The UK Government has confirmed that it plans for the National Security and Investment Bill (the “Bill”) to come into force by the end of 2021 (our previous updates on the Bill can be found here).
This is subject to the Bill’s passage through Parliament, as well as Parliamentary approval of the various statutory instruments that make up the regime in combination with the Bill. At the same time, the Government has published responses to its consultation on the 17 sectors where a mandatory notification will be required, as well as updates on the new unit within BEIS.
Mandatory notification: sector consultation
Under the Bill, where qualifying entities (typically target companies) operate within specified sectors, a notification must be made to BEIS before any transaction involving that entity can complete. To complete without notification and approval from BEIS will render transactions void, as well as potentially exposing parties to heavy penalties and even criminal sanctions.
The list of specified sectors was published by BEIS in November 2020 as part of a consultation on how the 17 mandatory sectors should be defined. The UK Government’s response to that consultation has now been published, with a view to transposing the draft sector definitions in the response into law alongside the Bill.
The principal changes in the definitions appear to be to narrow the draft definitions so they are clearer. For example, the definition of ‘Artificial Intelligence’ in the original consultation was very broad but the revised definition now focuses on the identification of objects, people, and events; advanced robotics and cyber security. The response also seeks to refine and clarify language where possible, for example renaming ‘Engineering Biology’ to ‘Synthetic Biology’.
As is the case with all parts of the Bill, the definitions are subject to change until they are transposed into law. For many sectors, the Government has signposted that the final detailed definitions that come into force will look different from the draft definitions in the document. For example, the consultation response provides for an updated definition of the ‘Energy’ sector but notes that the final definition of ‘Energy’ (i.e. in legislation) will look different, with time periods for the various thresholds set out in the definition, and that it will review the electricity definitions covering entities with a key role in overseeing or operating any part of the GB electricity and gas markets.
The consultation response also acknowledges the need to keep sector definitions under review even once they are in force, and plans to update them to reflect emerging technologies or newly identified national security risks from time to time.
Investment Security Unit
The UK Government has also published details about the new unit within BEIS that will review notifications: the Investment Security Unit (“ISU”). The ISU is already informally advising businesses on the application of the new regime and the UK Government’s latest update provides reassurance that the mandatory notification element of the regime is not retrospective and parties are not obliged to notify before the regime comes into force, however doing so can provide comfort to parties and means there would be a six month rather than 5 year time period for BEIS to call in transactions once the Bill becomes law.