The first National Security and Investment Act 2021 (“NSI Act”) report to cover a full year has recently been published. Our summary of the NSI Act is also available.
The report contains various statistics about notifications and gives an insight into the areas where the regime is having the greatest impact. The most interesting aspects are:
The vast majority of acquisitions caught by the regime raise no issues and most are cleared quickly (within the five working days for acceptance plus 30 working days review timeframes). Even for the few acquisitions which do raise issues, many of these are addressed by behavioural remedies rather than prohibition or requiring divestment.
National security concerns seem to occur most commonly in the Military and Dual Use, Defence and Advanced Materials sectors. However, transactions across a wide range of other sectors can also raise issues, for example: Academic Research and Development in Higher Education; Real Estate Activities; and Manufacturing.
Although the regime is “country agnostic”, and most acquirers caught by the regime are associated with the UK, the highest percentage of call-ins and Final Orders are related to acquirers associated with China. This is despite China being sixth on the list of notifying acquirer origins behind the UK, the USA, France, Canada and Germany.
These conclusions are in line with our experience advising clients in relation to the application of the NSI Act over the last year and a half in which it has been fully in force.
It is regrettable that so many transactions that do not raise national security concerns require prior notification and clearance to proceed, but the Cabinet Office does not seem to have any intention of narrowing the scope of the mandatory notification sectors at this stage. Accordingly, acquirers of relevant UK entities and assets will have to keep managing the risks posed by the NSI Act as an important aspect of their transaction planning for the foreseeable future.
If you would like to discuss any of the issues raised in this article, please contact Noel Beale or your usual Michelmores contact.
