Key Considerations ^ While most transactions are cleared unconditionally under the National Security and Investment Act 2021 (NSI Act or the Act), the UK government does not shy away from exercising its wide-ranging powers to investigate, impose remedies and block transactions that raise UK national security concerns. ^ Remedies imposed under the NSI Act tend to be “behavioral” rather than “structural” (for example, implementing information safeguards or “capability preservation,” which aim at retaining the presence of certain industries in the UK). ^ The government’s 2024-25 Annual Report recorded a significant increase in enforcement activity, with 17 final orders issued in the reporting period (more than three times the five issued the previous year) and 56 call-in notices, up from 41, demonstrating a clear willingness to impose binding conditions and, where necessary, order divestiture. ^ The Chancellor of the Duchy of Lancaster reaffirmed that “economic security is national security,” indicating that the NSI Act regime will continue to be applied robustly to keep pace with geopolitical instability and rapid technological advances such as artificial intelligence, while maintaining the UK’s position as “open for business.”
FDI Regime Overview The NSI Act came into force on January 4, 2022, introducing a standalone comprehensive FDI screening regime. It provides the UK government with powers to review and intervene in transactions on “national security” grounds, a term that is intentionally undefined. The UK government has emphasized that the country is “open for business” and, in practice, only a small percentage of transactions notified under the NSI Act will be subject to a full-blown national security assessment. Nevertheless, the wide jurisdictional reach of the regime, mandatory notification requirement and potential retrospective application add to an increasingly complex regulatory landscape for transactions connected with the UK. The NSI Act captures investments in: ^ “Qualifying entities,” which include a broad range of legal structures (for example, companies, limited liability partnerships, any
corporate body, trusts and unincorporated associations), which carry out activities in the UK or supply goods or services in/to the UK; and ^ “Qualifying assets,” including tangible property such as land and moveable objects, as well as intangible property, such as ideas, information, techniques or intellectual property, which are used in connection with activities in the UK or the supply of goods or services to people in the UK. Compared to the UK merger control regime, the NSI Act has a much broader jurisdictional scope in that its criteria for applicability are not framed by references to minimum turnover or thresholds relating to shares of supply or acquisition of goods or services. Instead, investments that satisfy the following control thresholds in specific “sensitive areas” of the UK economy fall within the scope of the Act (as “trigger events”), irrespective of the nationality of the investor:
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FDI and National Security Review
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