The Foreign Affairs Committee today publishes its Report
Striking the balance: Protecting national security through
foreign investment legislation.
The UK remains an open, stable and attractive environment for
foreign investors but the open investment regime, combined with
the attractiveness of its businesses, leaves Britain vulnerable
to exploitation from those whose investments may be more than a
simple bet on future growth and are in reality a national
security risk.
The Committee therefore welcomes the introduction of the National
Security and Investment (NSI) Bill, which will bring the UK into
line with its major economic competitors and partners who have
already taken measures to strengthen the national security
screening powers within their foreign investment legislation.
Lacking clarity
This report found that in line with the request for comment by
the Minister responsible, , the Bill could be clarified in places, particularly
in relation to the types of transactions that might be captured
under the new regime and the decision-making process behind this.
The term ‘national security’ is not defined in the Bill. The
Committee heard the arguments against providing a comprehensive
definition, due to the dynamism of the threats faced by the UK
and the consequent need for flexibility in responding to them but
considered the importance of clarity greater.
How national security will be interpreted will be important for
the effective implementation of the new business regime and
without this there is a risk of nugatory reporting making the
system unworkable. It is evident that some of the concerns
outlined in this report can, at least in part, be mitigated by
greater clarity on how “national security” is to be understood in
the context of this law.
This would help to ensure that foreign investment decisions are
made only on the basis of national security as is the Bill’s
intended remit, as well as improving clarity for UK businesses
and their investors, while also providing a level of flexibility
that permits responses to unforeseen events or developments. The
report outlines that this is what the Bill should be aiming to
achieve in order to protect the UK’s security without deterring
foreign investment.
The Committee has therefore tabled an amendment to the Bill at
report stage, outlining the set of issues and considerations that
the Secretary of State should take into account when assessing
foreign investments on national security grounds.
Chair of the Foreign Affairs Select Committee, , said:
“Many invest in the UK because of our stability and openness. We
all welcome that international support for our innovation and
ideas but we need to be careful. State-backed enterprises are now
changing investment decisions from looking for financial to
strategic returns. If the Government is not more coordinated and
long-term in its approach, we risk losing our most innovative
companies overseas, undermining our national security.
“Our strategic competitors, notably China, have a track record of
using foreign investments to gain access to important
technologies and information. We’ve witnessed too many of our
country’s brilliant tech firms disappear abroad with potentially
significant economic and foreign policy implications.
“The Bill in its current form would benefit from guidance on how
national security should be understood to target application of
the new law and prevent the reporting system being overwhelmed
and deterring legitimate approaches, with adverse repercussions
for the UK’s national security and economy.
“That is why we have tabled an amendment to the Bill, outlining
the issues that the Secretary of State should consider when
assessing foreign investments on national security grounds.
“The Government’s open and discursive approach has been hugely
important which we welcome. We will work with the Minister to
clarify those areas that would improve this important Bill.”
