If we look at the UK first, the Department for Business, Energy & Industrial Strategy (BEIS) published a consultation paper in October 2017 considering broader powers for the Government to intervene in foreign investment deals which raise national security concerns. The proposals have some short-term and some longer-term implications. In the short term, the Government is taking additional powers to block takeovers of companies in the defence and technology sectors which, so far, have not been caught because they are too small.
These changes are actually narrower in scope than some had predicted and in reality amount to a fairly small and incremental change to the Government’s existing powers to intervene on national security grounds (as opposed to, say, wider political grounds). On 15 March 2018, the Government confirmed its decision (subject to Parliamentary approval) to reduce the jurisdictional thresholds for targets active in three sectors: the development or production of items for military or military and civilian use, quantum technology and computing hardware.
Longer term, the consultation looks more broadly at the way in which foreign investment in certain sectors is reviewed, with proposals for greater “call-in” powers under the current voluntary regime, or the introduction of a mandatory notification requirement. These proposals are more substantial and would involve a significant revision of the existing legislation. The Government says that it would retain an independent competition authority and a clear separation between competition assessments and national security-related ones. Thankfully, the proposals also make clear that the Government is not planning to amend the process for other public interest-related assessments – and by that we mean financial stability or media plurality.
However, there is no clear definition of “national security” in the Green Paper and we shall have to wait to see how widely the test would be interpreted in the future. We expect BEIS to consult further on more detailed proposals later this year (possibly after the May elections), which may provide more clarity. The political row over the GKN/Melrose takeover might well embolden the Government to take more protectionist powers.