One year on, UK investment law shows how West is strengthening economic security
- The National Security and Investment Act gives the UK government powers to review, block and even undo investments on national security grounds
- It is clear that ministers are likely to increasingly use these new powers given the growing range of geopolitical, economic and technological challenges facing the country
CFIUS does not acknowledge which deals are under review, and does not publicly announce its findings. It is chaired by the US Treasury secretary, and includes representatives from 16 US departments and agencies, including defence, state, commerce and homeland security.
All US companies proposing to be involved in acquisitions with a foreign firm are supposed to voluntarily notify CFIUS, but the committee can review transactions that are not voluntarily submitted. The body’s primary concern in most reviews is that technology or funds from an acquired US business might be transferred to a sanctioned country as a result of being acquired by a foreign firm.
The UK’s investment legislation, whose key stakeholders in the government include the business and international trade departments, plus the Home Office and the Treasury, has drawn some parallels with CFIUS. It represents the biggest shake-up of the UK’s investment screening arrangements in decades by modernising the government’s powers to investigate and intervene in potentially hostile foreign direct investment.
The new powers reflect the fact that the United Kingdom faces continued, broad-ranging hostile activity from actors seeking to compromise national security which, unless checked, will increase vulnerability to disruption, unfair leverage and espionage. The UK’s screening powers have also been extended to include assets like intellectual property, as well as companies.
The 17 defined sensitive sectors are advanced materials, advanced robotics, artificial intelligence, civil nuclear, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum technologies, satellite and space technologies, suppliers to the emergency services, synthetic biology, and transport.
Under the new legislation, the government can impose targeted, proportionate conditions on an acquisition, or, if necessary, unwind or block it, although the vast majority of deals will still be able to proceed without delay. The act also grants the government a five-year retrospective power to call in acquisitions in the wider economy which may raise national security concerns.
However, these do not apply to acquisitions which took place before the legislation’s introduction to Parliament on November 11, 2020, so businesses and investors have certainty about historical deals. This reflects the ambition to provide such stakeholders with the clarity and transparency they need to do business in the UK.
Europe must break with US to avert global economic disaster
And in July, the UK government blocked the licensing of locally-developed technology to Beijing Infinite Vision Technology, preventing a deal that would have provided the firm with robot vision tech. The intellectual property, known as SCAMP-5 and SCAMP-7, was developed by the University of Manchester.
One year into the new national security regime, while there is still some uncertainty about how it will work in practice, one thing is much clearer: ministers are likely to increasingly use these new powers given the growing range of geopolitical, economic and technological challenges facing the United Kingdom and the wider Western world.
Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics