The National Security & Investment Bill 2020: A step change in the UK's screening of foreign investment


[Updated to reflect changes in the National Security and Investment Act 2021,[1] which comes into force on 4 January 2022.]

Yesterday the UK government introduced the National Security and Investment Bill (the "Bill") to Parliament.[2] The Bill strengthens the government’s power to scrutinise, impose conditions and block foreign investments into specified sectors which may harm the UK's national security.

The government explains that the growing value and sensitivity of certain recent technological innovations has necessitated more rigorous protection from hostile foreign actors. In 2018 and 2020 the government lowered intervention thresholds under the UK merger control regime for six sectors: military/dual-use technologies, computing hardware, quantum technology, artificial intelligence, cryptographic authentication and advanced materials. This broadened the Competition and Markets Authority’s jurisdiction to examine transactions with potentially adverse effects on national security.[3]

The new Bill goes further than that by removing all thresholds for transactions in certain sectors. It proposes major updates to the UK’s existing regime for such government intervention on national security grounds, bringing the UK in line with legislation in the U.S., France and Germany.

The power to "call-in" a transaction

The Bill permits the Secretary of State to intervene in a transaction if they reasonably suspect a "trigger event" has taken place and the event has given rise to a risk to national security.

Trigger events include the acquisition of: (i) more than 25%, 50%, or 75% of the votes or shares in a qualifying entity,[4] (ii) voting rights that enable or prevent the passage of any class of resolution governing the affairs of the qualifying entity, or (iii) "material influence" over a qualifying entity's policy, adopting the same concept used in the merger control regime.[5]

[In addition, while not a "trigger event" per se, the Bill will require mandatory notification of proposed transactions in certain specified sectors (see below) where there is an acquisition of 15% or more of the votes or shares in an entity][6] (a "Notifiable Acquisition"). The notification must be made prior to the transaction taking place (further detail will be provided in regulations) otherwise the transaction will be deemed legally void. The Secretary of State will thereafter have a 30-working day period in which to screen the proposed transaction to determine whether it wishes to formally "call-in" the transaction for further investigation. If a call-in notice is not issued, the transaction will be cleared to complete. Notably, the Secretary of State may intervene in a transaction irrespective of whether a notification is made.

The Bill also prescribes a voluntary notification regime which applies to transactions which do not meet the mandatory notification criteria, but for which the transaction parties nonetheless consider may raise national security concerns.

If a call-in notice is issued, the transaction will go through a national security assessment. Following the issuance of a call-in notice, the national security assessment must be completed within 30 working days. This may be extended by 45 working days, and if necessary, the Secretary of State can agree to a further extension with the acquiror. Both extensions are subject to certain conditions. Following a national security assessment, the Secretary of State must notify the parties whether any further action will be taken. If a national security risk is deemed to exist, the Secretary of State may make a final order preventing, remedying or mitigating such risk.

Specified sectors

The sectors covered by the Bill will be set out in accompanying regulations. For the time being, the government has identified 17 sectors it expects to be covered: advanced materials, advanced robotics, artificial intelligence, defence, civil nuclear, communications, computing hardware, critical suppliers to government, [critical suppliers to the emergency services], cryptographic authentication, data infrastructure, energy, [engineering biology], [military/dual-use technologies], quantum technologies, [satellite and space technologies], and transport.[7]


Contraventions of the new regime may attract financial sanctions on a business equal to the higher of 5% of global turnover and £10 million. Officers of a company may also face fines of up to £10 million and criminal sanctions of up to five years’ imprisonment if an offence under the Bill is committed by a company with the consent or connivance of such an officer, or as a result of their neglect.

Retrospective period and transactions in play from 12 November 2020

The Bill envisages a retrospective period for intervention of five years after a trigger event takes place for deals not subject to mandatory notification but which could raise national security concerns and have not been notified voluntarily. If parties fail to notify a trigger event that is subject to mandatory notification, the government can call it in whenever it is discovered and the five-year limit does not apply.

Notably, transactions will be subject to the new regime in the interim period between introduction of the Bill to Parliament (from 12 November 2020) until the legislation is brought into force (the "commencement date").[8] As a result, a trigger event occurring between 12 November 2020 and the commencement date can still be called in by the government, potentially up to five years after the commencement date.[9]

Parties who are involved in a transaction between 12 November 2020 and the commencement date which may be within the scope of the mandatory or voluntary regimes are invited to share information with the government about a relevant trigger event in order to help with business planning with regards to the likelihood of the government potentially exercising its call-in powers following the commencement date. Whilst such notification may result in a degree comfort for relevant acquirors, it will also provide certainty by fixing the time period by which the government may intervene following the commencement date.

[3] Under the lower thresholds, the target must have a UK turnover of over £1 million (rather than £70 million) and there is no requirement for the share of supply to increase as a result of the transaction. Instead, if the target has a share of supply of 25% or more of relevant goods or services in the UK prior to the transaction, the CMA will have jurisdiction over the acquisition.

[4] A "qualifying entity" is defined as any entity, whether or not a legal person, that is not an individual, and includes a company, a limited liability partnership, any other body corporate, a partnership, an unincorporated association and a trust.

[5] In addition, the acquisition of a right or interest in, or in relation to, a qualifying asset providing the ability to use the asset or direct or control how the asset is used, can constitute a trigger event. A "qualifying asset" is defined as (a) land, (b) tangible moveable property, or (c) ideas, information or techniques which have industrial, commercial or other economic value.

[6] Note that, since publication, this threshold has been removed. Thresholds for mandatory notification are where: (i) the percentage of the shares or voting rights that the person holds in the qualifying entity increases from 25% or less to more than 25%, from 50% or less to more than 50%, or from less than 75% to 75% or more; or (ii) the acquisition is of voting rights in the qualifying entity that (whether alone or together with other voting rights held by the person) enable the person to secure or prevent the passage of any class of resolution governing the affairs of the entity.

[7] The names of several of the economic areas have changed since publication: "critical suppliers to the emergency services" is now "suppliers to the emergency services", "engineering biology" is now "synthetic biology", military/dual-use technologies" is now "military and dual-use", and "satellite and space technologies" is now "satellite and space technology".

[8] Commencement date is 4 January 2022.

[9] For trigger events occurring between 12 November 2020 and the commencement date: (i) if the government becomes aware of the trigger event prior to the commencement date, it will have six months from the commencement date to call in the transaction; or (ii) if the government becomes aware of the trigger event on or after the commencement date, it will have six months from the date on which it becomes aware of the transaction to call it in, up to a maximum of 5 years from the commencement date.