The National Security and Investment Act 2021

Of the 866 notifications received in the Reporting Period, 43 were rejected by the ISU. Of those rejected, 23 (53%) were rejected because they were submitted as mandatory notifications when they were in fact deemed by the ISU to be voluntary (or vice versa).

This highlights the importance of careful analysis of both the control being acquired (whether constituting a trigger event for a mandatory notification under the Act) and the activities of the qualifying entity (whether they fall within the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (the Sensitive Sector Regulations). Choosing the correct form of notification first time will assist in limiting delays to transactions.

Approximately 77% of notifications received by the ISU during the Reporting Period were mandatory, demonstrating that many businesses are engaging with the Act and the notification process out of necessity. We are certainly finding that voluntary notifications tend only to be favoured in edge cases where there may uncertainty as to the application of the Sensitive Sector Regulations or a particular concern around national security risk factors.

In the region of 21% of notifications received by the ISU were voluntary. It isn’t clear from the Report what proportion of notifications were filed as voluntary notifications because they related to qualifying assets vs notifications relating to qualifying entities (e.g., where the parties were uncertain as to the applicability of the Sensitive Sector Regulations).

Fifteen retrospective validation applications were also received, for mandatorily notifiable acquisitions completed without prior necessary approval. However, no criminal or civil penalties were issued, nor criminal prosecutions concluded during the Reporting Period, which should give any parties needing to submit a retrospective validation notification some comfort.

The ISU took averages of 4/5 working days to accept both mandatory and voluntary notifications, and all notifications were either cleared or called-in within the 30-working day statutory time limit, demonstrating that the Government is efficiently handling notifications during the initial review stage and in line with their statutory obligations.

Of the notifications reviewed during the Reporting Period, only 55 (7.2%) were called-in for further assessment, and the rest (circa 93%) were cleared during the initial 30 working day review period. This suggests that the Government is using its powers under the Act modestly, seeking to minimise the impact of the Act on corporate transactions.

The Government has shown some willingness to call-in non-notified transactions for national security review. It called-in an additional 10 non-notified transactions using its market intelligence function. In addition, 17 of the total 65 call-ins (26%) resulted from voluntary notifications.

For 45% of the transactions called-in, the Government used the additional 45 working day period to review (on top of the standard 30 working day assessment period). Therefore, there is a not insignificant probability of this additional 45 working day period applying and this should therefore be factored into transaction timetables where a call-in is likely.

The Government cleared most transactions following call-in, with final orders imposed in 15 (20%) cases – with 5 of these resulting in prohibition or unwinding. One of these final orders was later revoked resulting in a final figure of 14 for the Reporting Period. This is slightly higher that the Government’s 2020 estimate in its Impact Assessment of around 10 remedies imposed per year.

Interestingly, we also saw 15 final orders published by the Government during the Reporting Period, which demonstrates the Government’s commitment to its transparency pledge.