On 16 June 2022, the UK Government published its first Annual Report (the “Report“) pursuant to the National Security and Investment Act 2021 (the “NSI Act“), along with a Memorandum of Understanding (“MoU“) between the Department for Business, Energy & Industrial Strategy (“BEIS“) and the Competition and Markets Authority (the “CMA“) on the operation of the NSI Act.
NSI Act Annual Report
The Report provides a summary of the functioning of the UK’s new foreign investment review regime established under the NSI Act, covering the first three months of its operation since the commencement of the Act on 4 January 2022 to 31 March 2022. Please see here for further details of the UK’s new regime.
The key figures from the Report are as follows:
- A total of 222 notifications were received during the reporting period – of these, 196 were mandatory notifications, 25 were voluntary notifications and one was a retrospective validation application.
- A total of 17 notifications were called in – 13 of these were mandatory notifications and four were voluntary notifications.
- 3 final notifications were given and 0 final orders were made.
- The remaining 14 notifications were still undergoing assessments by the reporting deadline, within the timelines set out in the NSI Act.
The sectors of the economy from which most mandatory notifications were received were Defence, Military and Dual Use, and Critical Suppliers to Government. Voluntary notifications were most commonly received from acquisitions where the target was active in Professional, Scientific and Technical Activities, and Data Infrastructure.
The Report also provides statistics on the time in which notifications were accepted or rejected, and the timeframe within which notifications were assessed once accepted:
|Time in which notifications were treated||Average|
|Average number of working days from receipt of a mandatory notification to informing parties of a decision to accept that notification||4 working days|
|Average number of working days from receipt of a mandatory notification to giving parties written reasons for a decision to reject that notification||6 working days|
|Average number of working days from receipt of a voluntary notification to informing parties of a decision to accept that notification||5 working days|
|Average number of working days from receipt of a voluntary notification to giving them written reasons for a decision to reject that notification (only one notification rejected)||12 working days|
|Average number of working days to call in a mandatory notification once accepted||24 working days|
|Average number of working days to call in a voluntary notification once accepted||22 working days|
Further, useful guidance is provided in the Report on the reasons why notifications have been rejected. These include the following:
- the notification did not meet the requirements for notifications set out in the NSI Act and Regulations;
- the notification did not contain sufficient information for the Secretary of State to make a decision as to whether to call in or clear the acquisition;
- the notification was made as a mandatory notification when it should have been a voluntary notification;
- the notification was made as a mandatory notification when it should have been submitted as a retrospective validation application because the acquisition had already been completed;
- the notification did not include enough information about the acquisition or parties to it; or
- the notification covered multiple qualifying acquisitions that should instead have been submitted as two notifications. However, the Report notes that in rare cases the Government has pragmatically accepted a single notification to cover multiple qualifying acquisitions where these contribute to a single effect – for example, in the case of some internal group reorganisations.
Memorandum of Understanding between BEIS and CMA
The aim of the MoU is to enable closer working between BEIS and the CMA. Specifically, the MoU sets out the legal framework and broad principles for collaboration on the timing of investigations, interim measures, remedies and the sharing of relevant information between the authorities.
The MoU will be significant as the NSI regime continues to develop in the first year of its full operation. Both BEIS and the CMA will continue to engage with one another on an informal basis in relation to acquisitions which are notified to them, and provide information as soon as possible that may assist with the other authority’s review. Examples of information that may be exchanged between the authorities include:
- information on current or historical CMA cases;
- information the CMA may hold on competition within a given sector; and
- notifications of when the Secretary of State intends to impose remedies or accept undertakings as part of a NSI review.
With regard to remedies, both authorities will seek representations from one another in advance of issuing any interim or final orders under their respective reviews. However, the MoU acknowledges that, for national security reasons, it may not always be “appropriate” for the authorities to align their review processes.
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