Foreign Investment in United Kingdom 2024

Foreign Investment in United Kingdom 2024

FOREIGN INVESTMENT IN UNITED KINGDOM

UNITED KINGDOM

Mary Wilks

(Proskauer Rose LLP)

LAW AND POLICY

Policies and practices

1. What, in general terms, are your government’s policies and practices regarding oversight and review of foreign investment?

The National Security and Investment Act 2021 (NSIA) came into force on 4 January 2022 and enables the government to call-in any qualifying acquisition it reasonably suspects may give rise to a risk to national security. Notification is mandatory for acquisitions of control over qualifying entities active in 17 specified sectors of the UK economy, from advanced materials to transport, to target those areas the government considers likely to pose the greatest national security risks. Acquirers are responsible for notifying transactions subject to the mandatory regime. Any party may notify other qualifying acquisitions voluntarily to obtain certainty as to whether they will be called in.

When deciding whether to call in a qualifying acquisition, the government will consider target risk, acquirer risk and control risk. An important feature of the UK regime is that there is no ‘white list’ for particular nationalities: the call-in power applies equally to qualifying acquisitions by UK and foreign entities.

Under the Enterprise Act 2002 as amended (EA02) the government may intervene in transactions reviewable under the UK merger regime that it considers may raise public interest issues, again irrespective of the acquirer’s nationality. The currently specified public interests concern media plurality, accuracy and quality; stability of the UK financial system and the capability to combat public health emergencies. The public interest regime previously covered national security, but this is now regulated by the NSIA.

The government can issue a special public interest intervention notice for transactions which do not meet the jurisdictional thresholds under the merger regime, but which both raise a public interest consideration and result in a person acquiring 25 per cent or more of newspapers or broadcasting services in the UK.

Main laws

2. What are the main laws that directly or indirectly regulate acquisitions and investments by foreign nationals and investors on the basis of the national interest?

The power to review and intervene in transactions on grounds of:

• national security arises under the NSIA.
• public or special public interest arises under the EA02.

Scope of application

3. Outline the scope of application of these laws, including what kinds of investments or transactions are caught. Are minority interests caught? Are there specific sectors over which the authorities have a power to oversee and prevent foreign investment or sectors that are the subject of special scrutiny?

NSIA

A qualifying acquisition arises where the acquirer will obtain control (shares/voting rights of 25 per cent, 50 per cent, 75 per cent or more, or the ability to pass a class of resolution) or material influence over a qualifying entity, or increase its control of a qualifying asset, and the entity/asset is located in or has a connection to the UK.

The NSIA can apply to share or asset purchases, joint ventures, minority interests/investments or internal reorganizations. It can apply to interests held individually or jointly, directly or indirectly. There are no turnover or market share thresholds.

Acquisitions of control over a qualifying entity active in one of the 17 sensitive sectors are subject to mandatory notification by the acquirer. Any party may notify other qualifying acquisitions voluntarily to obtain certainty over whether they will be called in.

EA02

The government can intervene in relevant merger situations that may raise public interest considerations. A relevant merger situation arises where enterprises (legal entities or assets that enable the acquirer to carry on a business) are brought under common ownership or control (material influence, de facto or de jure control) and the jurisdictional thresholds are met, namely, the target’s UK turnover exceeds £70 million, or the merger creates or increases a combined UK share of supply of 25 per cent or more.

The public interest regime can apply to joint ventures or minority interests/investments, or to asset purchases that enable the acquirer to carry on a business, but would not apply to internal reorganizations as there would be no change to the ultimate ownership/control position.

The government can issue a special public interest intervention notice where two enterprises are brought under common ownership/control, but the transaction does not meet the jurisdictional thresholds and both raises a public interest consideration and results in a person acquiring 25 per cent or more of newspapers or broadcasting services in the UK.

Definitions

4. How is a foreign investor or foreign investment defined in the applicable law?

Neither the NSIA nor EA02 defines foreign investor or foreign investment, as it is not relevant under either regime: the powers apply equally to UK and foreign acquirers.

Special rules for SOEs and SWFs

5. Are there special rules for investments made by foreign state-owned enterprises (SOEs) and sovereign wealth funds (SWFs)? How is an SOE or SWF defined?

There are no special rules for state-owned entities, sovereign wealth funds or other entities affiliated with foreign states under the NSIA or the EA02.

Relevant authorities

6. Which officials or bodies are the competent authorities to review mergers or acquisitions on national interest grounds?

NSIA notifications are submitted to the Investment Security Unit (ISU). The decision maker is the Chancellor of the Duchy of Lancaster and Secretary of State in the Cabinet.

If the government issues an intervention notice under EA02, the Competition and Markets Authority (CMA) will review the transaction and report to the relevant Secretary of State. Where the public interest concerns media plurality, the Office of Communications (Ofcom) also reports to the Secretary of State. The final decision on jurisdiction and competition is made by the CMA and on public interest by the Secretary of State.

7. Notwithstanding the above-mentioned laws and policies, how much discretion do the authorities have to approve or reject transactions on national interest grounds?

The government has intentionally not defined national security, to protect national security and provide flexibility in applying its NSIA powers. The definitions of the sensitive sectors and of qualifying acquisition are relatively broad, so overall the government has a fairly wide margin of appreciation. The government can amend or add to the 17 sensitive sectors that determine mandatory notification.

The specified public interests in EA02 are also broadly defined, and the government has the power to intervene in transactions on grounds of a new public interest it considers should be specified. In 2008, the government intervened in the Lloyds/HBOS acquisition on the basis that stability of the UK financial system should be a specified public interest.

PROCEDURE

Jurisdictional thresholds

8. What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?

NSIA

Under the National Security and Investment Act 2021 (NSIA), a transaction is a qualifying acquisition if:

• it concerns a qualifying entity or asset;
• located in, or with a connection to, the UK; and
• the level of control acquired exceeds one of the thresholds.

A qualifying entity is any entity other than an individual, including companies, partnerships, unincorporated associations and trusts. Qualifying assets include land, tangible moveable property and intellectual property.

UK nexus

• Qualifying entities/assets located in the UK.
• Qualifying entities/assets outside the UK used to carry on activities in, or supply goods or services to the UK.

Control thresholds

• Shares or voting rights in a qualifying entity of 25 per cent, 50 per cent or 75 per cent or more. A qualifying acquisition occurs each time a threshold is passed.
• Voting rights giving the ability to pass or veto any class of resolution governing the affairs of a qualifying entity (irrespective of shareholding size).
• The ability to ’materially influence’ the policy of a qualifying entity. Material influence is an established concept in UK merger control and the Competition and Markets Authority (CMA) guidance It arises where the acquirer obtains the ability materially to influence the management of the target, including its strategic direction and commercial objectives. The assessment turns on factors including shareholding, any special voting or veto rights, board representation and any financial or commercial arrangements between target and acquirer.
• The ability to use a qualifying asset, direct or control its use, or to do so more than prior to the acquisition.

Rights may be treated as held by a person where they are held jointly, indirectly via a chain of majority stakes or exercisable in certain circumstances.

Where an internal reorganization results in a change of control over a qualifying entity, this can be a qualifying acquisition even if the ultimate beneficial owner remains the same.

Acquisitions of control (i.e, shares/voting rights of 25 per cent, 50 per cent, 75 per cent or more, or the ability to pass a class of resolution) over a qualifying entity active in one of the 17 sensitive sectors must be notified by the acquirer and approved by the government before completing. Any party may notify other qualifying acquisitions voluntarily to obtain certainty over whether they will be called in. The government can call in qualifying acquisitions up to five years after completion or six months after becoming aware of them if not notified.

The 17 sensitive sectors of the UK economy are defined by statutory instrument and guidance:

• advanced materials;
• advanced robotics;
• artificial intelligence;
• civil nuclear;
• communications;
• computing hardware;
• critical suppliers to government;
• cryptographic authentication;
• data infrastructure;
• defense;
• energy;
• military and dual-use;
• quantum technologies;
• satellite and space technology;
• suppliers to the emergency services;
• synthetic biology; and
• transport.

EA02

Separately, under the Enterprise Act 2002 as amended (EA02) the government can intervene in transactions reviewable under the UK merger regime that it considers may raise public interest issues. A transaction is reviewable if two enterprises will or have been brought under common ownership/control and either the target’s UK turnover exceeds £70 million, or the parties have a combined UK share of supply of 25 per cent or more. Notification is voluntary, but the government can refer a transaction for Phase 2 review on public interest grounds up to four months after completion or, if the completion is not publicized, after material facts about the transaction are made public.

The currently specified public interests cover:

• accurate news and freedom of opinion in newspapers;
• media plurality;
• range and quality of broadcasting;
• broadcasting standards;
• stability of the financial system; and
• capability to combat public health emergencies.

The government can update the specified public interests by order and can intervene based on a new public interest it considers should be specified.

The government can issue a special public interest intervention notice for transactions that do not meet the jurisdictional thresholds but otherwise fall under the merger regime and that both raise a public interest consideration and result in a person acquiring 25 percent or more of newspapers or broadcasting services in the UK.

National interest clearance

9. What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?

NSIA

Notification by the acquirer is mandatory for acquisitions of control over qualifying entities active in one of the 17 sensitive sectors. Any party may notify other qualifying acquisitions voluntarily to obtain certainty over whether they will be called in. The government can call in qualifying acquisitions up to five years after completion or six months after becoming aware of them if not notified.

Notifications are submitted to the ISU online via the NSIA notification service. The government has published guidance on completing and registering a notification form. There is no filing fee.

Information required includes:

• other foreign investment filings in the past year;
• type of qualifying acquisition;
• timetable;
• qualifying entity/asset activities;
• pre- and post-acquisition target and acquirer ownership details, including holders of shares or voting rights of 5 per cent or more, any contractual arrangements regarding share ownership/voting and any non-UK government that will have direct or indirect control in operations or decision-making; and
• acquirer board of directors.

Parties can provide additional supporting information, such as why the acquisition does not raise national security concerns; acquisition rationale; whether any parties are in financial distress; details of related acquisitions, or existing relationships between target and acquirer.

EA02

Notification is voluntary, but the government can refer a transaction for Phase 2 review on public interest grounds up to four months after completion or, if completion is not publicized, after material facts about the transaction are made public.

If the parties are submitting a briefing paper to the CMA or formally notifying their transaction for merger review, they can address any public interest points in their submissions. The CMA has a duty to inform the government of any cases it considers may raise public interest considerations.

Alternatively/additionally, the parties can voluntarily notify the relevant government department to understand whether the government is minded to intervene on public interest grounds. There is no set form; the acquirer would typically write a briefing covering:

• parties’ activities;
• level of influence/control the acquirer will obtain; and
• why the transaction will not be adverse to the public interest, or if the parties anticipate potential concerns, any remedies they propose.

The usual merger filing fees apply where the government issues a public interest intervention notice. The fee becomes due when the government announces its decision on public interest at the end of Phase 1. Fees vary depending on the target’s UK turnover in its last complete financial year and currently range from £40,000 where the target generated £20 million or less to £160,000 where its UK turnover exceeded £120 million. There are no filing fees for special public interest cases.

10. Which party is responsible for securing approval?

NSIA

The acquirer is responsible for filing a mandatory notification. A voluntary notification can be submitted by acquirer, target or seller, and a retrospective validation application can be submitted by anyone materially affected by the fact a non-notified acquisition is void.

EA02

The legislation does not specify responsibility for securing approval in a public interest case. For mergers the parties normally take joint responsibility; for other transactions the acquirer typically takes the lead.

Review process

11. How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?

NSIA

Transactions subject to mandatory notification must be notified and cleared before completing, but there are otherwise no filing deadlines. Notifications can be made prior to signing the transaction documents, once there is a good faith intention to proceed and the transaction terms are sufficiently stable.

Once a notification is submitted, the government must accept or reject it, typically in around five working days. The government has an initial review period of 30 working days starting on the date it accepts the notification. At the end of this time, the government must call in the transaction or confirm it will take no further action.

If a transaction is called in, the government has an assessment period of 30 working days starting with the date of the call-in notice. The government can unilaterally extend this by 45 working days and can agree further voluntary extensions with the acquirer. Before the end of the assessment period the government must make a final order (imposing remedies or prohibition) or confirm it will take no further action.

There is no fast-track process. However, where a transaction requires mandatory notification, or is called in, and the parties can evidence material financial distress, the government may expedite the timelines. Irrespective of the parties’ financial circumstances, transactions subject to mandatory notification that complete without government approval are void.

EA02

If the government considers a transaction may operate against the public interest, it will write to the parties indicating it is minded to issue an intervention notice and invite written representations by a specified deadline.

If the government then issues an intervention notice, it will specify the deadline within which the CMA (and, if relevant, Ofcom) must report to it. The standard CMA Phase 1 timetable (40 working days) will be adapted as required to meet the deadline. There is no statutory deadline for the government to decide on public interest issues having received the CMA’s Phase 1 report.

If a transaction is referred for a Phase 2 review on public interest grounds, the CMA has the standard Phase 2 period to prepare its report (i.e, 24-32 weeks) then the government has 30 working days to decide on public interest.

The parties can request during pre-notification or early in Phase 1 that a case is ‘fast-tracked’ to consideration of remedies or to Phase 2, provided they waive their right to challenge whether the criteria for a Phase 2 reference are met. The government will decide whether this is appropriate in public interest cases.

12. Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?

NSIA

A qualifying acquisition that triggers mandatory notification must not complete before receiving government approval or it will be legally void.

There is no requirement to suspend closing for transactions not subject to mandatory notification, but parties close at the risk of remedies or prohibition following government review, and of any interim measures that may be imposed if the transaction is called in.

Completing a transaction subject to mandatory notification without government approval is a criminal offence by the acquirer and any of its officers who are complicit/negligent. On conviction, individuals may be imprisoned for up to five years and/or fined. Alternatively, the government can impose civil fines of up to £10 million for individuals and up to 5 per cent of group worldwide turnover or £10 million (whichever is higher) for entities. Directors of the acquirer may be subject to disqualification orders (2-15 years).

Anyone materially affected by the fact a non-notified acquisition is void can apply for retrospective validation. An offence is still committed even if the government retrospectively validates the transaction.

EA02

The issue of an intervention notice does not prevent the parties from closing, or from integrating if the transaction has already closed, although they do so at the risk of subsequent remedies or prohibition.

However, the government or CMA can impose interim orders to prevent, reverse or mitigate any pre-emptive action. A person who breaches an interim order without reasonable excuse can be fined up to 5 per cent of the global turnover of the enterprises owned/controlled by that person.

Involvement of authorities

13. Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?

NSIA

Parties can contact the ISU at investment.screening@beis.gov.uk to seek informal advice before notifying, for example where there is significant uncertainty about whether a transaction is subject to mandatory notification. There is, however, no requirement or expectation to engage with the ISU before notifying.

EA02

Parties intending to formally notify a transaction to the CMA for merger review must request a case team and submit their notification in draft. As part of pre-notification, parties will be asked whether they consider the merger falls within the scope of a public interest consideration and can discuss this with the CMA. Parties can also engage with the relevant government department prior to notification. Any dialogue with the CMA or government department will be informal and subject to the formal investigation.

If the parties are submitting a CMA briefing paper rather than a full notification, and/or a briefing note to a government department on public interest issues, no pre-notification is required. Once they receive the note, the CMA and/or government department will contact the parties with questions regarding their transaction and discuss whether formal notification is appropriate.

14. When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?

The use of government relations, public affairs, lobbyists or similar specialists to support the review of a transaction under the NSIA or EA02 is not standard for every case. However, where a transaction is expected to be high profile and/or the parties consider it may be called in, the parties will want to ensure their regulatory strategy and case advocacy is integrated into their wider government and public relations strategy from the outset. The parties may also want to engage with the relevant government department or departments to put their case for clearance to key stakeholders and seek informal views on the transaction before notifying.

15. What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?

NSIA

If the government reasonably suspects a qualifying acquisition may give rise to a national security risk, it may call it in up to five years after completion or up to six months after becoming aware of it if not notified.

For qualifying acquisitions that took place between 12 November 2020 and 3 January 2022 inclusive:

• if the government became aware of the transaction before 4 January 2022, its ability to call in the transaction expired on 3 July 2022;
• the transaction can otherwise be called in up to and including 3 January 2027 or up to six months after becoming aware of it if not notified.

The decision whether to call in a completed transaction will be made in light of the risk to national security at the time of the decision not completion.

If a qualifying acquisition is called in, the government can impose an Interim Order to prevent, reverse or mitigate any pre-emptive action during the assessment period.

If the government determines the transaction raises a risk to national security, a Final Order may be imposed to prevent, remedy or mitigate the risk. This could impose conditions such as information safeguards, control of board appointments, maintenance of UK operations, inspection and step-in rights for the government, or prohibit/unwind the transaction.

EA02

The government can refer a transaction for Phase 2 review on public interest grounds up to four months after completion or, if completion is not publicized, after material facts about the transaction are made public.

If, following Phase 2 review, the government finds that a completed transaction is adverse to the public interest, it can take such action as it considers reasonable and practicable to remedy, mitigate or prevent the adverse effect, which could involve imposing remedies or unwinding the transaction.

SUBSTANTIVE ASSESSMENT

Substantive test

16. What is the substantive test for clearance and on whom is the onus for showing the transaction does or does not satisfy the test?

NSIA

Under the National Security and Investment Act 2021 (NSIA), if the government reasonably suspects a qualifying acquisition has taken place, or that arrangements are in progress that would result in a qualifying acquisition, and that this has given, or may give rise to, a risk to national security, it can call in the transaction.

The government has intentionally not defined national security, to protect national security and provide flexibility in applying its NSIA powers. The government has published a Statement explaining the primary risk factors it considers when deciding whether to call in a qualifying acquisition:

• Target Risk: what the target does, is or could be used for. Qualifying acquisitions in any area of the economy could be called in, but the government is unlikely to call in a transaction unless the target is active in one of the 17 sensitive sectors or a closely related area.
• Acquirer Risk: the acquirer’s sector of activity, technological capabilities or links to high-risk entities or ‘hostile’ jurisdictions. The call-in power applies equally to qualifying acquisitions by UK and foreign entities.
• Control Risk: the type and level of control being acquired.

These factors are not exhaustive, and all transactions are considered on a case-by-case basis.

If a qualifying acquisition is called in, the government must determine before the end of the assessment period whether, on the balance of probabilities, a risk to national security has arisen or would arise if the acquisition completed.

The onus to demonstrate that no risk to national security arises is on the notifying party. This is the acquirer for mandatory notifications, and whichever party notifies for voluntary notifications or retrospective validation applications.

EA02

Under the Enterprise Act 2002 as amended (EA02) the Secretary of State may give an intervention notice to the Competition and Markets Authority (CMA) if he or she believes that it is or may be the case that one or more public interests is relevant to consideration of the relevant merger situation. The CMA then carries out a Phase 1 investigation and reports to the Secretary of State; Ofcom also prepares a report if the public interest concerns media plurality.

Based on these Phase 1 reports, the Secretary of State may refer the transaction for a Phase 2 investigation if he or she believes that it is or may be the case that the creation of the relevant merger situation may be expected to operate against the public interest. The parties can offer remedies to the Secretary of State to avoid a reference to Phase 2.

At the end of Phase 2, the Secretary of State must decide whether it is the case that the creation of the relevant merger situation may be expected to operate against the public interest.

The onus to demonstrate that the transaction would not be adverse to the public interest is on the acquirer, or both parties in the case of a merger.

17. To what extent will the authorities consult or cooperate with officials in other countries during the substantive assessment?

NSIA

The government is entitled to disclose information received under the NSIA to overseas public authorities to facilitate the exercise of its NSIA powers, or to facilitate an overseas public authority in exercising corresponding functions. The NSIA notification requires details to be provided of other foreign investment filings in the past year.

Before disclosing, the government must consider whether:

• disclosure would unreasonably prejudice the relevant parties’ commercial interests;
• receiving country law provides corresponding protection against self-incrimination in criminal proceedings to the UK; and
• the matter is sufficiently serious to justify the disclosure.

EA02

If the transaction is formally notified to the CMA, the parties must state whether it has been notified elsewhere, and the CMA or relevant government department may ask about this in any informal discussions. The CMA or relevant government department may discuss non-confidential aspects of a public interest case with an overseas authority, but cannot disclose the parties’ confidential information without obtaining a waiver from the parties.

Other relevant parties

18. What other parties may become involved in the review process? What rights and standing do complainants have?

NSIA

The government does not publish the fact that a qualifying acquisition has been notified, and will not issue an invitation to comment. The ISU will contact the relevant government departments for their views and can consult with competitors, customers, suppliers or other third parties as appropriate. The government can serve a formal notice requiring third parties to provide information or to give evidence in person.

Public authorities including the CMA may disclose information to the government for the exercise of its NSIA functions. Overseas authorities may reach out to the government where a target is also active in or supplies to their jurisdiction, and the government can disclose information to overseas authorities to facilitate the exercise of its NSIA powers, or their corresponding functions.

EA02

If the government issues an intervention notice, the CMA will issue an invitation for comment, and will contact other government departments, sector regulators, industry associations and consumer bodies for their views on the relevant public interest issues. The CMA can serve a formal notice requiring third parties to provide information or to give evidence in person.

In media public interest cases, Ofcom is also required to prepare a report.

Prohibition and objections to transaction

19. What powers do the authorities have to prohibit or otherwise interfere with a transaction?

NSIA

Having called in a transaction, if the government determines on the balance of probabilities that it raises national security concerns, a Final Order may be imposed where this is necessary and proportionate to prevent, remedy or mitigate the risk. A Final Order may impose conditions (normally on the acquirer, but conditions can be imposed on any person), or prohibit/unwind the transaction.

Final Orders are not published due to national security sensitivities. Instead, high level summaries of the national security risks identified and conditions imposed are published in the Notice of Final Orders. Conditions are typically behavioral, for example information safeguards, control of board appointments, maintenance of strategic UK operations, or inspection and step-in rights for the government.

If a transaction completes in breach of a Final Order (whether this prohibited the transaction or imposed conditions), the transaction is void.

After a transaction is called in, the government can issue an Interim Order to prevent, reverse or mitigate pre-emptive action it considers might prejudice the exercise of its NSIA powers. An Interim Order can, for example, prevent completion, pre-completion steps or the transfer of assets.

EA02

If the government makes an adverse public interest finding at the end of Phase 2, it may take such action as it considers reasonable and practicable to remedy, mitigate or prevent the adverse effects. This could involve accepting remedies offered by the parties, imposing remedies by order or prohibiting/unwinding the transaction.

Once an intervention notice has been issued, the government can impose an Interim Order to prevent, reverse or mitigate pre-emptive action it considers might prejudice the outcome of its review. This could, for example, prevent completion or require the target to be held separate if the transaction has completed.

20. Is it possible to remedy or avoid the authorities’ objections to a transaction, for example, by giving undertakings or agreeing to other mitigation arrangements?

NSIA

When the government is considering imposing a Final Order, it will write to the parties with a summary of the national security concerns identified and the conditions the government intends to impose. The parties can make written submissions regarding the need for and terms of the conditions, which the government must take into account before issuing the Final Order.

There is no right for the parties to offer or negotiate remedies, and government departments will generally be reluctant to discuss the transaction after formal notification. If the parties anticipate national security concerns, it can be helpful to discuss potential issues and solutions with the relevant government department before notifying.

EA02

If the parties anticipate public interest concerns and have proposals to address these, they can discuss them with the relevant government department at any point, including prior to the issue of an intervention notice. If an intervention notice is issued, the parties can offer undertakings to remedy the public interest concerns at Phase 1 (to avoid a Phase 2 investigation) or at Phase 2.

Challenge and appeal

21. Can a negative decision be challenged or appealed?

NSIA

NSIA decisions can be appealed by applying for judicial review within 28 days starting on the day after the decision.

The imposition of a civil fine must also be appealed within 28 days, but is subject to a full merits review, and is not payable until the appeal is decided/withdrawn.

Any person required to comply with a Final or Interim Order can request the government varies or revokes it where there has been a material change of circumstances, for example if a transaction is abandoned.

EA02

Any person aggrieved by a decision of the Secretary of State on public interest grounds may apply to the Competition Appeal Tribunal for judicial review within four weeks of the decision being notified to the applicant or published, whichever is earlier.

Confidential information

22. What safeguards are in place to protect confidential information from being disseminated and what are the consequences if confidentiality is breached?

NSIA

Information provided to the government under the NSIA will be held in confidence. The government will not publish the fact it is reviewing a transaction, and will not normally publish the fact it has cleared or called in a transaction, unless the parties make an announcement or the government considers it would be in the public interest. The government must publish notice of Final Orders, but this is only a high-level summary.

The government is entitled to disclose information it receives under the NSIA to other public authorities or overseas authorities for certain specified purposes, including carrying out its NSIA functions, preventing or detecting crime, and protecting national security. The receiver may not use the information for any other purpose and may not further disclose it without government consent.

EA02

Information provided to the CMA or a relevant government department in a public interest (or standard merger) case is protected from disclosure unless the relevant party consents  or another EA02 information gateway applies. The CMA will request non-confidential versions of any submissions it intends to publish and will share the confidential version of its reports with the parties (without confidential third-party information) for the parties to identify commercially sensitive information. In case of a disagreement with the CMA, the parties can contact the procedural officer.

It is a criminal offence to disclose information if the disclosure is not permitted under EA02.

RECENT CASES

Relevant recent case law

23. Discuss in detail up to three recent cases that reflect how the foregoing laws and policies were applied and the outcome, including, where possible, examples of rejections.

LetterOne/Upp

In January 2021, before the the National Security and Investment Act 2021 (NSIA) came into force but during the lookback period, Upp Corporation Ltd (Upp), a UK regional broadband provider, was acquired by LetterOne Core Investment Sàrl (LetterOne), an investment group 49 per cent owned by Russian oligarchs Mikhail Fridman and Petr Aven. The government called in the transaction following the invasion of Ukraine by Russia, as a result of which Fridman and Aven were sanctioned by the UK, notwithstanding that both resigned from the LetterOne board and their share and dividend rights were frozen.

In December 2022 the government issued a Final Order specifying a risk to national security due to ownership of Upp by the ultimate beneficial owners of LetterOne and Upp’s expanding full-fibre broadband network. The Final Order requires Upp to be sold and a security audit of its network to be carried out prior to sale. LetterOne is reportedly seeking judicial review of the Final Order; in September 2023 it agreed to sell Upp to Virgin Media O2.

This case illustrates the dynamic nature of national security concerns, which may arise up to five years after completion if a transaction has not been notified, and will be judged at that time. Qualifying acquisitions not subject to mandatory notification can be notified voluntarily to obtain certainty as to whether they will be called in.

Epiris/Sepura

UK private equity firm Epiris acquired UK firm Sepura Limited (Sepura), which makes radios and accessories used by the emergency services, from Chinese-owned firm Hytera Communications (Hytera) in 2022. The transaction was notified and called in under the NSIA. The government imposed a Final Order requiring enhanced controls to protect sensitive information and technology from unauthorized access, as well as the maintenance of UK capabilities in repairing, servicing and maintaining devices for networks used by UK emergency services.

Hytera had acquired Sepura in 2017, prior to the NSIA, and offered apparently similar undertakings to avoid a reference for a Phase 2 review based on the public interest in national security under the Enterprise Act 2002 as amended (EA02).

In July 2023 the government published a Notice of Final Order Variation to enable Sepura to have a ‘wider choice of location for manufacturing activities, as well as associated administrative modifications’.

This case illustrates that the government may intervene even where the acquirer is British. It is also an example of an order being varied, which typically requires evidence of a material change in circumstance. The parties can make representations on the practicality of proposed conditions, but the government ultimately imposes them via Final Order. Given that conditions are typically high-level behavioral commitments as well as the penalties for non-compliance, parties may want to engage with the ISU regarding any implementation queries.

RedBird IMI/Telegraph

RedBird IMI is a joint venture between US firm RedBird Capital and International Media Investments, which is reportedly privately owned by a member of the UAE government. RedBird IMI is the front runner in the auction of the Telegraph Media Group (Telegraph), which was taken over by Lloyds Banking Group following the Barclay family owners’ inability to repay debts. The Barclay family is now looking to buy back the Telegraph via debt repayment and associated share options funded by Redbird IMI or IMI. On 22 November 2022 the Secretary of State for Culture, Media and Sport wrote to the parties indicating she was minded to issue an intervention notice, and inviting representations by 23 November 2023. On 30 November 2023 an intervention notice was issued, citing the public interest in accurate presentation of news and free expression of opinion in newspapers.

The Competition and Markets Authority (CMA) must report to the Secretary of State on jurisdiction and competition, and Ofcom on media public interest considerations, by 26 January 2024. The government will then decide whether to refer the transaction for a Phase 2 review on public interest grounds. If the government is minded to refer the transaction, the parties can offer remedies in lieu of a reference.

UPDATE AND TRENDS IN FOREIGN INVESTMENT IN UNITED KINGDOM

Key developments of the past year

24. Are there any developments, emerging trends or hot topics in foreign investment review regulation in your jurisdiction? Are there any current proposed changes in the law or policy that will have an impact on foreign investment and national interest review?

NSIA

At the time of writing, the government had issued a call for evidence on the operation of the National Security and Investment Act 2021 (NSIA), with a view to ‘narrowing and refining’ its ambit. The government is not considering changes to the primary legislation (including the thresholds for mandatory notification). However, it is reviewing the 17 sensitive sectors and considering whether these should be amended or expanded, and whether certain targeted exemptions from mandatory notification may be appropriate, for example for specific types of internal reorganisation or where the acquisition gives the acquirer minimal control in practice.

EA02

In relation to the Enterprise Act 2002 as amended (EA02) the Digital Markets, Competition and Consumers Bill was at Committee Stage in the House of Lords and expected to receive Royal Assent around spring 2024. The Bill proposes significant changes to UK competition and consumer protection legislation, as well as additional powers to regulate the conduct of digital firms designated as having strategic market status.

In merger control, proposed changes include:

• a new, alternative threshold for reviewable mergers where one party has a 33 per cent or greater UK share of supply and UK turnover of £350 million, and another party is incorporated, carries on activities, or supplies goods/services in the UK;
• raising the target UK turnover threshold from £70 to £100 million, which would apply to all public interest cases;
• for special public interest cases, a new £70 million target UK turnover threshold in the alternative to meeting the 25 per cent share of newspapers or broadcasting services in the UK.

* The information in this chapter was accurate as at December 2023.

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