UK Set To Upgrade National Security Measures For Infrastructure

Foreign entities planning to acquire or control a UK company active in infrastructure, technology and emergency services will need to consider UK national security before entering into a transaction. The proposed changes come as part of a tightening of the rules governing foreign takeovers across a number of countries. They follow recent changes to the UK merger control thresholds to broaden the scope for the Secretary of State to intervene in acquisitions of companies active in particular types of military technology, computer hardware and quantum technology. The detailed proposals are published in the UK Government's 122-page White Paper and draft Statutory Statement of Policy Intent (SSPI) (see link below).

The deadline for responses to the White Paper is 16 October 2018, which is exactly a year after the Government published its Green Paper on the subject. Although no definite timetable is given for implementing the proposals, this latest publication by the Government would suggest that the reforms may not be so far away.

The UK Government is not alone in seeking to reform its powers of scrutiny - the USA, Australia, Japan, Germany and France are also taking similar steps.

The proposed new regime

Under the new regime proposed by the White Paper and the SSPI, the Senior Minister (defined as covering Secretaries of State, the Chancellor and the Prime Minister) will have a statutory power to "call in" a transaction in certain circumstances. The use of this power will permit the Senior Minister to assess any national security risks posed by events (such as investments or acquisitions) that grant a party significant influence or control over entities or assets. Such events are defined as "trigger events".

What are trigger events?

The trigger events set out in the proposed legislation are:

the acquisition of more than 25 per cent of shares or votes in an entity; the acquisition of significant influence or control (defined in the draft legislation) over an entity; the acquisition of further significant influence or control over an entity beyond the above thresholds; the acquisition of more than 50 per cent of an asset; and the acquisition of significant influence or control over an asset. The statutory test to call in a trigger event

The parties to a transaction may make a voluntary notification to the Government where they consider the transaction may raise national security concerns, based on the guidance set out in the SSPI. If they do not...