The UK National Security and Investment (NS&I) bill - which sets up a new regime for the Government to review transactions involving entities and assets on national security grounds - received Royal Assent last week. The accompanying Government press release calls the National Security and Investment Act "a proportionate response to modern developments in international investment". But the new powers represent a major shift from the Government's position in 2018, when it envisaged a wholly voluntary regime. The new regime is not expected to come into force until the end of this year, however.

What does the new regime look like?

The bill, which was introduced in November last year, faced relatively few modifications in its journey through Parliament. The new regime, as adopted, is broad in scope and:

• requires investors and businesses to notify the dedicated Investment Security Unit (ISU) within BEIS (through a digital portal) about certain types of transactions in designated sensitive sectors such as civil nuclear, data infrastructure, artificial intelligence, quantum technologies, military or dual-use tech and satellite and space tech. Investors in these sectors must receive approval before completing their deals or else the deals are legally void;
• creates a voluntary notification system for sectors outside the "core" list to encourage notifications from parties who consider that their deal may raise national security concerns;
• enables the Government to ‘call in’  transactions or other events in the wider economy (with no materiality thresholds) to undertake a national security assessment;
• creates the power to apply remedies to address risks to national security (including blocking a deal), sanctions for non-compliance with the regime and the mechanism for legal challenge.

In contrast to many foreign investment screening regimes around the world, the Act catches investment in both UK companies and non-UK companies, provided that the latter carry on activities in the UK or otherwise supply goods or services to people in the UK. The regime also captures investment in assets, including land and intellectual property.

The new regime will replace the national security aspects of the Government's current powers of intervention under the Enterprise Act 2002.

What are the next steps?

The new regime is expected to formally commence towards the end of this year, but, unusually, the rules have retrospective effect, applying to all transactions taking place from 12 November 2020. This means that the Government will have retroactive powers to call in for review from the commencement date any qualifying transaction completed on or after 12 November 2020 that gives rise to national security concerns.

Ahead of commencement, the Government has promised to work closely with investors and businesses to help them understand the new regime. Special attention will be focused on those in sectors affected by mandatory notification. The Government will also have to adopt a number of statutory instruments before the regime can become fully operational, including regulations detailing the form and content of a mandatory and voluntary notification.

BEIS has already published three factsheets on the new regime: (i) an overview of the NS&I Bill; (ii) a process guide for businesses and (iii) an overview of how the ISU will work. The third factsheet notes that businesses are already able to contact the ISU should they require advice on any aspect of the new regime.

For our previous, more detailed coverage of the new regime, see here and here.

Lisa Wright and Nele Dhondt