The UK National Security and Investment Bill was granted royal assent on 29 April, in a move that will transform the UK foreign direct investment regime. We previously set out the aims and detail of the Bill in our previous post here. The new National Security and Investment Act (the “Act”) provides the government with far-reaching powers to investigate transactions in sensitive sectors and acquisitions of assets such as intellectual property, designs and software. The Government has stated that the Act is designed to give investors additional certainty and clarity and to ‘enshrine the status of the UK as a global champion of free trade and investment’. It will bring the UK in line with many other countries in creating a standalone foreign direct investment (“FDI”) regime.

The Government will have the power to impose mandatory notification obligations on certain transactions, and require that other transactions that cause concern are ‘called-in’ for notification. This is likely to result in over 1000 notifications per year. The process will be governed by BEIS, more specifically the 100-person Investment Security Unit that has been set up to review the transactions through a ‘unique’ portal. The Unit will consider both mandatory and voluntary notifications.

There were no significant amendments made to the Bill during its parliamentary passage. The thresholds for notification have been amended slightly to match regimes such as that of the US, and the minimum percentage acquisition of votes or shares that will require mandatory notification in a sensitive sector has been increased to 25% (previously 15%).

In March the Government also produced revised versions of the definitions of the 17 sensitive sectors, responding to comments from stakeholders that the envisaged scope was far too broad. Many of the definitions have been tightened which should reduce the number of mandatory notifications in these sectors, notably in areas of synthetic biology, communications and data infrastructure.

Further detail on the implementation of the new Act is likely to be set out in secondary legislation later this year. In the meantime BEIS is already engaging with companies on current transactions, in order to provide informal guidance as to the likely risk of notification. This communication has been encouraged by the Government in order to avoid an influx of notifications when the new regime is brought into effect. Much of the work on the new Unit and online portal is designed to make the process simpler and more efficient. The text of the Bill specified that the Government would aim to deal with most notified transactions within 30 working days, and it has emphasised that most transactions will not require intervention.

The regime is expected to commence towards the end of this year, and the Government is planning to continue consulting and further tightening sector definitions. The Government has also created the Investment Council to work with its recently formed Office for Investment on the Government investment strategy. The Council will be made up of various sector leaders and will ensure that there is representation from a wide range of industries.