On 20 May 2024, the UK Government issued updated guidance on the use of powers under the National Security and Investment Act (“NSI Act“). As noted in our blog post dated 26 April 2024, this updated guidance forms part of the UK Government’s response to the call for evidence that it launched in December 2023 asking for stakeholder feedback on a number of areas of potential change to the NSI Act. The updates to the guidance include a new Section 3 Statement, which has been updated for the first time since January 2022. This statement sets out how the Secretary of State expects to exercise their powers to call-in certain acquisitions,. The updates also include additional market guidance about the operation of the NSI Act.

We have included an overview of the specific updates to the Section 3 Statement and the new market guidance below.

Section 3 Statement on use of call-in powers

Under the NSI Act, an acquisition can be called in for assessment if the Secretary of State considers it may present potential for immediate or future harm to national security. To this end, it has been clarified that the Secretary of State may consider whether an acquisition (or cumulative acquisitions) may –

  • lead to the disruption, erosion, or degradation to critical national infrastructure or present risks to government and defence assets (including risk relating to supply chains and dependency that could lead to a national security risk); or
  • lead to the disruption or erosion of the UK’s military, intelligence, security or technological capabilities by enabling hostile actors to build defence, intelligence, security, or technological capabilities which may threaten UK security.

Risk factors

Similar to the prior Section 3 Statement, the updated guidance explains that there are three primary risk factors the Secretary of State will consider in making their decision on whether to exercise the call-in power: target risk, acquirer risk and control risk. The statement now also notes that the Secretary of State will take account of wider Government policy on national security when assessing transactions, including published sector strategies. The three risk factors have been updated in the following ways:

1) Target risk

Assessing target risk involves considering whether the target of the acquisition is being used, or could be used, in a way that raises a risk to national security.

Factors that will be considered in assessing target risk and the decision to call-in an acquisition include the following –

  • For entities –
    • Are there any national security risks arising from the target’s proximity to sensitive sites?
    • Is the entity operating in an area of the economy that is subject to mandatory NSI notification? If not, does it have activities that are closely linked to those areas?
    • Does the target hold a sensitive supply relationship to the Government in one of the areas subject to mandatory NSI notification? If yes, this may increase the likelihood of call-in because the capability or capacity of a particular supply chain may be viewed by the Government as important to maintaining UK national security.
    • Are there national security risks presented by cumulative acquisitions?
  • For assets –
    • Are the assets being, or could be, used in connection with the activities in areas of the economy that are subject to mandatory NSI notification or closely linked?
    • Will the asset acquisition allow the transfer of technology, intellectual property or expertise to an acquirer, or parties linked to an acquirer, which could undermine or threaten national security now or in the future?
    • Is the asset subject to export controls?
    • If the asset is land, is the land a sensitive site (or is it proximate to a sensitive site)? 

If yes to the above questions, this will increase the risk of call-in. The Secretary of State expects they will only rarely call in asset acquisitions that do not fall into the above categories.

2) Acquirer risk

Assessing acquirer risk involves considering whether the acquirer, through its acquisition of control over an entity or asset, poses a risk to national security. This involves an assessment of the characteristics of the acquirer. Such characteristics can include –  

  • Past behaviour of the acquirer (including by any linked parties) and the intent of the acquisition;
  • The sectors the acquirer operates in and its existing capabilities (e.g., technological and/or security capabilities);
  • Cumulative acquisitions across a sector or linked sectors;
  • Any ties or allegiance to a state or organisation which may seek to undermine or threaten UK national security; and
  • Source of the funds and whether hostile actors are seeking to obfuscate their identity via investment through other companies or corporate structures.

Jurisdiction of acquirers:

  • UK acquirers – If a target is considered sensitive, the guidance states that it may need to be investigated regardless of acquirer risk even if there is a UK acquirer, or the acquirer has previously had an acquisition cleared through the NSI regime.
  • Foreign acquirers – The country of origin of an acquirer will not be the sole basis of judgment. However, an acquirer’s ties or allegiance to a state or organisation which is hostile to the UK will be considered, including whether such states or organisations place requirements on the acquirer.
  • The guidance notes that not all state-owned entities and sovereign wealth funds are considered as being inherently more likely to pose a national security risk, but such ties or allegiances will be taken into account if these are to states or organisations hostile to the UK.
  • Whether the acquirer has been sanctioned will also form part of the assessment, including the level of control a sanctioned party will have over the target entity or asset.

3) Control risk

The Secretary of State assesses control risk based on the amount of control an acquirer gains over the target’s activities, policy, or strategy, whether through voting rights, board seats, direct ownership, loans, and/or conditional acquisitions.

The Secretary of State can consider whether there is a control risk from cumulative investments across a sector or supply chain. However,  long-term investments or voting rights held by passive investors compared to direct owners may indicate less risk.

The guidance states that the greater the degree of control, the greater the possibility of a target being used to harm national security, reduce the diversity of a market or influence the market’s behaviour in a way that may give rise to a risk to national security. However, if target and acquirer risk is low, the level of control acquired is less likely to give rise to a risk of national security and so the acquisition will be less likely to be called-in.

Each assessment by the Secretary of State is on a case-by-case basis with the guidance noting that the above factors and risks are not exhaustive.

Market guidance

The updated market guidance covers 4 key changes –

  • Changes to: How the National Security and Investment Act could affect people or acquisitions outside the UK – Includes information on how the NSI Act can apply to cases of outward direct investment, providing clarity on when non-UK entities can be subject to the NSI Act.
    • In particular, the updated guidance specifically notes that acquisition of a foreign entity that either: (i) carries on research and development activities in the UK, (ii) supplies goods to the UK, (iii) has an office in the UK from which it carries on activities, (iv) oversees the activities of a subsidiary that carries on activities in the UK (unless the subsidiary is independent from the foreign parent entity being acquired), or (v) supplies goods to a UK hub which sends the goods onto other countries (unless the UK hub only places orders for goods to be sent to other countries), is likely to be classed as the acquisition of a qualifying entity falling within the scope of the rules under the NSI Act and could allow the government to investigate the acquisition.Categories (iv) and (v) above are not explicitly called out in Section 7 of the NSI Act, and as such could arguably be regarded as guidance overreach.
    • In relation to assets, these are likely subject to the NSI Act where they are used in connection with activities in the UK or supplying good or services to the UK.
  • Changes to: Check if you need to tell the government about an acquisition that could harm the UK’s national security – The updates include clarifications on timelines for screening, including what happens after a notification is submitted, how the review period and assessment periods are calculated and the exceptional circumstances in which screening can be expedited. Clarifications include that:
    • acceptance of the notification form will typically take 5 working days;if the acquisition is called-in, the assessment period can vary between 30-75 working days, and may be extended further with the acquirer’s agreement; and
    • the UK Government may expedite its review in exceptional circumstances where the parties can clearly evidence material financial stress (the guidance also sets out examples of the type of evidence it may consider sufficient).
  • Changes to: Guidance for the higher education and research-intensive sectors – Includes further information on what qualifies as an acquisition that may be subject to the NSI Act and new information about how the NSI Act applies to the higher education and research-intensive sectors, including when the government needs to be notified of certain academic collaborations and examples of the same. Per the guidance, qualifying entities include but are not limited to a foreign or UK university, trust, university spin-out, subsidiary company of a university, research organisation, or a private company or corporation doing contractual work with a higher education research organisation. The guidance also notes that contract or sponsored research, sponsoring a research theme or position, or licensing IP can all be considered qualifying acquisitions under the NSI Act if through these agreements a person gains control, or greater control, over a university or research organisation’s qualifying assets, which can include IP.

  • Changes to: Guidance on completing and registering a notification form – The guidance includes additional tips on completing the form correctly, including step-by-step guidance on each section of the form. It also provides guidance relating to submitting a notification without sending any classified information. The guidance also clarifies that it may be possible to submit a single notification covering multiple acquisitions if they involve multiple assets or entities being sold from the same seller to a single acquirer, or where there is internal restructuring of an entity resulting in no overall change in ultimate ownership. However, multiple acquisitions by the same acquirer, each relating to different sellers must be notified separately.

In summary

  • The updated set of guidance provides greater clarity from the UK Government on many aspects of the NSI Act.
  • In particular, the Section 3 statement, in relation to the risk factors and acquisition characteristics that are likely to increase the risk of a call-in, will provide businesses with increased certainty regarding whether their transaction may be seen as posing a risk to UK national security. The statement is consistent with informal guidance from UK Government in the past, consolidating it into a more digestible and helpful format. 
  • It is important for companies to assess whether their transactions fall within the scope of the NSI Act. As always, please do not hesitate to contact the Baker McKenzie foreign investment team for support whenever needed.

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.


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.


Emily Thomson is an associate at the Firm's London office and is a member of the International Commercial & Trade and Antitrust & Competition practice groups. Emily advises clients on foreign direct investment, sanctions, export controls, trade compliance and customs. She has extensive experience advising clients on the application of the UK national security and foreign direct investment regime, from assessing whether the regime applies to clients and making notifications to the UK Government on their behalf, to assisting clients with advocacy on points of national security in front of UK Government. Emily also has a particular focus on advising clients on the ever-changing landscape of EU and UK sanctions against Russia and other jurisdictions.


Zeyang Gao is a Senior 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.