New security and investment law boosts investment screening process but risks causing delays

The extensive scope of the upcoming National Security and Investment Act is prompting some delays in new partnerships and deals, some law firms have warned.

New NSIA rules coming into force January 4 will require mandatory notification of acquisitions that fall within 17 industries considered to pose a rising risk to national security.

Some of the areas that fall within the Act’s scope include advanced robotics, artificial intelligence, communications, computing hardware, data infrastructure, energy, quantum technologies and transport, to reflect new technologies being developed especially by start-ups.

Chris Blairs, deputy director of national security policy at the Department for Business, Energy and Industrial Strategy (BEIS), said at an Institute of Chartered Accountants in England and Wales (ICAEW) event on Wednesday that the legislation provides, for the first time, “a set of detailed definitions of the sectors of the economy that the government is interested in particular”.

According to government estimates, the new regime is expected to see between 1,000 and 1,830 of in-scope notifications each year.

However, Neil Blundell, partner at law firm Bird & Bird, told Financial Director that the broad scope of the NSIA has meant “businesses are currently being cautious and notifying BEIS, because there is still uncertainty surrounding which stance will be taken in any given scenario”.

“As a result, the BEIS has received a large number of notifications from businesses, and this is delaying deals which are unlikely to be affected.”

Moreover, Peter Willis, partner at Bird & Bird, added, “one of the major issues that is not widely recognised is that the NSIA also catches intra-group transactions, so it needs to be factored into any internal re-organisation”.

Overall, the new legislation aims to modernise existing powers that derived from the Enterprise Act 2002, where UK authorities could intervene if deals had implications on national security or on competition grounds.

Fenton Burgin, head of UK Advisory at Deloitte, said the new Act provides “much needed clarification on the ground rules” bringing “certainty around process” that will “create predictability, transparency and early visibility” for businesses and investors.

Burgin added the Enterprise Act “wasn’t really fit for purpose in the connected world in which we’re all operating in.”

Blairs said the 2002 Act “wasn’t designed to carry the weight of an investor screening system.”

The government has 30 days to respond to an application which will need to be taken into account by businesses in any planning situation, added Willis.

Comments are closed.