New National Security and Investment Regime 11 November 2020
Introduction NSI Bill introduced by the UK Government on 11 November 2020 – undergoing legislative process Main feature – UK Government’s scope and powers to scrutinize transactions is wide ranging squirepattonboggs.com 2
Government intervention under the EA02 regime Public Interest Intervention Notice on CMA (s.42 EA02) if: reasonable grounds for suspecting that a “ relevant merger situation ” ( RMS ) has been created or that arrangements are in progress/contemplation which, if carried into effect, will result in the creation of a RMS; and RMS – either under s.23 or s.23A EA02 (relevant enterprise: e.g. military, dual use technologies, quantum • technology, computing hardware, artificial intelligence, cryptographic authentication technology, advanced materials) SoS believes it is/may be the case that one or more public interest considerations (including national security) is relevant to the consideration of the RMS. Triggers a CMA P1 review (on competition and the relevant public interest grounds) Special Public Interest Intervention Notice on CMA (s.59 EA02) if two or more enterprises must cease to be distinct Target and/or Buyer are a government contractor who holds or receives confidential defence- related information / or certain newspaper and broadcasting businesses (a “ special merger situation ”) SoS believes it is/may be the case that one or more public interest considerations (including national/public security) is relevant to the consideration of the special merger situation. Triggers a review on relevant public interest grounds only squirepattonboggs.com 3
New National Security Regime Reviewing broader range of transactions Trigger events: the acquisition of more than 25% of the votes or shares in a qualifying entity; the acquisition of more than 50% of the votes or shares in a qualifying entity; the acquisition of 75% or more of the votes or shares in a qualifying entity; the acquisition of voting rights that enable or prevent the passage of any class of resolution governing the affairs of the qualifying entity; the acquisition of material influence over a qualifying entity’s policy; the acquisition of a right or interest in, or in relation to, a qualifying asset providing the ability to: • use the asset, or use it to a greater extent than prior to the acquisition; or • direct or control how the asset is used, or direct or control how the asset is used to a greater extent than prior to the acquisition. squirepattonboggs.com 4
New National Security Regime (cont.) Mandatory notification regime Obligation falls on the acquirer (auction process – at point where single acquirer is found) Test – certain specified sectors and either (i) 4 trigger events in bold; or (ii) acquisition of 15% or more of votes or shares in qualifying entity (assists in deciding whether SoS reasonably suspects that the acquisition of material influence over a qualifying entity’s policy took place) Must be notified and cleared before completing – otherwise: Transaction will be legally void Heavy sanctions: 5% global turnover or £10m and criminal sanctions (fine/imprisonment up to 12 months). Voluntary notification regime Test – (i) trigger event (acquisition of entities or assets) and (ii) self-assessment: consider whether the transaction may be subject to call-in for a national security assessment using the Statement to inform decision (sets out areas of the economy and circumstances in which it expects national security risks to be more likely (will be changed as and when). squirepattonboggs.com 5
New National Security Regime (cont.) Proposed specified sectors 1. Civil Nuclear 10. Cryptographic Authentication 2. Communications 11. Advanced Materials 3. Data Infrastructure 12. Quantum Technologies 4. Defence 13. Engineering Biology 5. Energy 14. Critical Suppliers to Government 6. Transport 15. Critical Suppliers to the Emergency Services 7. Artificial Intelligence 16. Military or Dual-Use Technologies 8. Autonomous Robotics 17. Satellite and Space Technologies 9. Computing Hardware Public consultation until 6 January 2021 squirepattonboggs.com 6
New National Security Regime (cont.) Call-in power (full national security assessment) When? Following notification (mandatory or voluntary) SoS can also step in – retroactive powers If trigger event takes place after NSI Bill comes into force – 6 months after being aware of transaction and 5 years • after transaction completed If trigger event takes place between 12 November 2020 / date NSI Bill comes into force – • - If SoS became aware before NSI Bill comes into force: 6 months after it comes into force - If SoS became aware on/after NSI Bill comes into force: 6 months after being aware of transaction and 5 years after NSI Bill comes into force Test for call-in power to be exercised – reasonably suspects that (i) a trigger event has occurred/is in progress and (ii) the event has given rise or may give rise to a national security risk squirepattonboggs.com 7
New National Security Regime (cont.) Procedure/Timings Screening assessment – 30 working days Full assessment – 30 + 45 working days Decision to clear or to impose remedies (blocking/unwinding deals, reduction in a stake purchase etc.) – statutory test = balance of probabilities No CMA intervention (but SoS can intervene if competition remedies run contrary to national security interests) 70 – 95 call-ins per year (12 notices in total under EA02 regime) squirepattonboggs.com 8
Global Coverage Abu Dhabi Manchester Africa Office locations Atlanta Miami Brazil Regional desks and strategic alliances Beijing Milan Caribbean/Central America Berlin Moscow India Birmingham New Jersey Israel Böblingen New York Mexico Bratislava Palo Alto Turkey Brussels Paris Ukraine Cincinnati Perth Cleveland Phoenix Columbus Prague Dallas Riyadh Darwin San Francisco Denver Santo Domingo Dubai Seoul Frankfurt Shanghai Hong Kong Singapore Houston Sydney Leeds Tampa London Tokyo Los Angeles Warsaw Madrid Washington DC squirepattonboggs.com 9
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