National Security and Investment Bill

Baroness Bowles of Berkhamsted Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 4th February 2021 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, this Bill is about intervention when there is a transfer of control that puts at risk our security, and possibly vital supplies and critical infrastructure. I recall concern about vulnerability in the Economic Affairs Committee’s 2017 inquiry and then report, The Price of Power, regarding electricity markets. Indeed, concerns do not have to relate to hostile foreign Governments, and that raises questions about how geographic lines will be drawn for the purposes of this Bill and what part trade agreements play. Will measures under the Bill constitute security measures that trump trade and investment agreements? How far is the Bill directed at not losing technology and R&D capacity more generally, given that undertakings during takeovers are often useless?

The Bill before us has one basic element, the notion of a trigger event relating to control, and then it is rather like a puzzle book. Has the Secretary of State got every possibility covered? Schedule 1 is particularly entertaining to try and design around, but what does it really mean in practice? One thing seemingly left out is an export-only manufacturer. I suppose that export licences would cover security issues, but could that not still be a loss of knowhow? While on that subject, why are licences or intellectual property rights not explicitly mentioned in Clause 7, and perhaps other choses in action—or are they “things in action” nowadays?

If one accepts the “trigger” notion, it becomes an exercise in how to make it work and where the burdens lie. For one thing, it will require people with a wide range of knowledge, including in cutting-edge science and engineering, to do the scrutiny. Notifications will hit at a rate of more than four a day under the Government’s estimate, and may be much higher if there are lots of precautionary submissions. How much time does the Minister consider it takes an individual to scrutinise technology and understand the ramifications? How much reliance depends on the notifier, and what level and volume of information and data will be needed in a notification? A real problem is not where it is already known that there are security implications, but where that is a theoretical potential.

I have experience of battling over secrecy restrictions on patent applications, when key words would trigger a secrecy order because that was all the designated official could understand. Words with dual use implications such as “radar”, “laser” or “spread spectrum” in their time almost always gave spurious, annoying triggers—spurious because when it was known that there were security implications, that was made clear in advance, and annoying because it would be several months before the “all clear” from the MoD review would come back. An insecticide that could be nerve gas famously slipped through. Can we be assured that arts graduates will not be in charge of analysing scientific information? Let us hope that that is a thing of the past, but the scope of this framework Bill has raised concern from universities faced with how to comply with yet unknown notification requirements and the implications of delays when there are short timescales for concluding competitive contracts with sponsors for research.

The unfiltered sectoral scope is presently staggering. Looking at the list of materials, which is of particular interest to me as a solid-state physicist, apart from it being huge, I wondered how on earth people would know at early-stage developments whether something was notifiable if there had not been a specific notifiable type of target use? When designing materials to provide protection in car crashes, would their use in armaments always spring to mind? How early does speculative usefulness count? “Speculative” is a difficult concept in an academic world that demands hard evidence to substantiate claims.

Call-ins do not commence until there is a statement about how powers will be exercised. It is expected that the statement will narrow things to a more manageable scope, but Clause 1(8) says that statements are not actually limiting. Will the Minister confirm that that is meant as an emergency power rather than a regular fallback?

Once the Bill passes, there is a Damocles’ sword over everything in the 17 sectors, which is a problem for businesses needing to plan ahead for investment sources. The statement is all important and I would like to know more about it. Is it to be one big statement covering everything or is it going to be staged in some way, and why does Parliament get a vote only at the end, with no advance consultation or ongoing oversight of any kind? This is an instance where information on the scope of the statement is vital before legislation is passed and before consultation on a draft statement. Can the Minister give an example of what is envisaged in any area to enable a feel for the type of narrowing or detail under consideration? I am not against the notion of interventions, but the Bill should be more than notion and compulsion, and I hope that it is possible to include more direction and balance.

National Security and Investment Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage & Lords Hansard
Tuesday 2nd March 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, there are very wide-reaching powers in this Bill and, to start where I ended my Second Reading speech:

“I am not against the notion of interventions, but the Bill should be more than notion and compulsion, and I hope that it is possible to include more direction and balance.”—[Official Report, 4/2/21; col. 2364.]


That is exactly the aim of Amendment 1. It aims to be positive rather than negative, by defining an overarching objective. One might debate whether it could be slightly different, but the idea is to have an overarching objective to safeguard national security in respect of economic and social harm. “Social harm” is a very broad term. Recognising that broad scope, it specifically lists that the Secretary of State must

“have regard to the effect … on technology investment… the research and innovation environment … and business opportunities for small and medium-sized enterprises.”

I can almost hear the Minister assuring us that the Secretary of State will have regard to a lot of things, and that would be right, but it is also necessary to make sure that there are correct messages given by the Bill—messages that endure and give confidence to the business sectors most likely to suffer, perhaps entirely unnecessarily, from rumours, concern or finger-pointing from competing jurisdictions.

If we take the starting point that the Bill has good intentions, that there are similar moves internationally, that we have perhaps been too slack in the past, and that there are inevitably burdens arising from both notification requirements and notification concern, that will lead to unnecessary voluntary notification. One wonders if there are not more mechanisms that can give an all-clear signal.

Maybe some will become clearer or develop over time but, wherever that is possible, as we work through the Bill, I am mainly looking to see what incremental steps can be made towards certainty. That can be helped right at the start of the Bill by using the combination of broad objective plus a list of the most sensitive “have regard” matters. This appears in various other pieces of UK legislation, not least in the financial services legislation that is occupying both my time and that of the noble Baroness, Lady Noakes, on the days either side of this sitting. Therefore, I hope that the Minister sees the advantage of taking that approach here.

[Lord Robathan (Con)]

My Lords, I will disappoint my noble friend Lady Noakes by making a comment that is more a Second Reading comment than anything else. But it is important we see this Bill in context. The genesis of this Bill is, I assume, largely about Chinese influence and the debates we have had about Huawei and so on. I want to raise only one issue on the context; it is the way in which British commerce and the economy are so intricately and deeply linked with China. Is that globalisation? I am not sure.

We all know how much we buy now comes from China on the one belt, one road programme or elsewhere. The interdependence between western consumers and economies and the Chinese economy is extraordinarily deep-rooted. I am going to use a little example—a silly one, you may say. Old-fashioned fellow that I am, I try to buy British if I can. Looking for a butter dish online, I bought quite an attractive one from the English Tableware Company. I thought that was pretty safe, until the moment it arrived. I turned it over and found it was made in China, which seems quite strange to me. I took it up with the company, and it came back to me saying its products were all ethically sourced and it had checked the suppliers. Of course, we have no idea about the working conditions or possibility of slave labour in Chinese factories.

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[Lord Lansley (Con)]

My Lords, we are grateful to my noble friend Lord Leigh of Hurley for his amendment, which is a helpful exploration of this issue. I rather enjoyed the way he introduced it as well, although I must say that the MP who was quoted by Isabel anonymously was clearly not in government in coalition.

I have an amendment of my own in this group; I am grateful to the noble Lord, Lord Bilimoria, for signing Amendment 8 in my name. I shall talk to that amendment and to Amendments 3 and 4, tabled by my noble friend, and leave Amendments 9 and 10 to others, although I think that both add a little to probe the way in which Ministers propose to structure their statement.

Amendment 8 is designed to clarify what constitutes the Secretary of State becoming aware of a trigger event. In the absence of a further definition, a Secretary of State might claim not to be aware in circumstances where any reasonable person would say, “You should have been”. It is a belt-and-braces operation.

What does it mean? I looked to the relevant comparator in the Enterprise Act. The equivalent, in Section 24 of that Act, is whether something has been made public, which is defined as:

“means so publicised as to be generally known or readily ascertainable”.

I simply borrowed that language. Amendment 8 would not say that those are the only circumstances in which the Secretary of State becomes aware, but the Secretary of State should not be able to claim that he was not aware in circumstances that have generally been made public. The purpose of this amendment is to explore what “becoming aware” really means.

Reverting back to Amendments 3 and 4 and the question of “or contemplation”, I think the drafting derives, if it derives from anywhere, from Section 33 of the Enterprise Act 2002 and the question of a merger reference. It is when the Competition and Markets Authority

“believes that it is or may be the case that … arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation”,

so contemplation exists in statute.

The guidance issued by the Competition and Markets Authority on this, published most recently in December 2020, said that “at phase 1”, which colleagues will recall is the earliest investigatory phase,

“the CMA will generally consider that ‘arrangements are in progress or in contemplation’ for the purposes of section 33 of the Act if a public announcement has been made by the merger parties concerned.”

When my noble friend defines “contemplation”, he does so accurately, but that is not how the Competition and Markets Authority has interpreted “contemplation”. It means somebody firmly considering such a thing, which Ministers may well be thinking of in this context, but it is important to make that clear in the guidance.

The Competition and Markets Authority and the Enterprise Act do this for mergers, which are defined acquisitions. Here, we are talking of a much wider scope of acquiring activity in relation to intellectual property, technology, assets, land and minority stakes. A merger control has bitten on 15% or thereabouts, in certain circumstances, but it is a much wider breadth of activity. If contemplation of such acquisitions is to be included, Ministers at the very least have to define it in the guidance in a way that corresponds to the way in which “contemplation” has been interpreted by the CMA for mergers.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, this group contains a range of amendments aimed at improving certainty which I broadly support. In particular I favour the removal of the expression “contemplation” because it is a broad expression that in my understanding, if it is not reinterpreted through guidelines, could range from not even a twinkle in the eye to serious preparations.

When I looked at this, it seemed that the first expression of “arrangements are in progress”, followed later on in the clause by

“which, if carried into effect”,

is already quite broad because it poses the notion that the “arrangements” do not have to be substantial enough to have an effect yet, only if carried through. That seems to cover quite a preliminary range of stages. Even if the Minister does not accept that proposition of deletion, is there case law that can point to what “contemplation” means? The noble Lord, Lord Lansley, has provided some useful indicators. I thought about “in contemplation of matrimony to a given individual”, which is accepted in wills as a means to overcome a negation of a will through marriage, but that will itself is a legal document defining intent. That would not necessarily be the case for just a random contemplation.

From my various adventures as a patent attorney I know better the interpretations of “serious preparations” or “effective and serious preparations”. They are used in patent and trademark law, which has received attention and clarification—or rather verification—in courts. If we have to use something, I prefer to use something akin to those terms, although this shows that it is quite difficult to define when a line is crossed.

As has already been raised, the intention of “contemplation” or anything else could be clarified by guidelines, but if that route is needed, is it not just simpler to delete “contemplation” and explain in guidelines what “arrangements are in progress” is intended to cover? To me, that sounded exactly like what the CMA had done: it had taken “arrangements are in progress” or “contemplation” as one and the same thing and then defined that, which implies something much further down the track than simple contemplation. I am therefore on the side of those who think that the wording just looks too vague, and if it has precedent elsewhere, it needs to be clarified that it does not mean anything more substantial. The CMA has pointed the way to showing that the word is not very much use.

I also support Amendment 8 relating to publication, which aims to give some certainty about when the Secretary of State can be regarded beyond doubt as having been aware of a trigger event. As the noble Lord, Lord Lansley, explained, that reflects the wording of the Enterprise Act and it would help to reduce unnecessary notifications.

[The Deputy Chairman of Committees (Lord Caine) (Con)]

Lord Vaizey of Didcot. No? We will come back to him. I call the noble Lord, Lord Clement-Jones.

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[Lord Lansley (Con)]

My Lords, I am glad to follow the noble Lords, who presented a compelling case that mergers of companies should not be sought to be unwound after five years. However, that is not how I interpret the effect of the legislation.

For Amendment 7, we have to direct ourselves to Clause 2 and the structure of Clause 2(2). It requires that a call-in notice given by the Secretary of State cannot 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”.

Noble Lords will recall that I was interested in the question of when the Secretary of State “becomes aware”. My noble friends have so far rebuffed the idea that we can define “becoming aware” rather better.

In the case of a merger, particularly between listed companies, but between companies of the kind so ably described by my noble friend, the Secretary of State should become aware of it, because it would appear to be publicly known. The Secretary of State could become aware because the parties to the transactions could themselves provide notification to the Secretary of State. Either way, the question of five years does not arise. That arises only in relation to circumstances where the Secretary of State does not become aware.

It is not a matter of people being exposed to an uncertainty; they can remedy the uncertainty by notifying the Secretary of State. That is why we are going to get a lot of notifications and, to some extent, Ministers accepted that when they revised the number of notifications they are anticipating from the original White Paper, which I think was a few hundred, to about 1,800. I think that is partly anticipating that there will be such notifications.

The circumstances we are talking about are probably not mergers but the trigger events relating to assets. As we previously discussed, this involves quite a wide range of acquisitions of assets including technology, transfers of technology, intellectual property or even potentially land that people did not necessarily understand was sensitive. The five years is not an irrelevance because, as Clause 2(2) says, there is a five-year period which would apply in circumstances where the Secretary of State had not become aware of the trigger event.

At this point, I want to ask my noble friend a question. In so far as the trigger event relates not only to the acquisition and the entity or asset but to the understanding of the nature of the acquirer—I keep coming back to this question of who the acquirer is; we talked about it in the second debate—can the Secretary of State apply the five years in relation to the nature of the acquirer being somebody other than the person whom the Secretary of State thought it was at the point at which the Secretary of State became aware of an acquisition? That is when the five years really begins to bite and the uncertainty begins to become more manifest.

That is true not only because the acquirer might be somebody who the Secretary of State did not understand to be hostile but who turned out to be, but because when we get to Clause 10 and we understand the implications of Schedule 1, which Clause 10 brings in, a person may be held to have acquired an interest or right in relation to an asset or entity by virtue of things such as the fact that they are connected persons, they are in a common purpose or they have an arrangement, all of which might not have been evident in public or to the Secretary of State when the Secretary of State saw the acquisition in public material. Indeed, maybe he did not see it at all but became aware of this interest only at a later stage.

There is a reason for the five years being there, because two years is not very long in relation to these kinds of acquisitions. The Minister might entirely reasonably say that five years is not without precedent: there is five years in the French, Italian and German regimes. With this Government, if it is good enough for the Europeans it is good enough for us, as we often say. However, leaving that to one side, we have to be aware that understanding who is in a common purpose, what is the nature of arrangements that might not have been disclosed and what is their nature in relation to assets, not just mergers, gives one a reason to think hard about the circumstances in which the Secretary of State might have to intervene, even though a significant period of time has elapsed. For those reasons I am inclined to live with five years, on the strict understanding that, to get rid of uncertainty, people make a voluntary notification and then six months is the limit.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, it is always very interesting to follow the noble Lord, Lord Lansley. He is approaching this partly in a similar way to me and partly in a different way. I was, and still am, attracted to the notion of trying to get this time of uncertainty down from five years to two. Part of what I would say to the noble Lord is that, if it is going to take five years to work out who might actually have bought something, that is something we should look at in its own right. If you cannot work out whether somebody is hostile and they have had it for five years, you have missed the boat if it is a question of whether they have learned the technology and found out things you do not want them to find out.

I would be interested to hear from the Minister the reasoning behind the length of the period. It could not really be due to a workload of investigating, because one must presume some sort of steady state pipeline with adequate staffing, but how much of it is fear that something new is not recognisable as having a security application until some time later. That thought was going through my mind: was there fear about missing things? This goes back to one of the issues I flagged at Second Reading about sifting being done by the right kind of skilled people—those who have the right kind of applied science or engineering knowledge, plus knowledge of potential usage in national security fields.

I have to say, these things are not necessarily all that obvious. I have experience of working as a patent attorney in the field of defence. I have worked with people whose job it was to invent—put two and two together and have something inventive at the end of it. If you work in a field where those kinds of things are deemed inventive, you will be very short of the people who have that kind of knowledge because, for the main part, they will probably want to be involved in more interesting and economically useful things than participating in what seems to be an overwide fish-sorting process, as it has been termed. I am turning this back to the Minister. On volume, if you cast the net wide, will you have sufficiently skilled people to be able to do the sorting, or will you find that important fish get missed? Will you then be trying to do things to backtrack on what has not been done or give yourself more time to do things?

That is a slightly different take. I know that there are some safeguards in there, but five years is quite a long time to live with uncertainty. If that uncertainty comes about because of ownership, one should sort the ownership or shareholding issues; I am actually among those people who think that we should have a lot more transparency on those kinds of things.

[Lord Fox (LD)]

My Lords, in his excellent intervention, the noble Lord, Lord Hodgson, started out by calling for clarity. We need some clarity on the wording of this part of the Bill because a number of different interpretations have emerged. I must confess, my interpretation is similar to that of the noble Lord; by the way, we would seem to be backed up by the Law Society, which took the same view. If the Government’s intention is something different, some different words need to be used to put that forward.

Assuming that, to start with, the intention was as the noble Lord, Lord Hodgson, set out, his counter to that was very clear. I have been involved in lots of what is known as integration, which involves bringing two companies together when one has bought another. Five years is well past the point at which you would find it very difficult to unmake that company. Indeed, the entire product life cycle in the sort of industries we are talking about here is probably about two years, so they will have marched through two and a half product life cycles by the time the five-year period expires.

In a way, I hope that the Government’s intention is more closely aligned to that of the noble Lord, Lord Lansley. If that is the case, I have similar thoughts to the noble Baroness, Lady Bowles. How long do you need to leave the stable door open before the horse has definitely bolted? To me, five years seems much too long for that bolting to occur; two years is probably long enough in that respect. However, if, on the other hand, the Government’s intention is to offer an opportunity for 20:20 hindsight—in other words, the world changes and, looking back over our shoulder, that deal five years ago now does not look like such a clever deal for the nation and we want to unmake it—that is clearly unfair on investors and others but might perhaps be fair to the country.

We need a real understanding of what the Government’s intention was, and the Government need to understand that their intention needs to be articulated in a way that the outside world can understand.

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I broadly support this amendment, although I am also interested in what happens after a statement is declined by Parliament. Statements take effect immediately and things already done under them are not revoked, even if Parliament votes one down, and I did not think that it was entirely clear whether there was anything to stop a new statement being made immediately, because the Secretary of State is under an obligation only to conduct

“such consultation as the Secretary of State thinks appropriate”.

Could they consider that it is appropriate to do none if there has been something tantamount to an exactly equivalent previous consultation?

National Security and Investment Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Tuesday 9th March 2021 Grand Committee

[Lord Vaizey of Didcot (Con) [V]]

My Lords, Amendment 15 and other subsequent amendments seek to bring in an exemption from the mandatory filing requirement for acquisitions and investments by entities that are ultimately controlled by UK nationals or nationals from certain countries allied to the UK. It is important to stress that this is to exempt companies from the mandatory filing requirement, not from having to file at all.

The Bill currently provides that the mandatory filing requirement applies equally to all investors, despite the fact that the Government have acknowledged that UK investors are inherently less likely to give rise to national security concerns. A more targeted and proportionate approach, which would better reflect where national security risks are most likely to lie, would be to exempt from the mandatory filing requirement acquisitions and investments by UK nationals or entities that are ultimately controlled by UK nationals.

In addition, investors from countries which are closely allied to the UK, such as Australia, Canada, New Zealand and the US, plus any other country subsequently specified by the Secretary of State, should also be exempt from mandatory filing requirements for the reasons I have already stated. That is the thinking behind my Amendment 95, which is included in this group. To the extent that national security risks arise in relation to any such transaction, the Secretary of State would still retain the power to call in a qualifying transaction for review. As I say, the exemption would relate solely to the mandatory filing requirements.

Amending the Bill in this way would also better align the UK’s regime with those of other countries, such as the US and Australia, which I have already mentioned. I can understand why the Government may wish to appear agnostic when it comes to providing exemptions to UK nationals and friendly countries. While there is no doubt that, for example, investments from China in sensitive sectors would come under close scrutiny under the new regime—no one should pretend otherwise—it is important to bear in mind that only four of the 12 national security interventions under the existing regimes have involved Chinese investments.

It is important for me to acknowledge that the Government have intervened in eight transactions that involved investors from countries that have historically been allies, such as the US, Canada, Italy and Germany; they extracted undertakings from those investors to protect UK national security interests. A consistent theme in those interventions, in addition to the usual concerns about access to sensitive data, has been the Government’s interest in ensuring continuity of supply to critical services to government and to maintain strategic capabilities. Such concerns, I acknowledge, are effectively nationality-agnostic, because they go to ensuring that critical capabilities, skills and manufacturing are maintained in the UK and not moved abroad. As a result, it is likely that in particularly sensitive sectors we will see the Government calling in transactions involving investors from so-called friendly countries and imposing remedies under the new regime. The Government can, via regulation, exempt certain acquirers from notification requirements but no investors or classes of investor are currently exempt. Nevertheless, these interventions happened before the Bill was introduced, so I do not believe that they undermine my point—namely, that friendly countries and UK investors should be exempt from the mandatory filing requirement, which will not exist until the Bill is passed.

I looked at the evidence given to the Bill Committee in the other place and was particularly struck by two interventions from witnesses. One was from Dr Ashley Lenihan from the London School of Economics, who said that for the legislation to cover domestic investors would be “truly rare” in comparison to similar legislation in other countries and, importantly, that the inclusion of domestic investors will

“lead to a much larger volume of mandatory notifications than most other national security FDI regimes”.—[Official Report, Commons, National Security and Investment Bill Committee, 24/11/20; col. 33.]

This brings out the point that was a theme of our debate on our first day in Committee and at Second Reading, which is that the Government have wildly underestimated the number of notifications they expect to get. As I say, I think we are all united in wanting to see this legislation passed, but we all want to see it passed in a form that is workable, does not overwhelm the new unit that the Government are setting up and does not put off investors by placing too onerous burdens on them.

In addition, other evidence given to the Bill Committee in the other place in the same session included that of Michael Leiter, a lawyer from Skadden Arps, a US law firm. He said that including domestic investors “is probably not wise”. He went on:

“I think trying to take a slightly smaller bite of the apple and not including current UK businesses in the scheme would be well advised.”—[Official Report, Commons, National Security and Investment Bill Committee, 24/11/20; col. 42.]


So I pray in aid those two experts in making the point that this amendment in no way undermines the regime that the Government propose to bring in, but it does make it a slightly more practical approach as this legislation beds down. Indeed, Mr Leiter pointed out later that the Bill can still catch transactions in which the ultimate actor may be foreign, because the unit that the Government are setting up can still look at the ultimate parent or, indeed, at a follow-on transaction.

I understand why the Government may want the legislation to pass in its current form—to have a belt-and-braces approach and to avoid people trying to hide behind a UK investor or a friendly foreign investor—but in my view the Government will still have powers to call in such transactions if they believe that this is the case. I beg to move.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I am grateful to the noble Lord, Lord Vaizey, for introducing his amendments and explaining some issues that I agree with, such as whether the Government are trying to make a failsafe, will it catch too many people and whether there will be too much to do. Although I understand that there may be different levels of concern, depending on the relationship with the country of the acquirer, I do not fully support the amendments in this group.

Where there are already sensitive industries, especially related to defence, who owns them matters in the sense of whether they are fit and proper for that kind of industry. Those considerations can apply within the UK as well as outside so, at some point, they have to be looked at. The question is whether they should be within the same regime or left to other operations that, the Government have considered, do not necessarily pick up everything.

My experience suggests that, in most instances, companies already used to dealing with sensitive matters would already be alert to what might not be desirable, and that it would either not happen or not happen often, but that does not mean that there should be no way of acting when it does. Therefore, they should all be included within this generic framework.

The Bill will apply to more companies or interests than companies used to dealing with sensitive matters, as I have just called them. Quite a lot still looks speculative, so I wonder whether there is, or in due course might be, further subdivision where certain geographies and industries might have different thresholds, depending on how likely they are to be particularly sensitive.

There will certainly be instances where the ownership interests of Five Eyes countries or other allies are of less or maybe no concern, but that may not always be the case if the security of supply or knowledge base is threatened. There are examples in the defence industry where, following takeovers by US corporations, research has been closed down, leaving only certification, assembly or supply of parts as the UK activity. This has led to a serious loss of forward vision and an undermining of the knowledge base, as well as other issues, such as access to technology. Sometimes that might be accepted, but not always.

It is one thing to recognise that we do not—indeed cannot—stand alone on defence issues, but quite another to accept, always and without review, what might be serious diminution or removal of all active participation. Therefore, although I expect the results of reviews to be different for different categories of acquirer, I do not see how there can be any blanket exclusion at the initial filtering stage. I am very interested in how different thresholds may play a part in reducing the number of transactions that would have to be filtered.

[Baroness Noakes (Con)]

My Lords, my first instinct was to say that the amendments in the name of my noble friend Lord Vaizey are obviously correct. I am sure that the majority of cases that would threaten our national security will involve foreign actors and, like him, I am concerned about the volumes of notifiable transactions.

However, I think that there might be circumstances in which the powers in the Bill could appropriately be used in respect of wholly UK companies. In that respect, I agree with the noble Baroness, Lady Bowles of Berkhamsted. For example, large company A may have a monopoly or near monopoly in providing something critical to our security. Tiny company B may have developed a new technology, which not only achieves a better result in the light of emerging risks, but at a fraction of the price. If company A acquires control of company B, it can kill the new technology and keep its monopoly profits on its old products. Sometimes, large companies acquire smaller ones to avoid disruption to lucrative markets, rather than to exploit their innovations. I do not think it would apply often, but it is a good reason not to restrict the Secretary of State’s powers in the Bill.

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[Lord Leigh of Hurley (Con)]

My Lords, I will speak to Amendment 17, which is in my name. I thank the noble Baroness, Lady Hayter, for her comments in respect of her amendment, which might actually be a better amendment than mine but none the less would achieve much the same thing. She probably does it in a more elegant way, but the purpose of my amendment is to understand the logic here and to persuade my noble friend the Minister that he should revert to 25% throughout.

The mandatory notification obligation in Clause 6(2)(b), which the noble Baroness, Lady Hayter, wants to delete, is triggered as a result of acquiring over 15% of shareholding or voting rights. In paragraph 52 and elsewhere, the White Paper specifies 25% but forecasts 15% for notifiable acquisitions. Accordingly, it is not, and is not intended to be, consistent with Clause 8, as the noble Baroness said, but that leads us into problems. Let us try to walk through this. It is complicated.

As I read it, Clause 6 is there so that the Secretary of State is given a mandatory notification for them to consider whether a trigger event has happened. Let us look at what a trigger event is, then. For that, we have to rely on Clause 8 to see under what definitions a people has gained control. Clause 8 lists four situations, three of which are where the shareholding is 25% or more. That is fine, but that clearly does not apply in a 15% situation. So you have to rely on the fourth situation, which is set out in Clause 8(8), which bites because it is the scenario where there is the ability, alone or with others,

“materially to influence the policy of the entity.”

Therefore, if an investor goes from, say, 14% to 20%, a lot of work has to be undertaken to see whether that person can materially influence the policy. If the threshold was 25%, there would be no need to do this. So given that it is most unlikely that a sub-25% shareholder can materially alter the policy—more importantly, this will be hard to determine in practice, as the noble Baroness, Lady Hayter, said—are we not creating an unnecessary problem for ourselves? What does “materially influence the policy” mean anyway? Which policy? All policies? Dividend policy? Maybe. Hiring and firing policy? Most unlikely. Again, this will lead to consternation and commercial agreements on shareholders’ rights having to be implemented, which will be hard to negotiate because, when you enter this sort of area, there will be uncertainty over whether you can materially alter policy.

In my plea for certainty and clarity, can we make it 25% throughout? The risk of a 15% shareholder throwing their weight around to demand that action be taken to change a policy that would be against our national interest is somewhat remote. I suggest that, with a 15% threshold, there will be significantly more cases to consider, the overwhelming majority of which will not have national security implications. The current filing threshold of 15% is significantly below the thresholds used in a number of other major foreign direct investment regimes. France’s is 25%, which the amendment proposes, and Canada’s is 33.3%. I note that my noble friend Lord Vaizey is not due to speak on this group, unfortunately, but if he did I am sure that he would continue to encourage the Minister to look to Canada rather than France, which is perhaps a natural progression.

I am aware that some countries have a 15% threshold, but they are not jurisdictions seen as international business headquarters or centres of international business in the same way as we are, and we have to remember that there is a difference. Considering the volume of transactions, it will even, I suggest, lead to transactions that pose a national risk being overlooked because of the volume generated by this very low, 15% threshold.

While we are on this clause, can the Minister help me with Clause 6(3), which is relevant to the clause we are debating? It states:

“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).”


What does “would be impossible” mean? I have asked around, and no one I have asked can be sure. Is this when a public company’s shareholder trips over 15%? What does “complying … would be impossible” mean? Could we all argue that it is impossible, give all sorts of reasons unspecified and that is the end of it? If much, much better brains than mine cannot understand the clause, it must need amending. I cannot amend it because I do not know what it is trying to achieve, but it cannot be good law to have clauses which are not immediately intelligible to, if not the layman, then the reasonably well-informed reader.

The whole of Clause 6 is difficult. It talks about regulations we have not seen and then gives power for those regulations to be amended at will under subsection (5). I think subsection (5) is where a white list is introduced in the regulations, but it, and subsection (6) allow carte blanche and, accordingly, more uncertainty. Can the Minister commit to look at Clause 6 again, specifically with the amendment I have tabled and with the amendment that he can see I will perhaps have to table on Report? Amendment 94, tabled by the noble Lord, Lord Fox, which we discussed the other day, would have helped. Can the Minister give some assurances that parliamentary scrutiny will be given to these regulations?

Amendment 17 looks to strike a more proportionate balance between protecting national security and reducing unnecessary burdens on investors. We want to be seen as an investment-friendly country.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank noble Lords for introducing their amendments and exploring the reasoning behind them, which I have found helpful. I put my name down to speak to Amendment 17, which was signed by my noble friend Lord Clement-Jones, for whom I am broadly substituting because he is regrettably unavailable until later today. Like the noble Baroness, Lady Hayter, I was wondering why the Government chose 15% as the threshold above which a notification would become mandatory.

On the previous group, I wondered whether we could have different thresholds for different reasons. That would not be without precedent. For example, Australia has different percentage thresholds for lesser and more sensitive assets and different business value thresholds depending on the country of the acquirer. However, here we have 15%, which might be a number above which you fear an activist shareholder, but why?

In the UK, shareholders get some additional rights at 5%: they can go to court to prevent the conversion of a public company to a private company; they can call a general meeting; they can require the circulation of a written resolution to shareholders in a private company; or they can require the passing of a resolution at an annual general meeting of a public company. At 10%, you can call a poll vote on a resolution. At more than 10%, in a private company, you can prevent a meeting being held at short notice. At 15%, you can apply to the court to cancel a variation of class rights, provided that the shareholders have not consented to or voted in favour of the variation. Getting to 25% is significant, because it gives the right to prevent the passing of a special resolution, which could affect various articles and other things. I cannot see that preventing a change in class rights, assuming that a court would agree, is significant. I am slightly bemused about where that 15% number was plucked from.

We get to the point about whether fear of an activist shareholder is what this is all about. We hear of the insistence on having a director, when there is a certain quantity of shares, but they have to be able to control all the other directors, which does not always happen. It brings to the fore a thought about who owns the other shares, which would have to be taken into account in any assessments. Conditions might then be put on a company in respect of what happens to other shareholders to allow a transaction to pass.

As the noble Lord, Lord Leigh, explained, this makes something more complicated for reasons that do not yet seem clear. There are surely other inherent safeguards that would do the job. From that point of view, I support Amendment 17 signed by my noble friend but, as has been explained, there are other ways in which it could be achieved.

[Baroness Noakes (Con)]

My Lords, the effect of amendments in this group may be to restrict the Government’s ability of to act where de facto control is the result of an acquisition. We should not underestimate the ingenuity that could be deployed to achieve de facto control or make it easier for people to escape the Bill where there are substantive concerns. For that reason, I do not believe that we should tie the Government’s hands in this way.

I put my name down to speak on this group, in particular on my noble friend Lord Leigh of Hurley’s Amendment 17, which increases the voting rights threshold for notification from 15% to 25%, and I support the probing Amendment 15A in the name of the noble Baroness, Lady Hayter, which removes the reference to the voting rights test.

While a shareholding needs to be 25% to be certain of stopping a special resolution—the noble Baroness, Lady Bowles of Berkhamsted, referred to that a moment ago—in practical terms that assumes that all other voting rights would be exercised and in the opposite direction. The de facto ability to stop a special resolution kicks in at much lower levels. I am interested to hear what the Minister says about the rationale for 15%.

For many years, I was a director of the Reuters Founders Share Company, which was set up to hold a form of golden share in Reuters to protect the independence and integrity of the Reuters news service and to prevent it falling under the control of any faction. There is a long history to that, which I will not go into. The trigger point for the ability to use the golden share was set at 15%, for the very reasons I have just given. It is the level at which the influence of a shareholding bloc can be significant. In the history of Reuters Founders Share Company, deployment of the 15% was needed on one occasion. For that reason, I am inclined to support the Bill’s cautious approach in this area.

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[Lord Lansley (Con)]

My Lords, I am pleased to have the chance to speak briefly to Amendment 38. This group is linked, in so far as we are all addressing issues relating to limitations on the interpretation of the “qualifying asset” in Clause 7. Amendment 38 in my name is particularly directed towards the issue of such assets in Clause 7(4)(c)—ideas and related intangible assets—where they are licensed. In particular, Amendment 38 seeks to regard such assets, which are licensed on a non-permanent basis, and where ownership of the asset is not transferred to somebody else in any permanent or substantive form, as not being controlled. This relates to the set of exceptions in Clause 11, which sets out those circumstances in which assets are not to be regarded as controlled.

We need to do that because Clause 9, “Control of assets”, is very widely drawn—deliberately, I am sure, and probably rightly so. It says that control of a qualifying asset can result in the person being able to use the asset. Of course, if an asset is licensed to somebody for their use, they could be said to be controlling it. But anybody licensing it to them will be doing so with restrictions and provisions. To that extent, they are not controlling it; the person who has licensed it to them is controlling it. So we have an issue not only of definitions but of scope.

The definition of control should not extend to where somebody had something licensed with restrictions imposed upon it. The definition of using the assets is probably, in that sense, too wide to be applied in this case to those kinds of innovative assets. To whom is this important? It is very important to those whose job it is to bring forward innovation and to license their intellectual property, and to do so in circumstances where they continue to control its use and exploitation. We do not want the routine use and exploitation of assets or intellectual property to be seriously impeded every time it is licensed or for this to be regarded as potentially the control of a qualifying asset and hence notifiable. Amendment 38 gives us an opportunity to set proper limitations on the use of licensing for assets on a temporary basis.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, my reason for speaking in this group relates to licences. I generally support the thrust of Amendment 23, if there can be appropriate definitions, but I was not quite sure whether I agreed with Amendment 38. I disagreed with the explanatory statement of the noble Lord, Lord Lansley, because whether or not the licenser maintains control depends on quite a lot of things.

An IP licenser may be able to impose conditions when a licence is first granted, but what happens after that and how much control there is over future events is up to whatever is agreed in the licence. If the price and conditions are right, it could be a fully assignable licence; it could be assignable with or without consent of the IP owner; it could be exclusive, so that the IP owner no longer has any rights to use it themselves or to license others; or it could be a sole licence that also effectively restricts supply under the IP. A licence can therefore be for something that is relevant to national security and have both ownership and security of supply implications.

In paragraph (c) of Amendment 38—the substantive economic ownership point—I am sure the noble Lord, Lord Lansley, is trying to exclude the exclusive licences that are assignable because, as he would say, economic control had been obtained. I am not sure whether that is the right way to define it, but I understand the sense of what he is trying to do. However, I wonder whether that also captures what could be restriction of supply issues. Those can also happen through licences that would not necessarily mean economic control.

The whole matter of licences is quite interesting, but they can be unique—I used to do them for a living, so I should know. We therefore have to be careful about clarifying, perhaps in a more substantive way, the things that one wants to exclude from review. I think it is necessary to exclude some, because I am absolutely certain that you would get an even bigger deluge if you did not. It may be that things that count as ordinary licences, where there are many licensees—rather like in the other amendment—and no security of supply issues, can be treated the same as any product for sale. However, wherever there is a sole or exclusive licence in particular, it would be necessary just to have a look to make sure there was nothing that you might want to do something about. There could quite possibly be something if it was in a relevant technology area. However, the noble Lord, Lord Lansley, has drawn an interesting point to our attention.

[Lord Clement-Jones (LD)]

My Lords, as has been mentioned, the amendments in this group have a common factor very much along the lines of what the noble Lord, Lord Hodgson, said: that it is really important to look at the nature of qualifying entities and assets under Clause 7 with a keen eye. I think that the debate will continue beyond Committee.

One has to make choices here where one thinks it is appropriate to go for a change. I would give this a score of one out of three. I put my name to Amendment 23 in the name of the noble Lord, Lord Vaizey, because the argument there is very straightforward. As he said, it is about “business as usual” procurement and the purchasing of things such as software licences and standard equipment, so that, even if it might technically be caught by the sectors, it is not captured in the definition of a qualifying asset. This is so that, again, we do not have a vast quantity of referral requirements for what are essentially day-to-day transactions, which could be a massive burden on business. The noble Lord made the argument extremely well there.

I am much more nervous about the proposition of taking land out of this, particularly when it comes to reversing the requirement: that is, you publish the sensitive sites and then say whether the transaction is caught because it is next door to that site. The way in which the qualifying entities and assets clause is currently set out, with sensitive sites not being published, is probably a rather safer way of dealing with national security, but that is a purely personal view. I hope that we keep things that way round.

It was a great pleasure to hear what my noble friend Lady Bowles had to say about the third proposition, given her experience and expertise in the whole area of intellectual property. That was exactly my reaction: that licences are animals that can vary in many different ways. As she said, they can be exclusive or non-exclusive, long-term or short-term. I agree that they are not as easy to define as an asset transfer, such as an assignment of copyright or other forms of intellectual property. Nevertheless, in substance, they can mean the transfer for quite a period of time—indeed, the wholesale transfer of knowhow—just as much as an assignment can. One therefore needs to be somewhat wary.

Then you start getting into paragraph (c), as proposed by Amendment 38, which says that

“substantive economic ownership of the asset has not been transferred”.

That is virtually impossible to define for this particular purpose. I am wholly sympathetic to the idea of screening and filtering in a way that cuts back red tape, but at the same time one must recognise that intellectual property is one of the most sensitive aspects that needs to be caught by this Bill. That is the future. Intangible assets are the real Crown jewels of national economies. We must be very careful about that.

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[The Deputy Chairman of Committees (Lord Bates) (Con)]

I have received requests to speak after the Minister from the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Clement-Jones. I will call the noble Baroness first.

[Baroness Bowles of Berkhamsted (LD) [V]]

I have one comment and one question. My comment is that I understand everything the Minister said and I broadly agree, but I think the Government underestimate the amount of licensing they might find has to be reported, because licensing is the new sale. That is the way everything is going: there is no outright purchase of anything any more; everything is licensed, whether the programmes you use on your computer or anything else. Indeed, accounting standards even drive towards that kind of model because in some instances it becomes increasingly difficult to fit true sales into the new IFRS. I cite IFRS 15 as an example.

I meant to ask my question, but I spoke a bit too spontaneously to remember it. I am interested in follow-on activities. If, for example, you have a clearance on an investment into, say, some university research but that also encompasses a right to have a licence, would that licence to the same organisation automatically be cleared if the investment has been cleared or would you have to go round the loop again? You could apply the same to any assignment of a licence: if it is assigned to an essentially similar kind of business and a previous notification has not resulted in a clearing, can you be confident that you do not have to notify again on the basis of such a previous clearance?

[Baroness Bloomfield of Hinton Waldrist (Con)]

The noble Baroness makes some very good points—I am conscious of her much greater knowledge of this area than I have—particularly the point she makes about licensing being the new sale. I am pretty confident that we have taken these points into consideration. On her specific point about whether investments would be cleared, the true answer is that every notification would be counted separately.

National Security and Investment Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, as my noble friend Lady Noakes said, Amendment 67 deals with Clause 18 on the voluntary notification procedure. I entirely support what she has said and her amendment. Like her amendment, Amendment 67 is to deal with no man’s land, but it adds a further wrinkle to no man’s land beyond that which she covered in her remarks. I am grateful for the support from the noble Lords, Lord Clement-Jones and Lord Bilimoria, and I have been reliant on the expertise of the Law Society for the detailed drafting.

As I say, this amendment is concerned with voluntary notification procedures. The objective behind the establishment of voluntary notification procedures seems entirely praiseworthy in that it can speed up the investment or divestment process for those involved by seeking in advance a decision by the Government on whether the proposed action will be subject to a call-in notice. If the Secretary of State decides to issue a call-in notice, the clock starts running on the 30-day period for initial assessment.

So far so good, but the Bill as drafted is not clear —as my noble friend made clear—on the time the Secretary of State has in which to decide, following a voluntary notice, whether he or she should issue a call- in notice. The only guide we have is under Clause 18(5):

“As soon as reasonably practicable after receiving the voluntary notice, the Secretary of State must decide”


and so on. This does not give any clear idea of how elongated this process may be. In particular, the use of the word “practicable” is rather strange—practicable for whom and in what circumstances? The solution to this is to redraft the clause so that unless the Secretary of State responds to the voluntary notification, it is deemed to have been accepted. That triggers the 30 working day period, so gives an end date by which the company or the investor will achieve clarity.

Amendment 67 also aims to correct a procedural anomaly in the current drafting, which touches on a point that was the subject of a discussion between myself and my noble friend Lord Lansley on the first day in Committee. I think this point goes beyond where my noble friend’s amendment went. It is as follows: the Secretary of State has this 30 working day review period to decide whether to issue a call-in notice or notify the parties that no further action will be taken, but the drafting of Clause 18(9) appears to muddy that clarity when it says that the review period

“does not affect the operation of the time limits in subsections (2) and (4)”

of Clause 2. This was the point raised by my noble friend on our first day. This would appear to mean that the Secretary of State could fail to make a decision within the 30 working days but would still have up to six months from becoming aware of the trigger or five years from the date of the trigger to serve a call-in notice. The same difficulty applies to Clause 18(8)(b), which allows the Secretary of State to inform the parties after considering a voluntary notification that no further action will be taken. Again, it seems overridden by the provisions of Clause 2(2), with the six months or five-year period allowing for further reflection by the Secretary of State.

Amendment 67 aims to cut through this Gordian knot by requiring the Secretary of State to make a decision on the voluntary notification by the end of the 30-working day period, and the absence of such a decision would be taken as approval. Objectively, that is to give clarity and certainty to investors, as we are trying to do throughout the Bill. Without an amendment such as this, the whole purpose and the advantages of the voluntary notification procedure could be undermined.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I have added my name to the amendment in the name of the noble Baroness, Lady Noakes, and I support everything that she said. I also support what I might call the companion Amendment 67 from the noble Lord, Lord Hodgson, which has been signed by my noble friend Lord Clement-Jones. I also agree with what was said there.

I favour mechanisms to give certainty, and the way the Bill operates at the moment means that, absent a call-in or other response, a business is left in no man’s land—as the noble Baroness, Lady Noakes, called it. Indeed, the noble Lord, Lord Hodgson, pointed out that even if you escape from no man’s land, there is a piece of elastic that pings you back in again for up to five years.

I realise that with a new system the Government may not know how well it will operate, but many noble Lords have repeatedly expressed concern, and I am coming from the standpoint that it is totally unreasonable to push all the uncertainty on to industry.

We have operated without these measures for a long time—maybe for too long—but to switch to draconian uncertainty overnight does not seem fair. There needs to be a point at which no response is an all clear, even though that itself is unsatisfactory compared with the positive receipt of an all clear notice in your hand.

I have nothing else to add, but I support the amendments. The Government need to take notice and to make this whole process more workable for industry.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am delighted to support Amendment 67 and, by the same token, everything that my noble friend Lady Noakes said in connection with her amendment. The two dovetail nicely together. It will be for the Government to determine which drafting is the best. I welcome my noble friend Lady Bloomfield to her position. I am delighted to be in the Chamber rather than in the virtual Chamber; it is an altogether more pleasant experience.

The consequences of the current drafting of Clause 18, as so ably set out by my noble friend Lord Hodgson of Astley Abbotts, together with Clause 2(2), leave everyone in a very precarious position, as the parties involved would have literally no clarity as to any certainty or finality. My understanding is that the parties would have to proceed to complete the transaction before any time limit started to run. Perhaps my noble friend the Minister could clarify that.

I welcome Amendment 67 in particular as giving clarity. I thank the Law Society for bringing it to our attention and my noble friend Lord Hodgson for bringing it forward, with the able support of the noble Lords, Lord Clement-Jones and Lord Bilimoria. I hope that my noble friend the Minister will look favourably on these amendments. If she is not minded to, will she undertake to bring forward amendments of her own? It would be very unfortunate to leave the parties in what my noble friend Lord Hodgson described as a no man’s land, without any degree of clarity or finality.

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I support the amendments in this group, which, as usual, the noble Lord, Lord Hodgson, has done a very good job of introducing. I was particularly drawn to the notion of streamlining, as suggested in Amendment 48A. I admit that my interests are probably wider than in this particular instance, but what we are dealing with here is a situation where there may already have been a previous notification and much of the same information might be needed again. If this is thought too wide, in that it goes on for ever so that it is hard to believe that updating might not be required, perhaps the streamlining could be for a certain period and, as the noble Lord, Lord Hodgson, also suggested, on the condition that nothing else has changed or, perhaps as an alternative, that one has to notify only what changes have been made.

This also raises the question of how much record-keeping the Government are going to undertake. I raised a somewhat similar query last week when I was thinking about licences and an investment agreement that covered options for licensing and whether they could be covered at once or, as perhaps this amendment envisages, there could be some kind of streamlining. However, the response from the Minister was that each instance had to be dealt with on its own. That would be a great shame from the industry side of things. That is no way to build up, if you like, intelligence, and for that to work both for the department and industry in helping to make it simpler to get through these notifications and to understand what is going on.

Looking at how a lot of notifications are made on a precautionary basis—much of the interest in the Bill is about making sure that an acquisition is safe—if an acquisition has already been cleared as being not of interest in response to a voluntary notification, for example, is it then sold on again? Is it safe to assume that, if there has been no significant change in activity but it was felt previously to have fallen within the definitions, it is safe to go ahead again with a voluntary activity? That is because again there will otherwise be a temptation to think that safety requires another notification. I would have thought that it was in everyone’s interests to cut down on the number of voluntary notifications.

Amendment 67B is self-evident, given that the “reasonable in all circumstances” provision must cover not only any urgency perceived by government but also the facilities at the disposal of the person. One interesting point that I would like to make here, although it goes a little beyond what the amendment is all about, is that Clauses 19 and 20 bear some resemblance to clauses in the Internal Market Act 2020, which were in turn lifted from the CMA information requirements. If the noble Lord, Lord Callanan, was answering this —although it is not—I am sure there would be a recollection that I recalled bitterly that those conditions were inappropriate. It is interesting to see that, in what might be called rather stronger situations, a slightly lighter touch is nevertheless being adopted here; that is, when individuals are involved in something that is necessarily of a security interest. Perhaps that reflects some recognition by the Government that people who have done no wrong should not be subjected to overly coercive requirements as though they were wrongdoers. That is a comment on an aspect of this part of the Bill, rather than in direct relation to the amendments.

I support these amendments. I was not sure what the noble Lord was going to say on the financial clause. Some very good points have been made, but I tend to be of the view that if the Government’s requirements have caused disaster to befall a company through delay, there should be a mechanism for compensation. However, how that is to operate needs to be made clear.

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Amendment 64 is in that context in relation to voluntary notifications. If somebody has gone to the trouble of making a voluntary notification, the Secretary of State should reject or accept it very rapidly. Amendment 64 would ensure that, if the voluntary notification were accepted, the Secretary of State would be required to give notification within five working days instead of as soon as practicable. At that point, there is no justification for any significant delay at all. I hope that all these amendments work to secure much more specific timetables for this process.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I added my name to the amendments of the noble Baroness, Lady Noakes, as they are yet another way to incrementally reduce the various points of uncertainty. It is notable how many of these can be found as we go through the Bill. As the noble Baroness explained, these amendments relate to the time for accepting a mandatory notice, from which other time periods can also flow, and then shortens the time for deciding whether to issue a call-in notice. As she explained, this is not meant to be part of the assessment and can therefore be short.

Now that the noble Lord, Lord Lansley, has explained his take on solving what is basically the same problem, I wonder whether it is better to look at the whole period, or to keep it cut up into segments so that people know where they are as they go along. As the noble Lord explained, it is very important not to start the process with two “as soon as practicable” requirements, because that just looks like a bottomless pit.

I will not repeat what has been said, and I am sure I can anticipate the Minister’s answer, but it seems that at every point in the Bill, the balance of convenience rests with the Secretary of State and the department. It does not make for a good business environment when there is no pressure put on the department. It reminds me of conversations I had not that long ago when I was chairing a regulatory strategy group looking at doing business in China. The repeated refrain from the business side was, “How do we get legal certainty?” The answer was always that you cannot; it is when the party decides. That is where this Bill puts us, and I fear the collateral damage it will create. I regret that I have to use the language of warfare and bombs to bring that home, but this should be made much more business-friendly.

[Lord Naseby (Con) [V]]

My Lords, I shall be very brief. I am full of admiration for my dear noble friend Lady Noakes for the thoroughness with which she has trawled through the Bill and these particular aspects. I have been in and have knowledge of a situation of a mandatory notice—I make no comment on the other aspect—and my noble friend is absolutely right: we need certainty in life. Whether five working days is the appropriate length of time I personally am not able to judge, but it seems entirely reasonable, and if its sponsors and their experienced colleagues from the City believe in it, I am more than happy to go with it. It does not seem to allow for any wriggle room; the worst thing in politics and making law is to allow for wriggle room, so I am absolutely behind Amendment 49.