National Security and Investment Act 2021

Policy background

3. The Government published a review of its powers to scrutinise and intervene in investments as a Green Paper on 17 October 2017, "National Security and Infrastructure Investment Review ".
4. The Green Paper explained that, until now, the UK has used the Enterprise Act 2002 as the legislative basis to examine mergers for the purposes of national security and other areas of public concern. The Green Paper found that there was a case for reforming the Government’s powers. It therefore proposed short and long-term measures to do so and held a public consultation, which closed on 17 November 2017.
5. The Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018 (S.I. 2018/578 ) and the Enterprise Act 2002 (Turnover Test) (Amendment) Order 2018 (S.I. 2018/593 ) were made on 14 May 2018 to implement the short-term measures proposed in the Green Paper. These orders amended the "share of supply" and "turnover" thresholds to enable the Secretary of State to intervene in more mergers on public interest grounds in three sectors of the economy: military or dual-use goods which are subject to export control; computer processing units; and quantum technology.
6. Building on the Green Paper’s proposals for long-term reform, the White Paper, "National Security and Investment: A consultation on proposed legislative reforms ", was published on 24 July 2018 along with a draft "Statement of Policy Intent". The White Paper set out detailed proposals for how the Government proposes to reform its powers to protect national security from hostile actors using the ownership of, or influence over, businesses and assets to harm the country.
7. Following the 2019 General election, the Queen’s Speech of December 2019 outlined the Government’s intention to "… work closely with international partners to help solve the most complex international security issues and promote peace and security globally. It will stand firm against those who threaten the values of the United Kingdom…" (Queen’s Speech, December 2019). The briefing pack accompanying the Queen’s Speech detailed the ambitions of the National Security and Investment Bill. The briefing stated that the purpose of the Bill is: "[to] Strengthen the Government’s powers to scrutinise and intervene in business transactions (takeovers and mergers) to protect national security; and, provide businesses and investors with the certainty and transparency they need to do business in the UK."
8. On 26 February 2020, the Government outlined its intention to overhaul its approach to foreign, defence, security and development policy. The Government indicated its intention of considering "the totality of global opportunities and challenges the UK faces and determining how the whole of government can be structured, equipped and mobilised to meet them." (Integrated Review , 26 February 2020).
9. Two Orders, the Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2020 (S.I. 2020/748 ) and the Enterprise Act 2002 (Turnover Test) (Amendment) Order 2020 (S.I. 2020/763 ) were made on 20 July 2020 to expand on the 2018 measures (see paragraph 5). These orders expanded the "share of supply" and "turnover" thresholds to enable the Secretary of State to intervene in mergers on public interest grounds in three additional sectors of the economy where the amended share of supply and turnover thresholds are met: artificial intelligence (AI), cryptographic authentication technologies and advanced materials.
10. The Government published its response to the National Security and Investment White Paper consultation on 11 October 2020. The Government stated that it had decided to make changes to the proposals it put forward in 2018, including the addition of a mandatory notification system for some transactions in specified sectors of the economy.
11. A draft Impact Assessment on the incoming regime was published on 11 November 2020.