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This post was first published in August 2023 and has been updated to reflect current developments.
In 2022, the then UK government tabled an amendment to the National Security Bill that was proceeding through Parliament: the Foreign Influence Registration Scheme (“FIRS”). FIRS and the related offence of foreign interference are aimed at protecting the UK’s political and state systems from foreign pressure which goes beyond what is considered acceptable foreign influence in UK state affairs. As initially drafted, FIRS was widely criticised. Broad concepts, alongside an unhelpful lack of definitions in the draft text, risked a range of bizarre outcomes and, perhaps unintentionally, the imposition of a bureaucratic nuisance on a range of businesses, educational institutions and charitable organisations. The then government subsequently accepted revisions proposed by the House of Lords to mitigate these concerns and an amended version of the scheme was included in the National Security Act 2023 (the “Act”), which received Royal Assent on 11 July 2023.
The purpose of FIRS, according to the government’s Factsheet, is to “[strengthen] the resilience of the UK political system against covert foreign influence” and “[provide] greater assurance around the activities of certain foreign powers or entities that are a national security risk”. It requires the registration of relevant agreements which have as their objective the influencing of certain specified political matters or persons in the UK. It has been made clear that the intention of the then government was not to create any barriers or deterrence to participating in legitimate activities within the UK but to increase transparency around these activities and arrangements.
FIRS is a two-tier scheme, comprising the “political influence” tier and the “enhanced” tier.
Political influence tier: “foreign influence arrangements”
The “political influence” tier requires the registration (via an online portal) of arrangements to carry out political influence activities in the UK at the direction of a foreign power, where the activity is being carried out for the purpose of influencing UK public life (“foreign influence arrangement”). Failure to register a foreign influence arrangement within 28 days of its being made will be an offence. However, it will not be an offence to undertake the arrangement within the 28 days, so long as it is registered before the 28-day limit has been exceeded. Any pre-existing arrangements enjoy a three-month grace period for registration.
Certain conditions must be satisfied pre-registration.
Enhanced tier: “foreign activity arrangements”
The “enhanced” tier provides the Secretary of State with the power to require the registration of a broader range of activities extending beyond ordinary political activities.
Under this tier, the Secretary of State may designate, or “specify”, any foreign power or entity that they reasonably believe to be controlled by a foreign power if it is considered reasonably necessary to protect the UK’s safety or interests. Any arrangements to carry out any activities in the UK at the direction of a specified power or entity (foreign power or entity controlled by a foreign power) or activity carried out in the UK by the specified persons themselves who are not foreign powers, will need to be registered. (Specified foreign powers do not need to register activities they take themselves provided they do not make any misrepresentations.) Unlike arrangements falling within the political influence tier, arrangements under the enhanced tier must be registered within 10 days of being made and activities cannot be carried out until they have been registered.
The following conditions must be satisfied pre-registration:
The Secretary of State has not yet clarified who will be identified as a “specified person” or what activities will be classified as a “specified activity.” However, in debates held prior to July’s general election, parliament discussed countries such as China, Russia and Iran, with the then opposition advocating for their inclusion. It remains to be seen whether these nations are eventually specified by the new government. Nonetheless, it is important to note that ordinary commercial activities within the UK could also potentially fall under the enhanced tier, creating significant compliance obligations. The discretionary decisions of the Secretary of State will therefore be crucial in determining the scope of these regulations and should be closely watched.
Penalties of up to two years’ imprisonment (political influence tier), up to five years’ imprisonment (enhanced tier) and/or fines (both tiers) may be given for offences under FIRS. These will include failing to register a registrable arrangement, carrying out political influence or relevant activities or arranging for others to carry these out where registration requirements were not met and for providing false, inaccurate or misleading information.
At the time of writing, there were still many details to be confirmed regarding the operation and scope of FIRS. In particular, the formal guidance, without which the scheme cannot come into operation, is still in draft form. With the recent change of government, there may be delays in finalising elements of FIRS, and whether new government will press on with the scheme as enacted and adopt the existing approach remains to be seen.
However, despite the uncertainty, the need for companies to assess their compliance requirements and prepare accordingly remains. Entities that are considered under the legislation to be directed by a “foreign power” will need to ensure that their activities are registered, if relevant. These could include foreign state-owned undertakings, for example. Entities acting under contracts or other agreements with foreign governments, pursuant to which they engage with UK policy decision-makers on that foreign state’s behalf, will also be caught. These could include large companies or investors. Companies may also need to consider their joint ventures with foreign state-owned companies.
Given the current political and regulatory uncertainties, coupled with the ambiguity that arises from the enhanced tier’s discretionary element, organisations and companies should be considering the proactive steps to take to ensure they are prepared for any outcome. We would suggest that, as a start, they: