{"id":588,"date":"2022-03-05T23:01:06","date_gmt":"2022-03-06T06:01:06","guid":{"rendered":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/?p=588"},"modified":"2022-03-05T23:05:21","modified_gmt":"2022-03-06T06:05:21","slug":"the-united-kingdoms-national-security-and-investment-act-a-british-exon-florio","status":"publish","type":"post","link":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/the-united-kingdoms-national-security-and-investment-act-a-british-exon-florio\/","title":{"rendered":"The United Kingdom\u2019s National Security and Investment Act: A British Exon-Florio"},"content":{"rendered":"\t\t
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By Sharon Foster<\/strong><\/em>
Law Student Editor<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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On January 4, 2022, the United Kingdom\u2019s National Security and Investment Act 2021 (NSI Act) went into effect. The NSI Act empowers the Department for Business, Energy & Industrial Strategy, through its new Investment Security Unit (ISU), to review transactions implicating national security. The NSI Act covers 17 “high-risk” sectors that the United Kingdom deems essential to its national security<\/a>.\u00a0<\/p>

The NSI Act employs a framework analogous to the Exon-Florio<\/a> provisions of the Defense Production Act of 1950, administered by the Committee on Foreign Investment in the United States (CFIUS). CFIUS\u2019s role is to oversee mergers and acquisitions with foreign investment components for national security purposes, subject to the President\u2019s ultimate discretion. For example, in 2016<\/a>, President Obama blocked Fujian Grand Chip Investment Fund LP, a partially government-owned Chinese company, from acquiring German technology firm Aixtron SE, based on a CFIUS recommendation. President Obama indicated in a press statement that \u201c[t]he national security risk posed by the transaction relates, among other things, to the military applications of the overall technical body of knowledge and experience of Aixtron, a producer and innovator of semiconductor manufacturing equipment and technology<\/a>.\u201d While most foreign acquisitions allow the parties to decide to voluntarily disclose the intended acquisition, Exon-Florio does require mandatory disclosure of some kinds of transactions. Failure to disclose these can lead to harsh penalties, as can failure to comply with a mitigation agreement on which CFIUS has conditioned its non-opposition. For example, in 2018, CFIUS levied a civil monetary penalty<\/a> of $1 million under its monitoring and enforcement powers. CFIUS issued the penalty against an undisclosed company for repeated breaches of a CFIUS mitigation agreement.<\/p>

Acknowledging the success of the Exon-Florio procedure, the United Kingdom followed suit in enacting the NSI Act. The NSI Act allows the United Kingdom to block acquisitions of UK business firms and assets by non-UK persons when such acquisition implicates national security concerns. The British ISU, like CFIUS, primarily operates on a voluntary disclosure basis. However, the government can also \u201ccall-in\u201d non-disclosed transactions if there is a \u201ctriggering event.\u201d A triggering event includes when \u201ca person gains control of a qualifying entity [under] section 8 or a person gains control of a qualifying asset [under] section 9<\/a>.\u201d Section 8 provides that a person gains control of a qualifying entity if that person\u2019s shares or voting rights increase by 25, 50, or 75 percent of the person\u2019s initial holdings. Section 9 states \u201ca person gains control of a qualifying asset if [that person] acquires a right or interest in . . . the asset and . . . is able to use the asset\u201d or \u201cdirect and control how the asset is used.\u201d Qualifying assets include \u201cland, tangible moveable property, and ideas, information or techniques which have industrial, commercial or other economic value.\u201d Examples of \u201cideas, information or techniques\u201d include: \u201ctrade secrets, databases, source code, algorithms, formulae, designs, . . . [and] software.\u201d The NSI Act also includes commensurately high penalties for non-disclosure of transactions. Failing to disclose a transaction carries prison term from 1 to 5 years or monetary penalties of 10 million pounds (and potentially more for businesses).<\/p>

The NSI Act requires disclosures in 17 sensitive areas, termed \u201cnotifiable acquisitions,\u201d including advanced materials, artificial intelligence, communications, data infrastructure, energy, military and dual-use items, among others. Some of the regulated sectors are high-growth industries<\/a>. As a result, many transactions could require disclosure to ISU. The United Kingdom has issued detailed guidance<\/a> relating to each sector.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

By Sharon FosterLaw Student Editor On January 4, 2022, the United Kingdom\u2019s National Security and Investment Act 2021 (NSI Act) went into effect. The NSI Act empowers the Department for Business, Energy & Industrial Strategy, through its new Investment Security Unit (ISU), to review transactions implicating national security. The NSI Act covers 17 “high-risk” sectors […]<\/p>\n","protected":false},"author":106,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[8],"tags":[101,48,103,62,102],"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/posts\/588"}],"collection":[{"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/comments?post=588"}],"version-history":[{"count":7,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/posts\/588\/revisions"}],"predecessor-version":[{"id":595,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/posts\/588\/revisions\/595"}],"wp:attachment":[{"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/media?parent=588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/categories?post=588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.asucollegeoflaw.com\/ibt\/wp-json\/wp\/v2\/tags?post=588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}