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New UK “CFIUS” regime kicks in – commencement of National Security and Investment Act

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.

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Author

Samantha Mobley is a partner in the Competition, Trade and Foreign Investment department of Baker & McKenzie’s London office. She headed Baker McKenzie’s Global Antitrust and Competition Group, a team of over 300 competition and antitrust specialists worldwide for six years and is currently a leader in our Global Foreign Investment Practice. Samantha has significant experience of advising on complex multi-jurisdictional mergers and has a strong understanding of the importance of working effectively and strategically with global regulators. In addition to antitrust and merger control, she advises on the implications of foreign direct investment rules for cross-border transactions. On foreign investment matters, she works closely with our Tier 1 trade team, given their export control national security expertise. Samantha is ranked as an Eminent Practitioner for competition law, Chambers & Partners 2023.

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".

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Tristan Grimmer is a partner in Baker McKenzie’s London office and the UK Head of the International Trade Practice Group. He is also a member of the Compliance & Investigations and the International Trade and Competition practice groups. Tristan advises clients on the management and mitigation of a range of international trade compliance risks, notably in the areas of sanctions and export controls. Tristan is also highly experienced in advising on the implications of the UK foreign direct investment rules for cross-border transactions and has closely followed the UK Government’s development of their foreign investment regime. He has advises clients across industries handling a wide range of trade law issues in transactional, commercial and compliance contexts, and on regulatory investigations and strategy in front of national and supra-national authorities. Tristan is named as a "Leading Individual" for EU And Competition: Trade, WTO Anti-Dumping and Customs in the UK Legal 500 2023 directory.

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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 Competition, Trade and Foreign Investment Department in London. Zeyang advises on all aspects of competition law including merger control, foreign investment and national security reviews, competition investigations, state aid, information exchange, abuse of dominance and general competition compliance. Zeyang is experienced in advising on high value and complex multi-jurisdictional transactions, and advises and represents clients in the tech, telecoms and healthcare industries. He has also represented clients on a broad range of matters before the UK Competition and Markets Authority, the European Commission, and the UK Investment Security Unit.

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