Sovereignty not for sale: the Foreign Affairs Committee Report


On 14 July 2021 the UK’s Foreign Affairs Committee published its report “Sovereignty for sale: the FCDO's role in protecting strategic British assets”.

The genesis of the report was the attempted takeover of Imagination Technologies by Canyon Bridge in Spring 2020, which the Foreign, Commonwealth & Development Office brought to the attention of the UK Government (UKG). The report focuses on the acquisition of technology firms, given the centrality of technology to the UKG’s ambitions for the UK’s security, defence, development and foreign policy, as articulated in the Integrated Review of Security, Defence, Development and Foreign Policy. However, it warns that other aspects of foreign investment can also undermine national security (e.g. the acquisition of property, critical national infrastructure, the use of debt as political leverage, or other forms of coercion via economic means).

The report welcomes the introduction of the National Security and Investment Act as a vital step towards securing sovereignty and protecting UK businesses. However, it notes that failure to implement it effectively would have “catastrophic effects” for the UK’s global influence and security, and that there is “no room for mistakes or teething issues”. While the report builds upon some of the core features of the NSIA, some of its recommendations introduce elements which would have a wider reach than the legislation.

Key takeaways

First, the report makes clear that the concerns relating to foreign investment extend beyond national security. The report warns that “acquisitions by foreign entities can serve as the first step towards moving strategically vital companies, assets and intellectual property abroad”. This threatens not only national security but also the UK’s independence, long-term prosperity and global influence. Given the significant geopolitical implications of foreign investment decisions, it is key that the FCDO contributes meaningfully to the newly-established Investment Security Unity and to the consequent outcomes of the review process for investments. This, in turn, must balance many aspects of UK national interest, including the wider public good.

Second, unlike the NSIA, which is geography and actor-agnostic, the report draws specific attention to certain jurisdictions. Citing China in particular, the report notes the takeover of Newport Wafer Fab by Nexperia as an example of a sale of a prized UK asset to a strategic competitor. Nexperia was previously owned by Wise Road Capital, a China backed private equity fund which was the subject of a recent review by CFIUS of its acquisition of Magnachip Semiconductor, a South Korea based but US listed Semiconductor company. CFIUS has challenged that transaction and Wise Road Capital’s attempts to reduce its US presence to remove CFIUS jurisdiction. The report urges the UKG to call in this transaction and to impose “appropriate mitigating measures, as a matter of urgency”.

Third, the report invites cooperation on foreign investment screening with other countries with shared values and strategic objectives. The report recommends that the FCDO plays a leading role in bringing together countries and partners from overseas and in building alliances to ensure investment vehicles in one country are not used as a Trojan horse in others. It remains to be seen whether this “cooperation with like-minded partners and allies” is envisaged as a general harmonisation of principles and/or procedures or a more targeted approach towards certain “high-risk” jurisdictions and/or actors.

Fourth, the report recommends that the UKG should not only screen foreign investment at the point of transactions completing, but should conduct continuous monitoring to identify developments that may increase the influence of foreign entities and, where necessary, intervene. While the NSIA already incorporates as trigger events certain increases in shareholding or voting rights, the proposals outlined in the report would go further than this. The requirements, which could include monitoring changes to board composition or ownership models, would be in addition to the NSIA screening procedures and would require regular feed-in from multiple departments, including those with a global footprint such as the FCDO.

Fifth, the report includes detailed suggestions regarding cross-government cooperation on investment screening, with 10% of the ISU proposed to comprise FCDO secondees. This would be accompanied by “cross-committee scrutiny”, including at least bi-annual private briefings on the activities of the ISU on Privy Council terms with the Chairs of the Foreign Affairs, Intelligence and Security, and Science and Technology Committees.


In the aftermath of Brexit and the Covid-19 pandemic, it is of the utmost importance that the UK continues to attract foreign investment, which has been a driving force behind the UK’s global prominence in certain sectors, including technology, whilst also protecting its national security interests. It remains to be seen whether and how the UKG would implement the FCDO’s proposals and how these would be received by the national and international investment community.