UK Law and Practice Contributed by: Alex Stratakis and Marc Freedman, Van Bael & Bellis
2024 Call for Evidence On 18 April 2024, the government published its Response to the Call for Evidence launched at the end of 2023 to invite views from stakehold - ers (such as law firms, trade bodies, banks or investors, businesses operating in the manda - tory areas, and academic/research institutions) on the practical impact of the NSI regime. In its response, the government set out five key areas it would be focusing on in 2024 to enhance the regime (see below), and on 21 May 2024 it published updated guidance about the opera - tion of the NSI Act, including the following. • Publishing an updated Section 3 statement to provide more clarity on the factors relevant to exercising its call-in powers, with specific updates released on 21 May 2024 covering: (a) the circumstances in which certain acqui - sitions could be considered under the NSI Act; (b) how the government may consider technology transfer risks when reviewing asset acquisitions; (c) where the government may see risk from UK acquirers or acquirers that have previously been cleared through the NSI system; and (d) improved examples of how the govern - ment assesses target risk, acquirer risk and control risk. • Publishing updated market guidance that addresses stakeholders’ requests for further guidance on situations in which the NSI Act can apply to outward direct investment, and that provides specific information for uni - versities considering when to notify acquisi - tions to the Investment Security Unit (ISU) (the updates released on 21 May 2024 also include new examples).
Qualifying transactions include: • transactions involving the acquisition of a 25% or more stake in an entity in a key sec - tor; or • transactions where the acquirer increases their level of interest exceeding certain thresholds (eg, from 25% to more than 50%). A qualifying entity is one that carries on activi - ties in the UK or supplies goods or services to persons in the UK. There are no turnover or share of supply thresh - olds under the NSI regime, so any planned acquisition in one of the 17 mandatory sectors will require approval from the UK secretary of state before it can be completed. Otherwise, such an acquisition will be void, and civil and criminal penalties may be enforced. Voluntary Notification For acquisitions involving entities outside of the 17 sectors, the parties may choose to voluntarily notify if the transaction may give rise to national security concerns. Where the transaction is not notified, the secretary of state has the power to “call it in” for NSI assessment. Any transaction can be caught under the ”call-in” regime, as there are no identified sectors. The voluntary regime and the call-in power also apply to asset deals resulting in the acquisition of land, tangible movable property and intellec - tual property. However, it is likely that such a transaction will be called in if it relates to one or more of the 17 sectors under the mandatory regime (otherwise the asset deal in question would be less likely to raise a national security concern).
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