British government is trying to protect national security

Date:

ON January 4th A new investment screening law is enforced, and the government says UK20-year national security system “. It’s not an exaggeration. It shows the transition from economic openness to suspicion and intervention. Business secretary Kwasi Kwarten said he would show the public that “their safety remains our number one priority.” What could go wrong?

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The government is trying to prevent the assets essential for national security from falling into hostile hands. A 2017 report warns that “ownership or control of critical business or infrastructure may provide an opportunity to perform espionage, sabotage, or improper leverage.” The context is pressured to align China’s investment concerns with its already tightened allies such as the United States, Australia and Germany.

Investors in 17 sectors, including artificial intelligence and telecommunications, need to notify the government if they want to buy more than 25% of their businesses. The government may consider and block the transaction. It doesn’t matter if the company is small or the investor is British. It should have caught the attention of the government, but if it didn’t, it could be invalid. Companies seeking to sell foreign assets used “in connection with their activities” in the UK may also face reviews.

This new regime is very broad. “National security” is undefined and the government can intervene in transactions outside the 17 designated sectors as needed. In other countries, such screening is generally limited to fewer sectors, acquisitions of domestic entities, and foreign investors. The wide range of UK rules reflects how difficult it is to protect against evolving, undefined threats. However, it can also complicate enforcement, especially when it comes to foreign assets.

Another risk is blocking welcome investments. The form is very simple and the initial cost is relatively reasonable (only a few thousand pounds for small businesses), but additional steps can cause delays. For example, additional information may be requested before the application is processed. In addition, the government estimates that in complex cases, a complete national security assessment can cost more than £ 120,000 ($ 160,000). Becket McGrath of law firm Euclid Law said that if venture capital or private equity investors are minority shareholders in early-stage companies, they are not being used by the government sector to make round deals, which is especially postponed. It says it’s likely.

Yet another concern is that uncertainty about the new system will clog it up. The government has sought to clarify the definition of the 17 sectors that are required to be notified, but inevitably there are borderline cases. Investors who do not notify the transaction to be notified are at risk of fines and imprisonment. Therefore, they may be careful and decide to slow everything down. “I’m very worried about the flood of notifications starting January 4,” says John Adebiyi of law firms Skadden, Arps, Slate, Meagher & Flom.

The final risk is that the government is too enthusiastic about the red pen. Unlike some European governments, the UK is not expected to be used for industrial policy. National security is assumed to be the only criterion in deciding whether to allow a transaction to proceed. However, there is ample discretion that it may be difficult to resist the political pressure to refuse foreign acquisitions.

There is no doubt that the government is planning to get more troublesome. Since 2002, when the previous administration came into force, there have been only 12 interventions in national security. An official impact assessment released in November 2020 estimates that the number of notifications under the new arrangement could reach 1,000 to 1,800 per year, with approximately 10 being eligible for formal relief. The government argues that the new rules should encourage investment by raising the UK’s perception of a stable business environment. You need to win that reputation. ■■

This article was published in the UK section of the printed version under the heading “Balancing act”.

British government is trying to protect national security

Source link British government is trying to protect national security

The post British government is trying to protect national security appeared first on Eminetra.

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