National Security and Investment Bill — House of Commons, 2020-11-17
Topic: Mixed Topics
Alok Kumar Sharma (Conservative, Centre-right): I will go on to the detail of that particular issue, but as the right hon. Gentleman identified, the Bill looks at assets and intellectual property. On the point that he raised about the size of transactions, as he knows, under the 2002 Act, apart from some limited exceptions, businesses being acquired must have a UK turnover of over £70 million or, indeed, the merger must meet a minimum 25% market threshold. This means that acquisitions of smaller but technologically sensitive companies are not covered The Government have been clear for a number of years about our intention to introduce new powers. Many of our international allies, including our Five Eyes partners, have also acted to update their legal frameworks to address national security risks. We, in turn, are seeking to update our legislation in a proportionate manner to ensure that we have more security for British businesses and people from hostile actors targeting our country; more certainty for businesses and quicker, slicker screening processes as we remain open to trade and recover from covid-19; and a regime that is in line with our allies, meaning that investors will be familiar with this approach Let me turn to some of the specifics of the Bill. Part 1, chapter 1 introduces a call-in power that the Government may use in relation to a trigger event across the economy that they reasonably suspect has given rise to or may give rise to a risk to national security. Trigger events include acquisitions of certain shares or voting rights in a qualifying entity, and the acquisition of material influence over such an entity. As the right hon. Gentleman pointed out, it will be possible for the first time to call in the acquisition of a right or interest in a qualifying asset, including intellectual property, where such an acquisition would enable the acquirer to use the asset or control or direct how it is used. That is similar to the US and other countries’ regimes The call-in approach is consistent with the 2002 Act, but importantly there are no minimum thresholds for the size of the business or asset to be acquired. That means that sensitive businesses and assets that may previously have slipped under the minimum size threshold will no longer do so. That will close the back door into the United Kingdom that hostile actors could exploit However, it is important to reassure the investment community that the Government expect to use these powers sparingly. We estimate that less than 1% of transactions in any given year will be subject to call-in. For transactions that fall outside the mandatory requirement of the regime, the Government will be able to call in a transaction within a period of five years of a trigger event having taken place where they have not been notified. When the Government become aware of a trigger event having taken place, they will have six months to issue the call-in notice. That five-year period is, again, consistent with regimes in Germany and France. The Bill requires that the Government publish a statement of policy intent explaining how they expect to use the power to issue a call-in notice Should the Bill become an Act, the Government’s call-in powers will apply from the date of introduction and will cover transactions that complete during its passage. That will ensure that hostile actors do not rush through the completion of transactions between the introduction of the Bill and Royal Assent as a means to avoid scrutiny under this legislation. My Department has already set up an investment security unit to field enquiries from businesses and investors about transactions under the new regime Under the National Security and Investment Bill, there will be no requirement to publish call-ins. That is of course in contrast to the public interest intervention notices under the 2002 Act.