National Security and Investment Bill (HL Bill 165)

Part 1 Call-in for national security

Chapter 1 Call-in power

1 5Call-in notice for national security purposes

(1)The Secretary of State may give a notice if the Secretary of State reasonably
suspects that—

(a)a trigger event has taken place in relation to a qualifying entity or
qualifying asset, and the event has given rise to or may give rise to a risk
10to national security, or

(b)arrangements are in progress or contemplation which, if carried into
effect, will result in a trigger event taking place in relation to a
qualifying entity or qualifying asset, and the event may give rise to a
risk to national security.

(2)15For the purposes of this Act, in considering whether a trigger event has taken
place, or whether arrangements are in progress or contemplation which, if
carried into effect, will result in a trigger event taking place, the effect of section
13(1) (notifiable acquisitions that are void) must be disregarded.

(3)A notice under subsection (1) is referred to in this Act as a call-in notice.

(4)20If the Secretary of State decides to give a call-in notice, the notice must be given
to—

(a)the acquirer,

(b)if the trigger event relates to a qualifying entity, the entity, and

(c)such other persons as the Secretary of State considers appropriate.

(5)The call-in notice must include a description of the trigger event to which it
5relates and state the names of the persons to whom the notice is given.

(6)The Secretary of State may not give a call-in notice unless a statement has been
published (and not withdrawn) for the purposes of section 3.

(7)The Secretary of State must have regard to that statement before giving a call-
in notice.

(8)10But nothing in the statement limits the power to give a call-in notice.

2 Further provision about call-in notices

(1)No more than one call-in notice may be given in relation to each trigger event.

(2)Subject to subsections (3) and (4), a call-in notice given on the grounds
mentioned in section 1(1)(a)—

(a)15may not be given after the end of the period of 6 months beginning with
the day on which the Secretary of State became aware of the trigger
event, and

(b)may not be given after the end of the period of 5 years beginning with
the day on which the trigger event took place.

(3)20Subsection (2)(b) does not apply where the trigger event is one in relation to
which section 13(1) has effect.

(4)In relation to a trigger event taking place during the period beginning with 12
November 2020 and ending with the day before commencement day, a call-in
notice given on the grounds mentioned in section 1(1)(a)—

(a)25if the Secretary of State became aware of the trigger event before
commencement day, may not be given after the end of the period of 6
months beginning with commencement day,

(b)if the Secretary of State became aware of the trigger event on or after
commencement day—

(i)30may not be given after the end of the period of 6 months
beginning with the day on which the Secretary of State became
aware of the trigger event, and

(ii)may not be given after the end of the period of 5 years beginning
with commencement day.

(5)35In this section “commencement day” means the day on which this section
comes into force.

(6)This section is subject to section 22 (and see section 62).

3 Statement about exercise of call-in power

(1)The Secretary of State may publish a statement for the purposes of this section
40if the requirements set out in section 4(1) are satisfied.

(2)The statement is a statement prepared by the Secretary of State that sets out
how the Secretary of State expects to exercise the power to give a call-in notice.

(3)The statement may include, in particular—

(a)details of sectors of the economy in relation to which the Secretary of
State considers that trigger events are more likely to give rise to a risk
to national security,

(b)5details of the trigger events, qualifying entities and qualifying assets in
relation to which the Secretary of State expects to exercise the power to
give a call-in notice, and

(c)details of factors that the Secretary of State expects to take into account
when deciding whether or not to exercise the power.

(4)10The Secretary of State must review a statement published under this section at
least once every 5 years.

(5)A statement published under this section may be amended or replaced by a
subsequent statement, and this section and section 4 apply in relation to any
amended or replacement statement as in relation to the original statement.

(6)15Nothing in a statement published under this section affects the power of the
Secretary of State to make notifiable acquisition regulations (see section 6).

4 Consultation and parliamentary procedure

(1)Before the Secretary of State may publish a statement for the purposes of
section 3 the Secretary of State must—

(a)20carry out such consultation as the Secretary of State thinks appropriate
in relation to a draft of the statement,

(b)make any changes to the draft that appear to the Secretary of State to be
necessary in view of the responses to the consultation, and

(c)lay the statement before Parliament.

(2)25Either House of Parliament may at any time before the expiry of the 40-day
period resolve not to approve the statement.

(3)If either House of Parliament resolves not to approve the statement under
subsection (2), the Secretary of State must withdraw the statement.

(4)Any such resolution under subsection (2) does not affect the validity of a call-
30in notice given following the publication of the statement prior to its
withdrawal, and does not affect the publication of a new statement.

(5)“The 40-day period” is the period of 40 days beginning with the day on which
the statement is laid before Parliament (or, if it is not laid before each House of
Parliament on the same day, the later of the days on which it is laid).

(6)35When calculating the 40-day period, ignore any period during which
Parliament is dissolved or prorogued or during which both Houses are
adjourned for more than 4 days.

(7)The requirement in subsection (1)(a) may be met by consultation carried out
before this section comes into force.

Chapter 2 Interpretation

5 Meaning of “trigger event” and “acquirer”

(1)For the purposes of this Act, a “trigger event” takes place when—

(a)5a person gains control of a qualifying entity, as set out in section 8, or

(b)a person gains control of a qualifying asset, as set out in section 9.

(2)In this Act “acquirer” means the person who gains the control referred to in
subsection (1) (or in relation to a trigger event that has not yet taken place,
would gain that control).

6 10Notifiable acquisitions

(1)The Secretary of State may make regulations for the purposes of this section
(“notifiable acquisition regulations”).

(2)A notifiable acquisition takes place when—

(a)a person gains control, by virtue of one or more of the cases described
15in subsection (2), (5) or (6) of section 8, of a qualifying entity of a
specified description, or

(b)a person acquires a right or interest in, or in relation to, a qualifying
entity of a specified description and as a result the percentage of the
shares or voting rights that the person holds in the entity increases from
20less than 15% to 15% or more.

(3)But a notifiable acquisition does not take place if complying with the
requirement to give a mandatory notice under section 14(1) in relation to the
gaining of control, or the acquisition of the right or interest, would be
impossible for the person within subsection (2).

(4)25A description of qualifying entity that is specified must include provision that
the entity carries on activities in the United Kingdom which are of a specified
description (whether or not it also carries on other activities).

(5)Notifiable acquisition regulations may—

(a)amend this section in relation to the circumstances in which a notifiable
30acquisition takes place or does not take place,

(b)make provision for exemptions by reference to the characteristics of the
person within subsection (2),

(c)make consequential amendments of other provisions of this Act.

(6)Notifiable acquisition regulations may by virtue of subsection (5)(a) include, in
35particular, provision about the circumstances in which the gaining of control
of a qualifying asset of a specified description is a notifiable acquisition.

(7)A description specified under subsection (6) may only include qualifying
assets within section 7(6) if it includes provision that any such asset is used in
connection with activities carried on in the United Kingdom which are of a
40specified description (whether or not it is also used in connection with other
activities).

(8)Subsections (3), (4) and (7) of section 8 (interpretation of references to holding
a percentage of shares or voting rights) apply for the purposes of subsection

 (2)(b) above as they apply for the purposes of subsections (2) and (5) of that
section.

(9)In this section “specified” means specified in notifiable acquisition regulations.

7 Qualifying entities and assets

(1)5This section defines “qualifying entity” and “qualifying asset” for the purposes
of this Act.

(2)A “qualifying entity” is (subject to subsection (3)) any entity, whether or not a
legal person, that is not an individual, and includes a company, a limited
liability partnership, any other body corporate, a partnership, an
10unincorporated association and a trust.

(3)An entity which is formed or recognised under the law of a country or territory
outside the United Kingdom is a “qualifying entity” only if it—

(a)carries on activities in the United Kingdom, or

(b)supplies goods or services to persons in the United Kingdom.

(4)15A “qualifying asset” is (subject to subsection (6)) an asset of any of the
following types—

(a)land,

(b)tangible (or, in Scotland, corporeal) moveable property,

(c)ideas, information or techniques which have industrial, commercial or
20other economic value.

(5)Examples of assets within subsection (4)(c) include—

(a)trade secrets,

(b)databases,

(c)source code,

(d)25algorithms,

(e)formulae,

(f)designs,

(g)plans, drawings and specifications,

(h)software.

(6)30Land or moveable property situated outside the United Kingdom or the
territorial sea, or any asset within subsection (4)(c), is a “qualifying asset” only
if it is used in connection with—

(a)activities carried on in the United Kingdom, or

(b)the supply of goods or services to persons in the United Kingdom.

8 35Control of entities

(1)For the purposes of this Act, a person gains control of a qualifying entity if the
person acquires a right or interest in, or in relation to, the entity and as a result
one or more of the cases described in this section arises.

(2)The first case is where the percentage of the shares that the person holds in the
40entity increases—

(a)from 25% or less to more than 25%,

(b)from 50% or less to more than 50%, or

(c)from less than 75% to 75% or more.

(3)In subsection (2), the reference to holding a percentage of shares is—

(a)in the case of an entity that has a share capital, to holding shares
comprised in the issued share capital of the entity of a nominal value
(in aggregate) of that percentage of the share capital,

(b)5in the case of an entity that does not have a share capital, to holding a
right to a share of that percentage of the capital or profits of the entity,

(c)in the case of a limited liability partnership, to holding a right to a share
of that percentage of any surplus assets of the partnership on a winding
up.

(4)10For the purposes of subsection (3)(c), to the extent that rights to share in any
surplus assets of the limited liability partnership on a winding up are not
expressly provided for, each member of the partnership is to be treated as
holding the right to an equal share of such assets.

(5)The second case is where the percentage of the voting rights that the person
15holds in the entity increases—

(a)from 25% or less to more than 25%,

(b)from 50% or less to more than 50%, or

(c)from less than 75% to 75% or more.

(6)The third case is where the acquisition is of voting rights in the entity that
20(whether alone or together with other voting rights held by the person) enable
the person to secure or prevent the passage of any class of resolution governing
the affairs of the entity.

(7)In subsections (5) and (6), a reference to the voting rights in an entity is—

(a)in the case of an entity that has a share capital, to the rights conferred
25on shareholders in respect of their shares to vote at general meetings of
the entity on all or substantially all matters,

(b)in the case of an entity that does not have a share capital, to the rights
conferred on members to vote at general meetings of the entity on all or
substantially all matters,

30and, in the case of an entity that does not have general meetings at which
matters are decided by such votes, includes any rights in relation to the entity
that are of the equivalent effect.

(8)The fourth case is (subject to subsection (9)) where the acquisition, whether
alone or together with other interests or rights held by the person, enables the
35person materially to influence the policy of the entity.

(9)Subsection (8) does not include a case where the person already holds any
interest or right that enables the person materially to influence the policy of the
entity.

9 Control of assets

(1)40For the purposes of this Act, a person gains control of a qualifying asset if the
person acquires a right or interest in, or in relation to, the asset and as a result
the person is able—

(a)to use the asset, or use it to a greater extent than prior to the acquisition,
or

(b)45to direct or control how the asset is used, or direct or control how it is
used to a greater extent than prior to the acquisition.

This is subject to section 11.

(2)In this section, references to the use of an asset include references to its
exploitation, alteration, manipulation, disposal or destruction.

10 Holding and acquiring interests and rights: supplementary

(1)Schedule 1 provides for particular cases in which a person is to be treated for
5the purposes of this Act as holding an interest or right.

(2)A person is to be treated for the purposes of this Act as acquiring an interest or
right (to the extent that the person would not otherwise be regarded as doing
so) where—

(a)the interest or right becomes treated as held by the person by virtue of
10Schedule 1, or

(b)the person is already treated as holding the interest or right by virtue of
that Schedule and something occurs in relation to the interest or right
which would be regarded as its acquisition by the person (including by
virtue of paragraph (a)) if the person was not already treated as holding
15it.

11 Exceptions relating to control of assets

(1)For the purposes of this Act a person is not to be regarded as gaining control of
a qualifying asset by reason of an acquisition made by an individual for
purposes that are wholly or mainly outside the individual’s trade, business or
20craft.

(2)Subsection (1) does not apply in relation to an asset that—

(a)is land, or

(b)falls within any of the following (as it has effect from time to time)—

(i)the Schedule to the Export of Radioactive Sources (Control)
25Order 2006 (S.I. 2006/1846),

(ii)article 4A or 9 of, or Schedule 2 or 3 to, the Export Control Order
2008 (S.I. 2008/3231),

(iii)Annex I or IV to Council Regulation (EC) No 428/2009 of 5 May
2009,

(iv)30Annex I to Regulation (EU) No 258/2012 of the European
Parliament and of the Council of 14 March 2012,

(v)Annex II or III to Regulation (EU) 2019/125 of the European
Parliament and of the Council of 1 January 2019.

(3)The Secretary of State may by regulations—

(a)35amend subsection (2) so as to add, vary or remove any asset or
description of asset,

(b)prescribe other circumstances, or descriptions of circumstances, in
which a person is not to be regarded for the purposes of this Act as
gaining control of a qualifying asset.

12 40Trigger events: supplementary

(1)If a trigger event takes place over a period of more than one day, or if it is
unclear when during a period of more than one day the event has taken place,
it is treated for the purposes of this Act as taking place on the last day of the
period.

(2)Subsections (3) and (4) apply if a person enters into an agreement or
arrangement that enables the person (contingently or not) to do something in
the future that would result in a trigger event taking place.

(3)For the purposes of this Act, entering into the agreement or arrangement does
5not necessarily establish that arrangements are in progress or contemplation
which, if carried into effect, would result in a trigger event taking place.

(4)The question of whether such arrangements are in progress or contemplation
(at the time of entry into the agreement or arrangement or subsequently) is to
be determined by reference to all the circumstances, including how likely it is
10in practice that person will do the thing that would result in a trigger event
taking place.

Chapter 3 Approval of notifiable acquisition

13 Approval of notifiable acquisition

(1)15A notifiable acquisition that is completed without the approval of the Secretary
of State is void.

(2)The Secretary of State may approve a notifiable acquisition by—

(a)giving a notification under section 14(8)(b)(ii),

(b)making a final order under section 26, subject to subsection (3),

(c)20giving a final notification under section 26.

(3)A notifiable acquisition, in relation to which a final order has been made, that
is completed otherwise than in accordance with the final order, is void.

Chapter 4 Procedure

25Procedure in respect of notifiable acquisition

14 Mandatory notification procedure

(1)Subject to subsection (2), a person must give notice to the Secretary of State
before the person, pursuant to a notifiable acquisition—

(a)gains control in circumstances falling within section 6(2)(a), or

(b)30acquires a right or interest in circumstances falling within section
6(2)(b).

(2)Subsection (1) does not apply if the Secretary of State has already given a call-
in notice, which has not been revoked, in relation to the proposed notifiable
acquisition.

(3)35A notice under subsection (1) is referred to in this Act as a mandatory notice.

(4)The Secretary of State may by regulations prescribe the form and content of a
mandatory notice.

(5)As soon as reasonably practicable after receiving a mandatory notice, the
Secretary of State must decide whether to reject or accept the notice.

(6)The Secretary of State may reject the mandatory notice on one or more of the
following grounds—

(a)5it does not meet the requirements of this section,

(b)it does not meet the requirements prescribed by the regulations,

(c)it does not contain sufficient information to allow the Secretary of State
to decide whether to give a call-in notice in relation to the proposed
notifiable acquisition.

(7)10If the mandatory notice is rejected, the Secretary of State must, as soon as
practicable, provide reasons in writing for that decision to the person who gave
the notice.

(8)If the mandatory notice is accepted, the Secretary of State must—

(a)as soon as practicable, notify each relevant person, and

(b)15before the end of the review period—

(i)give a call-in notice in relation to the proposed notifiable
acquisition, or

(ii)notify each relevant person that no further action will be taken
under this Act in relation to the proposed notifiable acquisition.

(9)20The “review period” is the period of 30 working days beginning with the day
on which the notification under subsection (8)(a) is given to the person who
gave the mandatory notice.

(10)In this section “relevant person” means the person who gave the mandatory
notice and such other persons as the Secretary of State considers appropriate.

15 25Requirement to consider retrospective validation without application

(1)This section and section 16 apply to a notifiable acquisition that is completed
without the approval of the Secretary of State and, accordingly, is void (see
section 13(1)).

(2)The Secretary of State must, before the end of the period of 6 months beginning
30with the day on which the Secretary of State becomes aware of the notifiable
acquisition—

(a)give a call-in notice in relation to the acquisition, or

(b)give a validation notice in relation to the acquisition to each relevant
person and notify those persons that no further action will be taken
35under this Act in relation to the acquisition.

(3)The effect of a validation notice given under this section or section 16 or 17, is
that the notifiable acquisition to which it relates is to be treated as having been
completed with the approval of the Secretary of State (and, accordingly, is not
void).

(4)40In this section “relevant person” means—

(a)the person who was required to give a mandatory notice to the
Secretary of State in relation to the acquisition (see section 14(1)), and

(b)such other persons as the Secretary of State considers appropriate.