paper at more length in Committee but it stated, on behalf of the Government, that "where national security concerns relate solely or primarily to the export of goods, the Government expects that the export control regime would remain the primary means of protecting national security" In Committee, I asked the Minister responding to reiterate that expectation. He failed to do so, nor did he offer any specific assurance about how the two regimes would interact. I am grateful to Ministers because, since then, they have committed to the publication of guidance, which will include the interaction of the national security and investment regime with the Competition and Markets Authority, the Takeover Panel and the export control regime. We have not, of course, yet seen the text of that guidance. Nor is a reference to the export control regime being included in the draft statement, which has to be made under Clause 3, that will explain where and in what circumstances the Secretary of State will exercise his call-in power The importance of that is illustrated not least by the references from time to time in the consultation on the sectors in scope of the mandatory regime, in which a number of respondents made it clear that they thought there was a widespread interaction and overlap. For example, paragraph 3.76 said that one respondent suggested that the pre-existing export control licensing regime was appropriate, for which a number of businesses had robust and sophisticated compliance programmes, noting a significant overlap between the lists and a number of the other proposed mandatory sectors The noble Lord, Lord Grantchester, on the Front Bench opposite, in Committee instanced other references to that in the consultation response. Indeed, he may have looked at the strategic export control list, which is 309 pages long, and the sectors in scope of the mandatory regime for the national security and investment regime. The overlap is very large indeed. It is important to those affected that these two regimes interact positively and sensibly Amendment 1 seeks to require that there be such a reference in the Clause 3 statement and a commitment to explaining to people how the two regimes will interact. Why does that matter? First, given the nature of the assets in the strategic export control list, a change of control of the entities that own them will often be a notifiable acquisition and therefore be subject to a mandatory notification. But will the acquisition be called in? That question will be in the minds of those affected and will depend upon the level of risk. If the acquisition is by a hostile actor, it is a fair argument that the national security and investment regime adds an extra safeguard beyond the export licensing process. However, it will be important for those who own sensitive assets to know when that issue—the nature of the acquirer—is the prompt for a call-in, not simply the sensitivity and nature of the assets themselves, since they can be safeguarded for national security purposes through the export control licensing regime. Therefore, those asset owners need to be able to reasonably predict when a call-in will be made Secondly, the Clause 3 statement should offer clarity about the distinction between the use of an asset and its control. The national security and investment regime is about ownership and, hence, control of assets. Export controls are directed to their use, specifically outside the United Kingdom by way of export. However, we should consider what will happen if we follow the American lead. Following the enacting three years ago of the latest US legislation, there are circumstances in which the American export control regime, because it anticipates that a given ownership could lead to a transfer of technology within an entity, deems such assets to be exports. We already see an increasing overlap between the question of control and the question of use. The statement needs to be clear about that distinction, too What I am really looking for from my noble friend on the Front Bench is, first, an assurance that these issues will be fully dealt with in the guidance to be published, and that there will be a specific reference in the statement to matters dealt with under Clause 3, even if that is supplemented in detail by the technical guidance Amendment 37 raises an important further interaction. When Ministers make interim or final orders, given the extent of overlap between assets in the scope of this regime and those in the strategic export control list, it is likely that the entities that control such assets may, if they pass into new ownership, be subject to such orders. Those orders are about not just the situation today but what should happen in future. There will be a temptation on the part of Ministers to make orders that, like contracts in law, provide for every set of circumstances in future My point is simple: when making orders, Ministers should always rely on the export control licensing regime to do its job effectively. They should not try to substitute for the export control regime in future by restricting, through orders, what entities are or are not able to do. Even though they have the power to do that, they should not do it. They should live up to the expectation of the 2018 White Paper that the export control regime is the means by which Ministers exercise control of the export of sensitive assets There are two units involved. The Export Control Joint Unit is made up of officials from the Ministry of Defence, the Department for International Trade and the Foreign, Commonwealth and Development Office, and there is the unit for the national security and investment regime. The interaction between the two units needs to be excellent. In the shape of my noble friend the Minister on the Front Bench, we have the embodiment of the relationship between the Department for International Trade and the Department for Business, Energy and Industrial Strategy. I hope that he makes sure that these two work together well We should not see orders under the NSI regime supplanting what should be licensing procedures under the export control licensing regime, not least because—I pre-empt an issue that we will come on to later—export control licensing is the subject of greater and specific parliamentary scrutiny by the Committees on Arms Export Controls in the other place. There is no such direct scrutiny of the orders being made under this NSI regime. I hope that I do not need to say that Ministers should not fall prey to the temptation to incorporate measures into orders under this regime because it entails less parliamentary scrutiny than would be the case for export licensing under the other regime When we get to Amendment 37, I hope that I will be able to rely on Ministers’ further assurances that they will not simply take account of the export control regime and will rely less on administrative law issues. It was slightly ironic that our debate in Committee was followed the following week by a debate on administrative law that suggested that statute should be as clear as possible about the requirements that people have to live up to and not rely on a general public law duty—but that is exactly what Ministers profess to rely on here. I would prefer Amendment 37 to be adopted by the Government and it to be very clear that Ministers will take full account of the export control licensing regime. Even if they are not happy to amend the legislation, I hope that what my noble friend says in response to this debate will make it clear that that will be the case. I beg to move Amendment 1.