On 4 January 2022, the new UK foreign investment review regime under the National Security and Investment Act (“NSI Act“) came into force, completing the overhaul of the UK’s foreign investment rules and commencing operation of a standalone foreign investment screening regime for the first time in the UK.

The new rules require businesses and investors to submit mandatory notifications for certain acquisitions of and investments in companies active in 17 key sectors of the economy. They also grant the UK Government extensive powers to investigate and impose conditions on a wide range of transactions (including both corporate investments and asset transactions) on national security grounds.

Here are our five key takeaways from the NSI Act:

  1. From 4 January 2022, a mandatory notification must be made for acquisitions and investments in companies that carry out activities in 17 key sectors of the UK economy. It will also be possible to submit voluntary notifications outside these sectors and for a broader range of transactions. Notifications will be submitted to the UK Government’s recently established Investment Security Unit via a new online portal.
  2. From 4 January, the UK Government will also be able to “call in” transactions for in-depth review where it suspects they give rise to a national security risk, including in respect of transactions that closed since 12 November 2020. At the end of an assessment period, the UK Government will either clear, impose conditions on, or unwind or block an acquisition.
  3. The jurisdictional criteria in the NSI Act are extremely broad, and the new regime catches the acquisition of intangible assets such as IP, certain minority investments, non-UK transactions and even internal corporate reorganizations.
  4. Businesses will need to self-assess whether they must submit a mandatory filing. Non-compliance with the mandatory regime risks significant criminal and civil sanctions, while mandatorily notifiable investments that complete without being cleared under the NSI Act will be void.
  5. Acquirers, sellers and parties providing finance should carefully assess the risk profile of their transactions and consider the possibility of review and any potential remedies or conditions that may be imposed, particularly where transactions involve: (1) businesses that supply or support defence or security related services, critical infrastructure, or strategic or emerging technologies, (2) buyers with higher risk characteristics, or (3) acquisitions providing a high degree of control over, or transfer of, a target’s sensitive activities.

For further details on the new NSI Act, and how it may affect your business, please read our full client alert here.

Author

Samantha Mobley is a partner in the EU, Competition & Trade Practice of Baker & McKenzie’s London office and a member of the London office Management Committee. She headed Baker McKenzie’s Global Antitrust and Competition Group, a team of over 300 competition and antitrust specialists worldwide for six years. Samantha has significant experience of advising on the implications of foreign direct investment rules for cross-border transactions. She has advised a number of companies on the implication of the reduced UK national security thresholds, as well as coordinating the global foreign investment review aspects of a proposed $12 billion joint venture between a FTSE100 company and a Fortune 500 corporate. Samantha is a Who’s Who Legal 2020 Leading Individual for Foreign Investment Review.

Author

Sunny Mann is a Partner and leads the EMEA and UK International Trade team, ranked Tier 1 by Legal 500. His practice includes a focus on national security, foreign investment, export controls and trade sanctions matters. He has worked on a number of foreign investment review cases, including obtaining clearance for a high profile acquisition triggering potential defence and national security concerns, one of the very few cases to go through a full UK statutory review. In the Legal 500, Sunny is ranked as a "Leading Practitioner".

Author

Tristan Grimmer is a partner in Baker McKenzie's London office. He is a member of the Compliance & Investigations and the International Trade and Competition practice groups. Tristan advises clients on the management and mitigation of risks under anti-bribery and corruption, international trade (trade sanctions and export controls), foreign investment and competition laws. Tristan has significant experience in the management of internal and external investigations by government authorities, regulators and prosecutors.

Author

Ross Evans is a Senior Associate in the EU, Competition and Trade team in London, who specializes in advising companies in the technology, telecoms, engineering, and fintech sectors on how to manage a rapidly changing landscape of competition/antitrust, trade law, and national security and investment regimes. He regularly advises clients in relation to UK public interest intervention rules and national security and investment issues, and on global foreign investment review strategy, leveraging his expertise in trade and export control laws and competition merger control regimes, and an in-depth understanding of emerging technologies.

Author

Zeyang Gao is an Associate in Baker McKenzie's London office. He is a member of the Antitrust & Competition, and International Commercial & Trade practice groups. Zeyang advises clients on foreign investment, competition, trade (sanctions & export controls), customs, anti-bribery and corruption.