National Security and Investment Bill (Fifth sitting)

Alan Whitehead Excerpts

Committee stage & Committee Debate: 5th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move amendment 10, in clause 2, page 2, line 12, leave out subsection (1) and insert—

“(1) No more than one call-in notice may be given in relation to each trigger event, unless material new information becomes available within five years of the initial trigger event.”.

This amendment would enable the Secretary of State to issue multiple call-in notices if material new information becomes available.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Dr Whitehead]

Rather late in the day, I will say what a pleasure it is to serve under your chairmanship, Mr Twigg. I am sure you are aware that we share an anniversary: we are among the few surviving Members of the 1997 intake—those happy days when Labour used to win elections. We came to this House in 1997 and have been here ever since.

The reason I emphasise that fact, Mr Twigg, is to underline just how many Bills you and I have sat on, led for the Labour party or been involved in over the years. I am unable to tot up the exact number but it is a considerable, and it is a great pleasure to be sitting on this Bill Committee. I have served on a large number of Bill Committees of late, the most recent being the Environment Bill Committee, which has just finished its deliberations. I was unable to be present for this Bill Committee’s witness sessions because I was finishing off the Environment Bill—well, trying to strengthen it rather than finish it off. I am grateful to my colleagues for asking a series of pertinent questions in the evidence sessions. We are all grateful for that and, indeed, to the expert witnesses.

I want to cite the amendment in the context both of the various Bills that have come through the House and of the witness sessions, which I have assiduously read, even though I was not present for them. I hope the Minister will accept that the amendment is entirely in line with the constructive way in which I hope we have gone about our business in this Committee. The amendment, which I shall unpack in a moment, strengthens not only the Bill but the ability of Ministers to do their job properly as far as its provisions are concerned. That is its intention.

The amendment seeks to replace subsection (1), which is a bald sentence:

“No more than one call-in notice may be given in relation to each trigger event.”

My time with Bills has taught me to look carefully through all of the different clauses to find the qualification. In my experience, tucked away somewhere in most Bills is a qualification. Sometimes it is about when a clause is to be implemented, sometimes it is a definition of the wording, and sometimes it is an additional provision that mediates the clause to which our attention was first drawn.

This clause has no such qualification. It is an absolutely straightforward statement. We have discussed trigger events to some extent in our evidence sessions, and they are elucidated and qualified in further clauses, as are call-in notices, but the fact that we get only one call-in notice per trigger event seems to be the central essence of this subsection. Our amendment seeks to put a question mark against whether that bald statement about the fact that we get one go per trigger event is the wisest formulation to have in the Bill.

The amendment makes a modest change to the clause, stating:

“No more than one call-in notice may be given in relation to each trigger event,”

and adding,

“unless material new information becomes available within five years of the initial trigger event.”

[James Wild]

From his experience of many Bills, I wonder what the hon. Gentleman made of the provisions in clause 22 on false or misleading information that has been given to the Secretary of State, whereby if he has been given that information he can change a decision he has previously given and can therefore issue another call-in notice.

[Dr Whitehead]

Yes, indeed. The hon. Member is quite correct to draw attention to clause 22, which concerns false or misleading information. It relates to where someone has, at the time of the trigger event, concealed or misled or sought to deceive those concerned with the trigger event about the nature of the event. I would suggest that that is a different case from what we are trying to establish today. It is not that anyone has tried to deceive anybody or maliciously mislead anybody at the time of the trigger event, but new material may come to light or become available within five years of the initial trigger event that might cause a further call-in notice to be introduced. According to the definition set out in the Bill, that looks like it might not be possible.

[Stephen Kinnock]

I thank my hon. Friend for giving way, and he is being very generous in doing so. He rightly talks about new material or information, but what about the evolving nature of geopolitical threats? There may well be countries that are not considered to be hostile actors now, but political changes one, two or three years down the line could have a massive impact on whether we see that country as a threat to national security. It could become a hostile actor.

[Dr Whitehead]

My hon. Friend makes an important point, which was reflected in the evidence sessions on this Bill. I want to dwell on that briefly, because he makes a really important point. These matters are evolving. Not only that, but the nature of databases evolves. The nature of what we do and do not find out evolves. There are circumstances—my hon. Friend mentioned a particularly important one—where the Secretary of State could be excessively curtailed in the diligent pursuit of his role in terms of call-ins and trigger events if no amendment is made to this clause.

The expert evidence we received from Dr Ashley Lenihan of the Centre for International Studies at the London School of Economics gave rise to a couple of important considerations in terms of how evolving circumstances or new information might be important. Dr Lenihan made a very important point, similar to that made by my hon. Friend, when she stated:

“Dealing with the kind of evolving and emerging threats we see in terms of novel investments from countries such as China, Russia and Venezuela needs the flexibility to look at retroactively and potentially unwind transactions that the Secretary of State and the investment security unit were not even aware of.” ––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November; c. 34, Q36.]

Speaking of existing databases, Dr Lenihan also stated:

“They do not cover asset transactions; they do not cover real estate transactions, which are of increasing concern, especially for espionage purposes.”––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November; c. 35, Q36.]

I note that there has been a lot of concern in the United States more recently about real estate purchases in strategic locations, which may give rise to espionage or other national security concerns. As Dr Lenihan emphasises, existing databases do not cover such arrangements but might do in the future and might find it necessary to do so in the future. Under those circumstances, new information could well come to light.

Dr Lenihan also gave an interesting example—this is not strictly in line with our considerations today—of how information might come to light in a way not easily anticipated by those doing the initial call-in notice and trigger event. She referred to the purchase in the United States of a US cloud computing company, 3Leaf, which had gone bankrupt. Huawei—as it happened—quietly bought up the assets, employees and patents of that bankrupt company. That was not noticed at the time by the Committee on Foreign Investment in the United States regulators, because they did not pay attention to bankrupt companies, as opposed companies that continued to operate. That went quietly unnoticed, uncommented and unactioned until, Dr Lenihan informed us, a Government staffer happened to notice on his LinkedIn account that someone he thought had been partially running 3Leaf was listed as a consultant for 3Leaf for Huawei. He thought to himself, “How can this be?” Only through his attention and reporting back was that acquisition unravelled in the United States. No one was providing malicious information or seeking to mislead at the time. It was just that new information came to light, in that instance through surprising mechanisms. However, an important issue came before regulators and the security services. That emphasises that clause 22, important though it is, does not cover those sorts of circumstances and eventualities.

National Security and Investment Bill (Sixth sitting)

Alan Whitehead Excerpts

Committee stage & Committee Debate: 6th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

It is a pleasure to serve under your chairmanship, Sir Graham. As I was saying, after a trigger event is called in, the Secretary of State has 30 working days in which to carry out a full national security assessment, although that may be extended in certain circumstances. During that period, the Secretary of State may use his information-gathering powers under the Bill to gather from relevant parties any further information he requires to make a final decision. I can reassure hon. Members that the Secretary of State will make full use of these powers to fully assess every aspect of an acquisition.

Where, at the end of an assessment, the Secretary of State imposes remedies in relation to a trigger event, the Bill provides a power for him to amend those where appropriate. Such an amendment is really relevant only in cases where a trigger event is called in for scrutiny but ultimately cleared by the Secretary of State outright, without any remedies being imposed. In cases where false or misleading information is provided that materially affects the Secretary of State’s decision to clear a trigger event outright, he may revoke his decision and give a further call-in notice up to six months after the false or misleading information is discovered.

Adding further opportunities to call in a trigger event each time new material information becomes available after the Secretary of State has already had the opportunity to carry out full scrutiny of the trigger event would be disproportionate and give rise to unjustified uncertainty for the parties involved. The Government have been clear that this regime must provide a slicker route to investment by providing clarity and predictability for investors. Sadly, the proposed amendment would create uncertainty for businesses, with them unable to assess if and when the Secretary of State might call in their trigger event again, up to five years after the trigger event has been completed. That is why I am unable to accept the amendment. I hope that the hon. Member for Southampton, Test will agree with me and withdraw it.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Our amendment was genuinely intended to be helpful, to try to ensure that what we see as a loophole is closed. The Minister has indicated that, in his view, that loophole would be closed at the expense of uncertainty in company land, as it were—uncertainty for those companies that might be subject to this procedure.

The circumstances that would see this amendment put into action—I have outlined some possible circumstances—would be very rare; only circumstances in which things had changed very substantially, in terms of global interest in particular areas of our economy, or circumstances in which information that could have been supplied was not supplied, and not because there was an intention to be malicious or misleading, but because people did not get to the bottom of something first time around. In those circumstances, companies would perhaps anticipate that that change might happen, and certainly if there were substantial global changes in who was interested in what, then companies would also anticipate that to a considerable extent. I do not share the Minister’s view that the amendment would place companies in general in a state of uncertainty.

The additional assistance that the amendment would provide to make the process watertight should be taken seriously. However, I hear what the Minister has said and appreciate that a balance has to be achieved between different arrangements so that they are satisfactory both for national security and for company wellbeing and development—I am sorry that he has perhaps come down slightly further on one side than on the other in his appraisal of amendment 10. However, I appreciate what he has said and therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clause 3

Statement about exercise of call-in power

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I beg to move amendment 1, in clause 3, page 3, line 1, leave out “may” and insert “shall”.

This amendment would make it obligatory for the Secretary of State to include certain matters in a statement about his/her exercise of the call-in power.

--- Later in debate ---

[The Chair]

Before I call the next speaker, I did not interrupt the hon. Gentleman, because I am feeling benign this afternoon. However, it is timely to remind Members that other Members of the House should be referred to by their constituencies, not by their names.

[Dr Whitehead]

I did not mention what a pleasure it is to serve under your chairmanship this afternoon, Sir Graham.

[The Chair]

That is not required.

[Dr Whitehead]

It is unfortunately force of habit, and it is a habit that I am loth to break.

Amendments 1, 2 and 9 are closely related. Clause 3 is about the Secretary of State putting forward a statement about the exercise of the call-in power and, within that, specifying—or it looks like they are specifying—what at least some of the contents of that statement are likely to be.

I will talk about the context in a moment, but amendment 1 draws attention to another problem that I have had to look at closely on several occasions in my examination of Bills over the years: the use of the word “may”, which appears at the beginning of clause 3 and in clause 3(3). In looking at Bills, whenever the word “may” appears, I have always concluded that there needs to be a silent “(or may not)” after it, although it is never there. That is what that phrase actually means in any piece of legislation.

--- Later in debate ---

[Chi Onwurah]

I am sorry. Southampton, Test.

[Dr Whitehead]

I quite like it.

[Chi Onwurah]

My hon. Friend intends to stay where he is. I thank him for his oratory on the importance of the single word “may”. Something has been lost in translation between ourselves and the Clerks, in that there was originally an intention to address the first “may” with regard to publishing the statement. The Minister says that we do not need that to become a “shall” because it will be published but rejects the notion of it becoming “shall” despite the fact that it will be published. I leave it to the Committee to decide on the holes in that logic.

I am sure that the Minister was not deliberately trying to misinterpret what we were saying, but we made it clear that we are not looking for a precise and narrow definition of national security; we are looking for broad indications or guidance. As my hon. Friend the Member for Aberavon said in citing how the US does it, we are looking for a sense of what is taken into consideration with regard to national security. I would only plead with the Minister to recognise the circumstances of so many small businesses, start-ups and investors in trying to understand what the Secretary of State will take into account. This is intended not to define it narrowly, but to give a sense of what will be taken into account as we move into this new regime that is so vastly different. Because these amendments are important and significant, I intend to press them.

Question put, That the amendment be made.

--- Later in debate ---

[Chi Onwurah]

I thank the Minister for his comments on clauses 5 and 10 and schedule 1, which are quite technical provisions designed to allow for the different ways in which control may be acquired over a qualifying entity or asset or a trigger event may occur. I shall not repeat what the Minister so ably set out, but simply say that we recognise the need to set out ways to mitigate the impact of hostile actors, as he put it, going to complex lengths to hide their interest in a qualifying asset or entity. However, having the powers and these definitions is not the same as actually using them. There have been several instances in which hostile actors have behaved in entirely transparent ways that we have not identified and prevented. While these provisions are necessary, we need to see the ways in which the Secretary of State will actively identify evolving risks even as they hide behind complex financial organisations.

[Dr Whitehead]

Will the Minister expand on some of the provisions in schedule 1, particularly as they relate to what might be a UK version of the case that I mentioned earlier concerning the US company that Dr Lenihan mentioned in his evidence? A company that had gone bankrupt had its assets, patents and employees bought up by what might have been conceived to be a hostile company in the US, in this case Huawei. If we imagine that happening in the UK, some questions arise about how schedule 1 is worded.

That sort of action might happen in a number of ways. It could be that a potentially hostile company buys up a failed, bankrupt company with the intention of making that company work again but so that it has control of its activities thereafter. Alternatively, the hostile company or organisation might want to buy up elements of the company not to make it work but to make off with the things that it wanted and then push the company further into liquidation. The company would not work but its assets and intellectual property would have passed into the hands of the other organisation.

--- Later in debate ---

[Dr Whitehead]

Yes, indeed, that is right, but what seems to be the case under the schedule is that the creditors and shareholders of that company would expect their rights and their ownership the remaining assets of the company to be protected and acted on by the administrators of the company, who, according to the schedule, do not have access to and ownership of those rights. Even though what the hon. Member says is absolutely right in terms of the ultimate interests of the shareholders and creditors, what agency do those shareholders and creditors have to do anything relating to rights under the Bill? Should those shareholders and creditors, for example, be held liable under the Bill for reporting what those rights are?

[Mark Garnier]

The administrators are employed to work on behalf of the creditors and shareholders, so they are serving their interests. It strikes me as relatively obvious that the rights over that intellectual property and those things that are relevant in this schedule still, either directly or indirectly through the administrators, lie with the creditors and shareholders.

[Dr Whitehead]

But if the IP, the patents and various other things have been made off with by another company, and the administrators have presumably agreed to that, although they never hold the rights, where are the shareholders and creditors’ duties and rights at that point? Indeed, what is the remedy as far as the Government are concerned in those circumstances?

I can honestly say I am fairly confused about this, so I do not have the full answer to the hon. Member’s concerns. I am raising this more because I am not sure whether the wording in the schedule is fully adequate for those circumstances. I would be grateful if the Minister gave me some assurance, took some of the clouds from my mind about this, or alternatively said, “Well, we’re going to have a look at this to see whether there is a bit of a problem that we might have to fix.”

[Nadhim Zahawi]

My hon. Friend the Member for Wyre Forest addressed the issue of the administrator’s acting on behalf of the creditors. The important point to focus on—I will happily write to the hon. Member for Southampton, Test after the sitting—is that ultimately, it is the acquirer. If a malign actor were come to acquire those assets, and it is notifiable as part of the 17 sectors, then the transaction is made void. That is the remedy, effectively, because the acquirer would have to come forward and make representations to the investment unit about why they are acquiring and get clearance.

--- Later in debate ---

[Stephen Kinnock]

I thank my hon. Friend. This is genuinely not an attempt to make a party political point. There is no doubt that we should have seen the impact of the rise of China long before 2010. This is something that has been going on for a long time. President Xi Jinping was appointed in 2013 and there has been a qualitative shift in China’s outlook and the way in which it is engaging with the world. There is an increasingly aggressive and assertive set of economic policies. One of the experts said that the objective is to dominate the global technology scene. That is an explicit objective in the Made in China 2025 vision that the President and the Chinese Communist party adhere to. While we are not trying to make party political points here, a lot has changed in the last seven years.

[Dr Whitehead]

Does my hon. Friend consider that had these provisions, as amended, been in place in, say, 2015, the Government would not have signed the Secretary of State’s investment agreement with the Chinese state nuclear corporation, giving it control of a nuclear power plant and the right to build its own reactor, staff it with its own staff and run it entirely according to its own interest? Does he think that it was perhaps naive to do that? Might greater protection have been afforded for future deals under this sort of arrangement?

--- Later in debate ---

[Nadhim Zahawi]

I hear what the hon. Gentleman says. The word that slightly worries businesses is “political” statement. I think that that is a concern. I think his intention is right, and the reason why we have taken the route of mandatory notification for the 17 sectors is precisely the point he makes. I assure him that the Secretary of State will always take into account the national security needs of the country within the critical national infrastructure sectors. Indeed, the hon. Gentleman will recall that the Government introduced a statutory instrument to include health in the Enterprise Act 2002 when the covid pandemic hit.

[Dr Whitehead]

I wonder whether I can tempt the Minister to confirm that the 2015 Secretary of State’s investment agreement concerning Chinese control of the nuclear power station and reactor was a naive act by the Government and did not take national security properly into consideration, and that the Secretary of State who signed that agreement in the Minister’s Department clearly did not do so. Will the Minister both reflect on the naivety of that deal and give an indication that such a deal would never be contemplated by this Department in future?

[Nadhim Zahawi]

If the hon. Gentleman is referring to the Hinkley Point deal with EDF, the operator and junior partner in that is CGN.

[Dr Whitehead]

I was not quite; I was referring to the investment agreement on the Hinkley deal that enabled the Chinese state nuclear corporation to develop one third of that series of reactors entirely within its own resources. That was signed into the agreement by the then Secretary of State so that they would be junior partners in Hinkley, equal partners in Sizewell and 100% owners, operators and organisers of Bradwell. That is what I was referring to. The Minister ought to say a few words on the likely actions of the Department in future under the terms of the Bill.

[The Chair]

Crucially, Minister, interesting though this topic may be, those last few words should be firmly in your mind in any response you give.

National Security and Investment Bill (Eighth sitting)

Alan Whitehead Excerpts

Committee stage & Committee Debate: 8th sitting: House of Commons
Thursday 3rd December 2020 Public Bill Committees

[The Chair]

I remind the Committee that with this we are discussing the following:

Amendment 19, in clause 18, page 11, line 28, leave out “may” and insert “shall”.

This amendment seeks to make the Secretary of State’s prescription of regulation of the form and content of a voluntary notice mandatory.

Clause stand part.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I will not take up too much of the Committee’s time, but I wish to say a few words about the excellent contribution that my hon. Friend the Member for Ilford South has made to our continuing discussions about “may” and “must”. It is a particularly egregious case that he has highlighted. If we look at the number of “musts” that appear in clause 14—this point has been made by other Members—we see that the subsequent “musts” would fall immediately if the Secretary of State may not prescribe by regulation the form and content of a mandatory notice—so the “must” in subsection (5) is relevant only if the Secretary of State does that in the first place, as are the “musts” in subsections (7) and (8), as my hon. Friend pointed out earlier.

There is also an interesting “must” at the beginning of the clause, which relates to the mandatory notification procedure itself. Subsection (1) states that

“a person must give notice to the Secretary of State before the person, pursuant to a notifiable acquisition…gains control in circumstances”

and so on. So subsection (1) appears to stand whether or not, in subsection (4), the Secretary of State decides to prescribe by regulation the form and content of a mandatory notice. That means that a person must provide a mandatory notice, even if the Secretary of State has not prescribed any form or content of that notice. The person may therefore have no idea what is to be in that mandatory notice, because the Secretary of State has not put it in regulations, but still they must give notice because this subsection says “must”.

That does not seem to be particularly proportionate. It appears to be constructed in such a way that, regardless of whether the concept is completely unknown to the person giving the notice, it is entirely up to the Secretary of State whether he or she makes the mandatory notice in any way comprehensible. I think that is quite an odd juxtaposition in this instance of “mays” and “musts”.

The “may” in subsection (6) is perfectly acceptable, in as much as its states that:

“The Secretary of State may reject the mandatory notice on one or more of the following grounds”.

That “may” is absolutely appropriate. However, the positioning of “must” right at the beginning of the clause, and the positioning of “may” in subsection (4), does not look reasonable to me. That could easily be solved by using the word “shall”, so that the situation is proportionate between those circumstances. That is the essence of the amendment 18, as my hon. Friend the Member for Ilford South outlined earlier.

I accept that there have been a number of occasions when, although I have not particularly liked “may” going into a Bill, it has had some justification. However, the particular juxtaposition that we see here causes me to think that it is a rather important issue, as far as “may” and “shall” are concerned. I am interested to hear whether the Minister thinks that the wording could give rise to the sorts of problems that I have suggested, in the event that another Minister—not himself, of course—might be tempted not to produce such regulations when defining the form and content, because I think that could cause potential problems for reasonableness, as far as this clause is concerned.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I rise to give some thoughts on clause 14 stand part, but will also refer to the amendment proposed by my hon. Friend the Member for Ilford South. Clause 14 is a critical part of this process, because it sets out the mandatory notification procedure. In some respects, it is the mandatory notification which places the greatest burden on those falling, or who might consider themselves to fall, within its remit. This is because it requires the person who is to make a notifiable acquisition to give a mandatory notice to the Secretary of State prior to the acquisition taking place.

The clause goes on to give the Secretary of State the option to set out the form and content of the mandatory notice. I shall come back to that. It then sets out the process by which the Secretary of State “must” decide whether to reject or accept that notice. If a mandatory notice is rejected, the Secretary of State must provide reasons in writing for that decision to be made. It also sets out the timescale elements and the persons to be notified. We recognise that mandatory notifications are an important part of making the Bill have the desired impact on our national security. It is absolutely right that in key areas the onus should be on those who will be aware that the transaction is taking place to notify the Secretary of State.

However, the amendment set out by hon. Friend is all about protecting and supporting the interests of small businesses. I am concerned that the Minister does not seem to be as vigilant about reducing the burden on and setting out the guidance for small businesses as we would like. All our constituencies have small businesses—it is often said that they are the lifeblood of the economy—yet in the Bill, and particularly in the clause, the Minister is not setting out the minimum support that they might require.

My hon. Friend the Member for Southampton, Test got to the nub of the matter in one of his very informative discussions about the difference between “must” and “may”. He observed that the “must” falls on the person who has to do the notifying. For example, it could be a small artificial intelligence start-up with a few members of staff, none of whom is a lawyer—remember that there are no de minimis provisions in the Bill for the size of the acquisition that must be notified—that is seeking investment from a foreign party. That start-up would be asked to indicate whether that investment would involve making a notification. Not only that, it must decide itself the form that the notification should take.

I really cannot understand why the Bill apparently seeks to give discretion to the Secretary of State to lighten his load, but not to our fantastic small businesses or to business generally. As my hon. Friend the Member for Ilford South said, why should a small business, the notifier, also have to set out the format in which its notification takes place? Given that the clause sets out,

“The Secretary of State may by regulations prescribe the form”,

why can we not simply turn that into “shall by regulation prescribe the form and content of a mandatory notice”?

Equally, when voluntary notices are considered, I hope the Minister has some ideas about what should be in the notification. If he does, is it not simple and desirable for him to share his ideas with our business community, which in less than a month’s time is facing a huge change in how it trades and does business with the European Union, our largest trading partner by value? That involves countless new forms to be filled out, as we have discussed in the Chamber, some of which are not yet designed. At the same time that that is happening, to require that they should decide for themselves what is involved in a notification seems wholly unacceptable.

On that basis, I ask the Minister to set out whether he intends to accept the amendment. If not, will he tell us what work has gone on in the Department to look at the kind of information might be required? How will the impact assessment assess the likely level of familiarisation required for this legislation—there is a phrase that says that there is not expected to be a huge amount of familiarisation required in it—while at the same time there is no guidance, assessment or inkling about the kind of information that will be required to be included in that notification?

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[Dr Whitehead]

I have a brief inquiry, following the Minister’s recent letter to me on a previous point raised in Committee, for which I thank him for his prompt attention. If a hostile company takes over another company, effectively puts it into liquidation and walks off with the intellectual property, patents and various other things, and those are out of the door by then, will it be necessary to provide a validation for the transaction, if it has not been previously notified or noticed, and to then pursue the consequences of that validation by subsequent means, given that the company was presumably in existence at the time of the validation, if not thereafter? Would that perhaps not be a cumbersome procedure?

[Nadhim Zahawi]

I am grateful to the hon. Gentleman for that question; I will write to him on that point, rather than attempting to go through our thinking on this. He raises an important point on what happens after the effect.

Where the final order has the effect of clearing the acquisition outright, subject to conditions, the Bill provides that the acquisition is no longer void. Where the final order has the effect of blocking all or part of the acquisition, the Bill provides that the acquisition remains void to that extent. Further provision on this particular situation is made in clause 17. The deadline of six months for giving either a validation notice or a call-in notice was chosen by the Government to align closely with the Secretary of State’s other requirements to act within certain timescales under the Bill.

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[Nadhim Zahawi]

Clause 16 provides a mechanism for any person materially affected by a notifiable acquisition being void to make an application to the Secretary of State to retrospectively validate the acquisition. Although there is a duty in clause 15 for the Secretary of State to give a validation notice or a call-in notice within six months of becoming aware of the acquisition, we recognise that in practice that is often likely to be a process driven by the parties themselves. It may be, for example, that a party realises that their transaction was a notifiable acquisition only after the event, and wishes to take proactive steps to resolve the situation. The clause allows them to make a formal application for retrospective validation, following a similar process to the conventional mandatory notification route.

Subsection (3) enables the Secretary of State to make regulations prescribing the form and the content of a validation application. It is likely that that will closely resemble the mandatory notification form, given all of that information remains pertinent to the Secretary of State’s decision on whether to give a call-in notice. The Secretary of State will be entitled to reject the application where it does not meet the specified requirements, or contain sufficient information for him to decide whether to give a call-in notice.

If the validation application is accepted, all relevant parties must be notified and a 30 working-day review period begins. By the end of the review period, the Secretary of State must issue either a call-in notice or a validation notice. Once again, if a validation notice is issued, the acquisition is no longer void and the Secretary of State must confirm that no further action under the Bill will be taken in relation to that acquisition. As is the case with clause 15, retrospective validation through that route does not provide immunity against criminal or civil sanctions being pursued.

Validation does not change the fact that a notifiable acquisition did not have the Secretary of State’s approval prior to taking place. This is simply about how the acquisition itself should be treated, following the screening of all pertinent details relating to the acquisition. I hope that hon. Members will be supportive of parties being able to apply to the Secretary of State for a validation notice, and that they will see clause 16 as part of our business-friendly approach to the investment screening regime.

[Dr Whitehead]

This is more of a slightly extended intervention than a speech. The Minister has set out very clearly what the clause means and how it is to be operated, but I am not sure that he completely covered what the opinion of the Secretary of State may consist of. I am looking at subsection (8), which refers to the Secretary of State’s opinion that

“there has been no material change in circumstances since a previous validation application in relation to the acquisition was made.”

My concern is that the words “material change” are potentially subjective. That may be overridden by the fact that it is

“in the opinion of the Secretary of State”,

but there is no definition of what a material change might be considered to be, and what the boundaries of a material change consist of.

The provision does not say “no change”; it says “no material change”. Does the Minister consider that that is safe enough, in terms of the Secretary of State’s opinion overriding the material change, or does he consider that the subjectivity of a material change is potentially actionable if the Secretary of State were to say that there has been no material change, but somebody decided that the Secretary of State’s opinion was not reasonable or proportionate in the context of what has happened to a particular company?

[Nadhim Zahawi]

I think the hon. Gentleman has answered his own question. Obviously, I do consider that the Secretary of State’s ability on the opinion is safe.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Retrospective validation of notifiable acquisition following call-in

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Chi Onwurah]

I thank the Minister for that intervention, and we will not oppose clause stand part.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Power to require information

[Dr Whitehead]

I beg to move amendment 20, in clause 19, page 12, leave out lines 24 to 27.

This amendment seeks to broaden the Secretary of State’s powers to require information.

[The Chair]

With this it will be convenient to discuss amendment 21, in clause 20, page 13, leave out lines 17 to 20.

This amendment seeks to broaden the information gathering powers of the Secretary of State, in specific regard to witness attendance.

[Dr Whitehead]

I ought to explain to the Committee that the Opposition are under some multi-tasking pressures this afternoon, Mr Twigg. I should have been in the previous debate in the main Chamber on the future of coal, in my role as energy Front-Bench spokesperson for Labour. I managed to factor that job out to somebody else in order to be here in the Committee this afternoon, and I am sure that the Committee is delighted to hear that. Unfortunately, there was no such luck for the shadow Minister, my hon. Friend the Member for Newcastle upon Tyne Central.

[Katherine Fletcher (South Ribble) (Con)]

I thank the hon. Gentleman for highlighting that our time is precious in the House. I, too, was hoping to be in the future of coal debate, to highlight the importance of the West Lancashire light railway. I thank him for bringing it to the attention of the Committee.

[The Chair]

I think we should stick to the business.

[Dr Whitehead]

I just wanted to explain the musical chairs that have gone on this afternoon, Mr Twigg.

[The Chair]

We are very grateful.

[Dr Whitehead]

The amendments relate to clauses 19 and 20. Amendment 20 might be regarded as slightly unusual, as it seeks to remove a number of sentences in the Bill: to be precise, lines 24 to 27 on page 12—it would remove clause 19(2), while amendment 21 would remove clause 20(2). The Minister might be saying to himself that Oppositions usually try to restrict Ministers’ powers, yet here we are trying to extend their powers through these amendments. I want to explain why we think that is important.

We want to hear from the Minister why he thinks those particular paragraphs should remain in the Bill, and how the restriction that they place on the Secretary of State’s activity is advantageous to the Bill’s main purpose. The paragraphs that the amendments would take out relate to the power to require information and the power to require the attendance of witnesses and seek evidence. I am sure that hon. Members can read clause 19 for themselves, but I will point out the key part:

“The Secretary of State is not to require the provision of information under this section except where the requirement to provide information is proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”

That is to say that unless it can be, or is, established that the requirement to provide information is proportionate to what the Secretary of State wants to do under the Act, the Secretary of State is not able to require the provision of information. That is effectively what the clause states.

We have already heard during evidence to the Committee that there may well be a complex web when it comes to getting information and working out what is and is not relevant, particularly if a hostile power or body is seeking to take over a company or gain access to its information and IP. The information may well not consist of what it appears to consist of, or there may be a number of paths by which that information can be obtained.

From our expert witnesses we heard some interesting examples of things they thought looked rather far from the central activity of information provision. For example, on academic projects, in his expert evidence, Charlie Parton from the Royal United Services Institute told us:

“It is quite difficult to distinguish some of these and to know about them all, but a few weeks ago The Daily Telegraph did a story on, I think, Oxford University and Huawei’s commissioning of research. I think there were 17 projects. I looked at those, and I am not a technologist by any means, but some of them rang certain alarm bells.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6.]

He was suggesting that, of a number of those postgraduate and PhD projects, there were some that he might have put a question mark against and others not, but he was not sure which were which. Nevertheless he seemed to think that some of those research projects—although they were cited within the ordinary parameters of whatever the research project might be, and who might be collaborating with whom, and who might get what information out of that—might ring alarm bells. That was in terms of who was collaborating, how the information might be used and where it might be going.

[Peter Grant (Glenrothes) (SNP)]

I think I understand what the amendment is intended to achieve, but is not the hon. Gentleman concerned about the danger of almost explicitly building in a recognition that the powers in the Bill do not have to be used proportionately?

[Dr Whitehead]

The hon. Gentleman raises an important point. I will come to the word “proportionate” in a moment, because that is an important part of this clause. I hope I can satisfy him about my concerns about the word “proportionate”. He may want to come back when we have that discussion.

We heard from Sir Richard Dearlove, who said that,

“the Chinese are highly organised and strategic in their attitude towards the West and towards us. For example, some of the thousands of Chinese students who are being educated in Western universities, particularly in the UK and the United States, are unquestionably organised and targeted in terms of subjects”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 19.]

Before we go any further, perhaps I should say that I have nothing against Chinese students coming to the UK. On the contrary, I think that in general, Chinese students in UK universities is a very positive thing, and spreads a very good element of international learning into the process. I also think we might be reasonably confident that those Chinese students are getting as much from us, in terms of our way of life and our way of organising things, as we are from them. I do not think Sir Richard Dearlove’s point was partial towards Chinese students, but he made the point that he thought that some of those students may have targeted, or have been targeted towards, particular subjects and areas in the UK and the United States. Again, that is extremely difficult to find out and go forward on.

I am citing those particular expert witnesses in the context of this area of information, particularly concerning somebody—a company, an organisation, or indeed a state actor—that has hostile, malevolent intent towards the information that they have. It is not very likely that they will simply present that information in a ring binder with coloured markers, specifying where the various bits are; it is a very different process indeed. The clause therefore appears to very much limit the extent to which the requirement to provide information can be carried out, and it does so by requiring the provision of information to be proportionate to the use to which the information is to be put.

The word “proportionate” is very important here, and is potentially a real problem in terms of ensuring that the search for information that may be necessary by diverse means can be carried out properly. On the surface, looking at the ordinary language, one might say that the use of the word “proportionate” is a thoroughly good idea. If we apply the ordinary language test—what is the opposite of proportionate?—the opposite would be unproportionate; we would not want the Secretary of State to go about this in an unproportionate way. However, in legal terms, the word “proportionate” has rather a different context,

Proportionality as a legal term is a relative newcomer to the legal lexicon. It entered the legal arena—I am not saying that it had not been used before, but it was put forward as a concept around which a lot of other matters might turn—with the civil litigation reforms introduced in April 2013, known as the Jackson reforms. They covered the concept of proportionality in legal terms as it relates to costs in legal cases, but the question of proportionality was discussed in a wider context. The concept of proportionality, which had not been a particular issue in legal matters before, stuck itself firmly into the legal lexicon. Since then, there have been a number of debates about whether ways of apportioning legal costs were proportionate, even if they might otherwise be seen as reasonable.

Up until that point, the guidance on the issue of proportionality came from Lord Woolf in the Court of Appeal in—I am sure hon. Members will remember the case well—Lownds v. Home Office, where he concluded that if the legal steps that had been taken had been reasonable and necessary, the other party could not object to the cost of these steps on the grounds of proportionality. The test of reasonability and necessity overrode the question of the grounds of proportionality.

That is what changed in 2013 with the civil litigation reforms. An interesting commentary was made in an article published on 12 March 2014 in The Law Society Gazette, entitled “Proportionality and legal costs”—I am saying all this because I am not sure I will get the article to Hansard easily.

The author had this to say about the meaning of proportionality:

“However, the meaning of proportionality is not straightforward and the new rules do not provide clear guidance on how proportionality should be applied. The suggestion seems to be that a body of law will develop on a case-by-case basis until gradually the meaning will become clear. Until that happens, litigants, legal advisers and judges will have to guess at what costs will be considered proportionate in particular circumstances.”

--- Later in debate ---

[Nadhim Zahawi]

Riveting!

[Dr Whitehead]

Yes, it is. Only one Member has left the room, so we are still in good order.

[Peter Grant]

I fear that the hon. Gentleman is taking the definition of proportionality into a context very different from what is mentioned here in the Bill, because this is not about whether the costs of civil proceedings are justified by the likely outcome, or even how those costs should be divided among the parties.

My reading is that subsection (2) is there to prevent a future Secretary of State—obviously, no one in the present Government would ever do this—from imposing extremely onerous requirements on a business, when it was perfectly possible for the Secretary of State to do due diligence and do the checks he needed to do without that information’s being provided.

I have not heard anything from the hon. Gentleman that would explain why he wants that protection to be taken out. He has said a lot about Chinese students, who may or may not collectively be working against our national interest, but this clause does not protect against that. What does the hon. Gentleman have against the idea that the Secretary of State is not allowed to put unreasonable and onerous demands on businesses when there is no clear benefit to national security of those demands’ being made?

[Dr Whitehead]

I hope that the hon. Gentleman will bear with me a few moments longer. Having unpacked “proportionality” in legal rather than colloquial terms, I want to put it back into the clause and see how it works, as far as the concerns of the Secretary of State go.

Indeed, the hon. Member for Glenrothes has questioned what we want to do on this clause in terms of the colloquial understanding of “proportionality”. I have mentioned how “proportionality” has come into the legal arena, specifically in terms of costs. Nevertheless, “proportionality” is now loose in the legal arena, so there is an interesting area of debate about it in general in the legal arena. That is not necessarily solely attached to the question of costs and civil litigation.

The problem is that there is virtually nothing to define that wider issue of proportionality in case law at the moment. Placing that word back into this particular clause suggests to us that the Secretary of State is restricted considerably on how that information may be gathered. The hon. Member for Glenrothes talked about research projects and various other things listed to us by our expert witnesses. I emphasise that I do not want to undermine those research projects or the presence of Chinese students. All I want to underline from that is that, on occasions, the process of getting hold of information and requiring people to give evidence can be convoluted. Indeed, it may require seeking information by going down paths that are not immediately apparent. As I say, it is not a question of someone turning up with a ring binder of things that can be perused.

In this clause, it appears that the Secretary of State may well have denied him or herself the ability to get hold of information, because it states that it has to be

“proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”

But he or she will not know about that information until it has been obtained. If there are difficulties in getting hold of the information, he or she will never know whether it is useful for carrying out his or her functions, because there is already a limit on getting the information in the first place.

I have brought the rather wobbly legal status of proportionality into the debate because it is potentially actionable through an obfuscation or refusal to put information forward by those actors. An actor who was required to give information could say, “It appears to me, your honour, that this request for information is not proportionate.” Of course, the Secretary of State may have a different point of view about what is proportionate from the person who is required to give the information.

There is also a vagueness in the application of the term “proportionate”. Although we think we know what it means in common language, that is not the case in the courts. That could be an additional issue that affects the Secretary of State’s ability to get the required information to make a judgment, over and above the fact that he or she may not know that until the information has been collected. So there are two procedural problems in the clause.

The hon. Member for Glenrothes said to me, to put it bluntly, “What exactly are you driving at? Perhaps it is not a good idea to appear to enable the Secretary of State to act disproportionately.” Of course, that is not what we are saying. We know that the Bill is more or less a giant amendment to the Enterprise Act 2002. Indeed, if hon. Members look at the back of the Bill, they will see that that is the only Act amended by it. Several amendments are made to the 2002 Act, but that is it—it is still sited within that Act. That Act was drawn up before the civil litigation changes to proportionality were put in place. The test set out in that Act, which is not amended by the Bill, is one of reasonableness, which is well understood, widely commented on and pretty clear.

If hon. Members consult the 2002 Act, they will see in clause 55 that the Secretary of State, in terms of enforcement, shall take such action

“as he considers to be reasonable and practicable to remedy”.

Therefore, we are not saying that the Secretary of State by acting disproportionately should act unreasonably. We are suggesting that the test that should be carried out is one of reasonableness, and should be in this particular clause. As the Enterprise Act already does, that would indeed prevent the Secretary of State going on fishing expeditions and undertaking actions that are wholly disproportionate because they would be unreasonable in terms of the definition of the Act. Our suggestion is to stick by that definition, which would be good enough to restrict the Secretary of State under the different circumstance that we are in today, in terms of seeking information. At the same time, it would give the Secretary of State the ability to take a path—I have said it is often a convoluted one—to obtain information that can be judged and used for the purpose of this Bill. I hope that the Minister will be favourably inclined towards that slight, but constrained, addition to his powers under this legislation.

[Nadhim Zahawi]

I am very pleased to be able to respond to the hon. Member for Southampton, Test on these well-intentioned amendments. I assure him that the Government and the Secretary of State will not be relying on a ring binder with highlighted paragraphs, because we have some of the best security and intelligence agencies in the world that would input into that process. It is an absolute joy to see Her Majesty’s Opposition play such a constructive role in the scrutiny of legislation, and to hear such a thoughtful speech.

Amendment 20 would remove subsection (2) of clause 19, through which the Secretary of State will be able to request information only through an information notice, where such requirements to provide information are proportionate. I agree with the hon. Member for Glenrothes on the issue. We have debated the fact that it is actually up to the courts to interpret if a particular acquirer feels somehow hard done by as a result of the process, and that there is a process to go through. The requirement to provide information is proportionate to the use to which the information is to be put in carrying out the Secretary of State’s functions under the Bill.

Amendment 21 seeks to remove subsection (2) of clause 20. Clause 20 enables the Secretary to require the attendance of witnesses and the giving of evidence. Therefore, clause 20 is complementary to clause 19, as it provides, for example, for the Secretary of State to receive expert explanation in person from those involved in a trigger event where the information previously provided does not give sufficient clarity. Clause 20(2) has a similar effect to clause 19(2). It means that the Secretary of State will be able to request information only through an attendance notice where requirement to give evidence is proportionate to the use to which the evidence is to be put in the carrying out of his functions under the Bill.

In response to both amendments, and mindful of the time, I can say that it is our view that any power of the Secretary of State to require the provision of information under clause 19, or to require the attendance of witnesses under clause 20, must be proportionate—indeed, the information-gathering powers are already significant. The Secretary of State may require information from any person in relation to the exercise of his functions under the Bill, which includes various stages of the procedure both before and after the call-in power is exercised. This may include requiring the provision of personal and commercially sensitive information about the parties in relation to a trigger event. There is good reason to include the restriction that any information required by the Secretary of State is proportionate to the use to which it is to be put in carrying out his functions. It is important that there are the safeguards for business. I have to say that I did not expect to be in the position of arguing against greater powers for the Executive from the legislature. It is clear to me, though, that business confidence and our reputation for being open for investment require it.

I hope that I have provided sufficient points of reassurance on these matters, and encourage the hon. Gentleman to withdraw his amendment.

[Dr Whitehead]

I appreciate what the Minister has had to say. He is clearly confident that the fine print of this clause is not going to be a problem. I slightly beg to differ: I think it may be. I also wonder whether the Minister has considered the extent to which what is already there—or, should I say, what I think is already there—in the Enterprise Act 2002 effectively restricts the Minister in his actions, in much the same way as this clause does, except that the restriction is much clearer from a legal point of view. That is to say, by relying on the restrictions that are already in the Enterprise Act, the Minister would probably not act any differently from how he would under this particular clause, but by relying on that element of the 2002 Act, his actions would be far less potentially actionable.

Before the Minister gets carried away by the idea that the legislature, or in this instance the Opposition, is clamouring for the Secretary of State to have far more powers, that is not our case. Our case is that it would be rather wiser to restrict what the Secretary of State may do through clearer legal definitions, which are already there, than through the rather woolly definition that is in the Bill. Before the Minister goes home thinking, “I have free rein to do whatever I like now”, that is not so: it is not so according to the Enterprise Act 2002, and it is something we want to stand strongly by. We do not want to underscore the idea that the Minister can act unreasonably, especially since the phrase “acting unreasonably” has a long pedigree, both in terms of civil action and administrative law over a long period of time.

I am sorry that the Minister does not accept our case, with all the caveats on it, although it may be that he is less inclined to accept the case now that we have highlighted the fact that there are caveats on what the Minister can do. I do not think we want to press this amendment to a Division, but we do so rather more in sorrow than in anger, because we think this could have been a prudent way to proceed with this Bill.

[Matt Western (Warwick and Leamington) (Lab)]

As always, my hon. Friend is making important points. I was surprised to see the letter from the Chair of the Intelligence and Security Committee, which dates back to its 2013 report. Does my hon. Friend agree that if that Committee had been involved and consulted before this legislation was drawn up, some of the issues he is raising could have been brought out into the open and addressed better?

[Dr Whitehead]

My hon. Friend is right. I think that, because things have changed so substantially over the past decade or so, we tend to see things in a way that we may not have easily seen them just a few years ago. Indeed, the expert witnesses who were before us made considerable points on the question of how naive we had been on some previous occasions; we had not really taken into account some of the implications of what we were doing, because we did not have a clear picture of the consequences of those actions.

My hon. Friend is right—I suppose this is to some extent wisdom of the stairs—that if we could have considered things at that particular point the way we see them now, we would have expressed ourselves in much firmer and more watertight ways. However, I do not think the fact that we did not do so then is any particular excuse for continuing not to do so now. The idea that we may miss out on the ability to get proper information that can point us in the direction we want to go, albeit possibly by very roundabout means, and that we deny ourselves that particular possibility because we have written something in the legislation that stops us doing it does not seem to me to be fully learning the lessons that we might have done from 2013 onwards.

However, far be it from me to lecture the Minister or otherwise on the wisdom of these things; I am sure he is able to decide that subsequently for himself, just as I have challenged him about the wisdom of the Secretary of State’s investment agreements a little while ago concerning Bradwell. I am sure he knows in his heart that that is an appallingly naive thing to have done in those circumstances, and we might have thought differently had that taken place even today. That is the spirit in which we are moving this amendment. As I say, we do not wish to press it to a vote, but I hope the Minister will be able to consider those points and think about how this section might best be applied in the circumstances we have before us today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Nadhim Zahawi]

Clause 19 gives the Secretary of State the power to require the provision of information in relation to the exercise of his functions under the Bill. The Bill provides for an investment screening regime for national security purposes—a purpose that we all agree merits appropriate tools. As such, it is essential that the Secretary of State is able to gain access to information to arrive at decisions that are fully informed. This clause provides for an information notice that the Secretary of State may issue to require any person to provide information that is proportionate to assisting the Secretary of State in carrying out his functions.

Any information notice may specify a time limit for providing the information and the manner in which the information must be provided. An information notice must specify the information sought, the purpose for which it is sought and the possible consequences of not complying with the notice. There is a range of scenarios in which the Secretary of State will need to require the provision of information, and I will provide some examples to illustrate them.

The first scenario is when the Secretary of State has reason to suspect that a trigger event that may give rise to a risk to national security is in progress or contemplation. That could be where an acquisition has not been notified but the Secretary of State becomes aware of it through market monitoring. In that situation, this clause enables the Secretary of State to require the provision of further information to inform a judgment on whether to call the acquisition in.

Secondly, when a party has submitted a voluntary or mandatory notification to the Secretary of State and that notification has been accepted, the Secretary of State may require additional information from the parties to decide whether to call in the trigger event. Thirdly, when a trigger event has been called in, the Secretary of State may need to require that parties provide further information to help to inform decision making. Information notices will allow the Secretary of State to gather evidence to support accurate and timely decision making. Hon. Members will agree that it is entirely proportionate for the Secretary of State to have recourse to this power as part of the investment screening process provided for in the Bill.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.

Clause 20

Attendance of witnesses

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Nadhim Zahawi]

I suspect that the Government will accommodate whichever way is secure and provides the evidence.

I am sure that hon. Members will agree that the clause is crucial in allowing the Secretary of State to consider the fullest range of information in order to make informed decisions under this regime.

[Dr Whitehead]

The Minister has given a good exposition of what the clause is about: the attendance of witnesses. I note that, as he said, the witnesses are required to give evidence on the equivalent level of civil proceedings before the court—as the clause states:

“A person is not required under this section to give any evidence which that person could not be compelled to give in civil proceedings before the court.”

--- Later in debate ---

[The Chair]

If the Minister wishes to make an intervention, that is a matter for him.

[Dr Whitehead]

I wonder if the Minister might intervene briefly, just to put my mind at rest.

[Nadhim Zahawi]

I think I have made very clear how these notices will work. The judicial procedure is open to any party that feels hard done by in any way by this Bill.

[Dr Whitehead]

I thank the Minister for confirming what I thought, which is that this can be challenged post hoc but not at the point of giving evidence. That is what I understand the Minister to have just said—but hey, I could be wrong. That is the clarification we wanted. On the issue of witness attendance, it is important that the Secretary of State is able to specify a time and that the evidence is undertaken at a level commensurate with civil proceedings. We do not oppose the clause standing part of the Bill, given the Minister’s clarification on proceedings involving witnesses.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Information notices and attendance notices: persons outside the UK

Question proposed, That the clause stand part of the Bill.

[Nadhim Zahawi]

Clause 21 makes provision in respect of the persons on whom the Secretary of State may serve an information notice or an attendance notice outside the United Kingdom. The clause applies in relation to the two earlier clauses. Clause 19 provides the power for the Secretary of State to obtain information either before or after the call-in power is exercised. Clause 20 gives the Secretary of State the power to require the attendance of witnesses to assist him in carrying out his function under the Bill.

Those outside the United Kingdom to whom an information notice or attendance notice may be given are clearly set out in clause 21, which is technical in nature. The purpose is to ensure that certain categories of persons with a connection to the United Kingdom are caught by the information-gathering powers, even if they are outside the UK. These categories of persons are UK nationals, individuals ordinarily resident in the UK, bodies such as companies incorporated or constituted in the UK, and persons carrying on business in the UK. Perhaps more importantly, notices may also be served on persons outside the UK who have acquired, or who are in the process of or are contemplating acquiring, qualifying UK entities or qualifying assets that are either located in the UK or otherwise connected to the UK. In practice, this means that notices may be served on most parties from whom the Secretary of State may wish to require information or evidence.

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[The Chair]

Well, the Minister has not intervened. I call Dr Alan Whitehead.

[Dr Whitehead]

Briefly, we fully understand the purpose of the clause. It is obviously necessary to ensure that witnesses, wherever they are, if they have a relevant interest in these matters, should be made available to give evidence. I share some of the concerns of the hon. Member for Glenrothes about how workable it might be. I particularly wonder whether subsection (2) includes UK overseas nationals. That is particularly relevant to some of our discussions earlier today. I see in the previous clause that if someone is a UK citizen and domiciled in the UK, they get their bus fare paid if they live more than 10 miles away.

[Nadhim Zahawi]

Quite right.

[Dr Whitehead]

But apparently there are no international flight payments as far as overseas witnesses are concerned. I do not know whether the Minister has that in mind, but I note a big difference between the two clauses. If such witnesses could get some payment towards their attendance in the UK, that might resolve some of the problems that the hon. Member for Glenrothes suggested—provided it is economy class, obviously.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Michael Tomlinson.)

National Security and Investment Bill (Ninth sitting)

Alan Whitehead Excerpts

Committee stage & Committee Debate: 9th sitting: House of Commons
Tuesday 8th December 2020 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move amendment 23, in clause 24, page 16, line 26, at end insert—

“(6) The Secretary of State must publish each year the aggregate amount of days included under subsection (4), the number of called-in events for which such days are included, and the number of times information notices are given for each called-in event in the report required at Clause 61.”

This amendment would require the Secretary of State to publish annual reports of how many information notices were given, how many days were added as a result of them, and how many notices were given in each relevant trigger event.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Dr Whitehead]

The amendment follows on from a number of concerns that have been raised about small businesses, their role in the production of information and attendance notices, and the effect on those small businesses; and about the potential development of a regime that is far more onerous than those in other parts of the world as we pursue the proper purpose of dealing with information and attendance, and shining a light on the activities of companies that may need to declare what they are doing in a reasonably timely way.

I am reminded of the question of reasonable speed and efficiency, as far as notification and evidence are concerned, as our expert witnesses mentioned earlier in our proceedings. Michael Leiter from Skadden, Arps, Slate, Meagher and Flom LLP stated:

“I think it will be an issue unless you are confident that small-scale, early-stage investors can have their transactions quickly reviewed within roughly 30 to 45 days. If it is longer than that, that will make the investment climate, I think, worse than other competing markets. I think that could have an impact.”––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November 2020; c. 47, Q53.]

The question in front of us is how we ensure that that happens, or at least shine a light on the process and monitor it. The amendment would require the Secretary of State to publish each year the aggregate number of days included under subsection (4), the number of called-in events for which such days are included, and the number of times information notices are given for each called-in event in the report required in clause 61.

We have not debated clause 61 yet, but it requires the Secretary of State to produce an annual report of quite extensive proportions on proceedings generally under the Act, as it will be. Hon. Members will note that clause 61 provides for what one might call a quantity report. It will record expenditure, the number of mandatory notices accepted and rejected, the number of voluntary notices accepted and rejected, the number of call-in notices, and the number of final notifications. It is an annual numbers report. The amendment would add quality to that quantity.

[Chi Onwurah]

I thank my hon. Friend for giving way and for his excellent comments on the amendment. Does he also recognise that the report under clause 61 is the one that the Minister just described as providing accountability to small businesses regarding their concerns about procedure or how they might be affected by the Bill? Does my hon. Friend therefore agree that adding quality to quantity as a function of that report would be a truly important step?

[Dr Whitehead]

My hon. Friend makes an important point about the overall effect that shining a light on proceedings, and accounting for them, will have. She emphasises that it will be important for small businesses—I will come to the mechanisms by which this might be done—to see how effectively things are run and organised, ideally in their own interest when it comes to the question of turnaround in proceedings. I quoted one expert witness, but a number of them emphasised the point about turnaround and the problems that might arise for small businesses as a result of lengthy periods of consideration.

My hon. Friend emphasises what I want to emphasise, which is that the report under clause 61 does not enable anyone to assess efficiency and effectiveness. A reader of that report could look at what has occurred and what numbers have gone out, but it would not allow them to consider the efficiency with which those numbers have been arrived at. Our amendment would make that possible. The report under clause 61 would be on the numbers, but the amendment would make it much easier for a reader of the report to interrogate the numbers, and it would therefore add quality to quantity.

[Katherine Fletcher (South Ribble) (Con)]

The hon. Gentleman mentioned quality and quantity. I have been reflecting on the fact that today is a relatively momentous day, with the first vaccines going into arms. The Committee is lucky enough to have with us the Minister, who has probably been up all night doing that. Although I appreciate that I am not quite speaking to the amendment, I wanted to talk about the quality and quantity of vaccination and of the Minister’s time.

[The Chair]

I am not sure that the Minister has been administering the vaccines himself.

[Dr Whitehead]

I am grateful to the hon. Lady for that interestingly injected intervention—[Laughter.]

[Nadhim Zahawi]

More!

[Dr Whitehead]

It is the way I tell them.

[Chi Onwurah]

It is important that the Committee recognises the momentous occasion of the first use of the vaccine in this country and congratulates the Minister. It is also important that we reflect on the fact that our fantastic NHS and key workers, rather than the Minister himself, made it possible.

[Dr Whitehead]

Indeed. I was about to reflect on the appointment a long while ago—in another time and another Administration, when there was a severe and prolonged drought—of a Minister for drought, the right hon. Denis Howell. The Minister’s success was amazing: within about three days of his appointment, it poured with rain.

[Nadhim Zahawi]

rose—

--- Later in debate ---

[Dr Whitehead]

I absolutely endorse that. I also congratulate the Minister on the fact that things are really happening on his watch. I do not necessarily make the parallel with drought and rain falling down, but I wish him every success with the programme that is now rolling out, which started remarkably quickly after his appointment.

I want to highlight the difference that the amendment would make between quality and quantity. In practice, the decisions about issuing information notices and attendance notices will be taken by the new BEIS investment security unit, although I have to say that we have not heard much information about that unit—its resourcing, practice or key performance indicators. The operation of the entire new regime, its impact on the UK’s status as a place for investment in high-value start-ups—the impact assessment states that about 80% of transactions in the scope of the mandatory notification will affect start-ups and small and medium-sized enterprises—and its impact on national security will depend on the competence of the new unit when it is set up. So far, the Government have laid out limited plans for securing the capacity and capability it needs. In that context, the extent to which the unit will be able to act efficiently and effectively is a potential concern. To some extent, that is a question of its resourcing and of the way it is set up and required to work.

At the moment, we have no method of assessing how the unit is doing in terms of carrying out what the Bill wants it to do. The amendment, among other things, would bring much greater accountability to the unit to ensure that it carries out an efficient and effective national security screening regime. We have to remember that efficiency is about not just how well the unit goes about its business, but what judgments it makes and, for example, whether it gives multiple information notices out to businesses, as it can under the Bill. Each time a successive notice is given out, it would stop the clock on time limits and extend the period in which that overall examination would take place.

--- Later in debate ---

[Chi Onwurah]

My hon. Friend is making a really important point, because we all know that what is measured throws a light on the process behind it. If these orders are not measured, I am concerned that they will effectively be a way for a hard-pressed department to gain more time. We have all seen during this pandemic—I refer not least to responses to parliamentary questions—how pressure on resources has increased timescales in the operation of Government Departments. This amendment would shine a light on that and prevent such misuse.

[Dr Whitehead]

My hon. Friend makes an important point on the amendment about how we undertake the difficult job of making sure something is efficiently and effectively carried out, while not taking the wheels from under the organisation as it does its job. That is a difficult process to undertake, because information notices are clearly important, as are attendance notices, and we should have no mechanisms in the Bill that prevent or undermine the ability of the organisation charged with giving notices out to do that properly. That is a given as far as the process is concerned.

However, it is equally important that substantial light is shed on how that process works in practice and whether, over a period of time, that process might be seen not to be working as well as it should be in combining the necessities of those notices with a reasonably fair approach, particularly as far as small businesses are concerned. Managing that metric properly while enabling the unit to carry out its job properly is quite a task.

The amendment would enable us to undertake that task by requiring the recording of quality—that is, the numbers of notices given out, the “aggregate amount of days” that those notices have consumed and the

“number of called-in events for which such days are included”.

By enumerating those numbers and putting them together in each report, we can see whether the unit is doing its job well overall, could improve or could undertake activities to make sure that there was a balance between efficiency, effectiveness and fairness in the whole process.

Indeed, it is not just small businesses that might welcome having a light shone on what is being done to them; it would also be a potentially important tool to allow the Secretary of State to see what the unit, which is essentially carrying out the Secretary of State’s work, would be doing over each period of the year. The Secretary of State could use that reporting mechanism as a way of ensuring that the unit is doing what it should and that the principles we have set out in the Bill for the good expedition of information and attendance notices continue to operate in the best possible way over a period of time.

Adding quality to the quantity in the report is good news all around. It enhances the Secretary of State’s ability to manage his or her own Department. It shines a light for those bodies that ought to be co-operators in the process, but that may sometimes feel themselves as victims in the process. It shines a ray of light on the operation of the organisation itself—the unit carrying out these activities—and is therefore a welcome addition to its activities. That will keep it considering the efficiency and effectiveness of its operations in the knowledge that the information will be stuck in a report each year and will be scrutinised in terms of the unit’s activities in carrying out the wishes behind what will be the Act.

The amendment would be a constructive and careful addition to the reporting process, and one that would considerably enhance the effectiveness of the Bill. I hope the Secretary of State can consider it in the light in which it is intended, which is as an addition to the Bill, and not as seeking to undermine the effectiveness of the process or the activities of the unit itself.

[Nadhim Zahawi]

I am grateful to the hon. Gentleman. I intend to speak first to clause 24 stand part and then turn to amendment 23. Clause 24 concerns the Secretary of State’s information-gathering powers in clause 19 and his power to require the attendance of witnesses in clause 20, with the requirement that national security assessments are completed within a defined period, which appears in clause 23.

Clause 24(4) ensures that the clock is stopped on the assessment period while the Secretary of State waits for information or for the attendance of witnesses, as required through the issuance of the relevant notices. That helps to avoid the Secretary of State being timed out of properly assessing a case simply because someone fails or refuses to provide information or to attend to give evidence.

Amendment 23 seeks to require that the annual report, provided for in clause 61, includes additional information relating to how often subsection (4) is engaged. In particular, it seeks to require the Secretary of State to include the aggregate number of days on which the clock is stopped as a result of the Secretary of State awaiting the provision of information through clause 19 or the attendance of a witness through clause 20. It also seeks to include the number of call-in days, and the number of times information notices are given for each call-in.

Our response has three parts, though the Committee will be relieved to hear that each part is distinctly and deliberately brief. First, clause 24(4) is entirely necessary to help to ensure that the Secretary of State is not timed out. Secondly, clauses 19(1) and 20(1) stipulate that the requirements to provide information or evidence must relate to the Secretary of State’s functions under the Bill. In this context, that means that they have to be relevant to assessing the trigger event and making a decision on it.

The Secretary of State will furthermore need to comply with public law duties when issuing an information notice or attendance notice, which would preclude him from doing so for an improper purpose, not that he would ever contemplate such a thing. A decision to issue a notice would also be subject to judicial review. There are therefore appropriate legal safeguards on the use of information notices and attendance notices. Finally, clause 61 does not preclude the Secretary of State from publishing such information should it later prove a helpful metric for assessing the regime.

[Nadhim Zahawi]

I am grateful to the hon. Gentleman for his ingenious attempt at augmenting this excellent Bill, but for the reasons I have just set out I see no grounds for including the amendment. I therefore ask the hon. Member for Southampton, Test to please withdraw it.

[Dr Whitehead]

I am not sure that the Minister has given sufficient consideration to what I thought were genuine points concerning, as I set out, both quality and quantity. He says that it will be possible, if the Secretary of State thought it a good idea, to include some of those points in the annual report anyway. That comes back to some of our “may” and “must” arguments. The Secretary of State might, if they want to, decide to do that in an annual report, but the circumstances under which that happened could be that they wanted to say in the report, “The unit is working brilliantly, everything is hunky dory and terrific, and here is the evidence.” Conversely, were the unit not working very well, they might decide not to put those things into an annual report.

Although the Secretary of State would have the ability to add something to the annual report, if they did not want to do it, or they felt that it was a better idea to put such things under the table, away from the light of day, no one else would ever know about it—unless, as the hon. Member for Aberdeen South suggested, some sort of undertaking were given that those numbers were available on request to hon. Members. The formula that the Minister has put forward falls well short of the mark in meeting the three tests that I have put forward for quality plus quality: that the report should be of benefit to the Minister, the unit, and the firms and companies that may be affected. The Minister addresses only one of those three.

[Chi Onwurah]

Given that, as my hon. Friend sets out, this information should be of use to the unit’s internal workings and that it would, I hope, be readily available in the Department, as part of the workflow in modern-day information management systems, can he think of any reason why the Secretary of State would not want to make it available?

[Dr Whitehead]

I cannot immediately, because as I mentioned, having that information available in some way or other—we suggest it should be in the report—is a win, win, win all round. It is useful for everybody and potentially important for some.

I do not suggest for a moment that there might be anything untoward about hiding that information away, and I am sure that the Minister absolutely would not want that to happen. However, under the mechanism he has set out and his argument for why this amendment is unnecessary, that is precisely what could happen, which is not something that we should feel very happy about. I hope that, as a minimum, the Minister will address that point, along with the intervention by the hon. Member for Aberdeen South about this information being freely available one way or another, whether in a report or not. An overwhelmingly better idea would be simply and unobtrusively to add it to the report, so that we knew it would come out and could refer to it.

I am not sure whether we would seek to divide the Committee on this—[Interruption]—but I think we might. Like my hon. Friend the Member for Newcastle upon Tyne Central, I am slightly at a loss as to why this provision would not be acknowledged and put in the Bill, or something close to it, one way or another. I invite the Minister to intervene to say whether the disclosure of this information on a regular basis would happen in the report or whether he will give an undertaking to ensure that happens in passing this legislation.

[Nadhim Zahawi]

We have very carefully considered the types of information that would be helpful to investors. The direction of travel—this was the question raised earlier by the hon. Member for Aberdeen South—for Parliament and the public was to include that information in the annual statement. The Committee should also note that the list does not prevent us from adding other relevant non-sensitive information, as I mentioned earlier. I hope the hon. Member will see fit—I know there is a slight disagreement on the shadow Front Bench—to withdraw the amendment.

[Dr Whitehead]

I think there is not so much disagreement as puzzlement.

[Nadhim Zahawi]

I heard the hon. Gentleman say that he was going to withdraw the amendment, then the hon. Member for Newcastle upon Tyne Central said, “No, we’re going to put it to a vote.”

[Dr Whitehead]

To be precise, I said that I was not sure whether we should divide, because we are a little bemused as to why, one way or another, that information should not be within the report or the Minister could not make a firm statement that it will be regularly available, and the Minister has not said either in his response.

[Chi Onwurah]

My hon. Friend is making an excellent point. Does he agree that it would be helpful if we could be sure that the Minister’s accuracy were not as low when reporting my hon. Friend’s words as when reporting on the functioning of the clause?

[Dr Whitehead]

To be kind, I think the Minister was reflecting on what the motives for our brief discussion about dividing might have been, rather than attempting in any way to put words in people’s mouths that were not there.

I will put Committee members out of their misery. I do not think there was sufficient reassurance in the responses that have been given, and I think we ought to record that we would like the amendment to be in the Bill. Therefore, we will divide the Committee.

Question put, That the amendment be made.

--- Later in debate ---

[Nadhim Zahawi]

I turn to clauses 25 to 28, which I shall treat together, as they all relate to orders that the Secretary of State may make in relation to notifiable cases under the national security and investment regime. It is important that, during any national security assessment following a trigger event being called in, parties do not act in a way that undermines the assessment or any remedies that might be imposed at the end of it. Clause 25 therefore gives the Secretary of State the power to impose requirements for the purpose of preventing, reversing or mitigating actions that might pre-empt the regime through what is known as an interim order. In practice, this could include requiring that the parties do not complete a trigger event until a final decision has been issued, or, where the Secretary of State is concerned about access to sensitive intellectual property, an order could be used to prohibit the intellectual property from being transferred or shared pending the outcome of the assessment. The power is necessarily flexible to allow conditions to be tailored to particular cases and particular risks, although it rightly comes with important safeguards.

First, interim orders may be made only during the formal assessment period when a trigger event has already met the legal test to be called in for a full assessment. The Secretary of State may not, therefore, impose an interim order before he has called in a trigger event, which I hope hon. Members will agree is a significant bar to meet in and of itself. Secondly, the Secretary of State must reasonably consider that the provisions are necessary and proportionate for the purpose of preventing, reversing or mitigating a pre-emptive action. Any decision to make an order would be open to judicial review.

Thirdly, as an interim measure it is inherently time limited. In a particular case, there might be a reason why a requirement is not needed for the full duration of the assessment period. Consequently, a specific end date might be given in an order. Furthermore, unless an earlier date has been specified in the order, or the order has been revoked, an interim order will cease to have effect once the Secretary of State has given a final notification or made a final order decision.

The Bill also includes specific provisions for interim orders to be kept under review and for those subject to them to request that they be varied or revoked. That is provided for in clause 27. Without clause 25, it would be possible for a dangerous acquisition outside of the mandatory sectors to be completed before the Secretary of State has an opportunity to assess it properly. Indeed, the Government expect a genuinely determined hostile actor to seek to do just that.

Clause 26 provides for the Secretary of State either to put in place effective remedies to counter national security risks discovered during an assessment of a trigger event, or to clear a trigger event where no national security risk is found. The clause therefore provides for both final orders and final notifications, and subsection (1) requires the Secretary of State either to make a final order or to give a final notification before the end of the assessment period. Final notifications act as notice to parties that no further action is to be taken under the Bill in relation to the call-in notice.

Final orders seek to address any national security risks found during an assessment. Those will not be arbitrary and will be subject to a strict legal test. First, the Secretary of State must be satisfied on the balance of probabilities that a trigger event has taken place or is in progress or contemplation and that this would give rise to a national security risk if carried into effect. Secondly, the Secretary of State must reasonably consider that the provisions of the order are necessary and proportionate for the purpose of preventing remedy or mitigating the risk.

The permitted contents for final orders are set out in subsection (5). This includes the power to put certain conditions on a trigger event before it can proceed, or for it to remain in place. The subsection also gives the Secretary of State the power to block a trigger event or, where it has already taken place, require that to be unwound. I make it clear to hon. Members that such a course of action would be a last resort. In the nearly two decades since the Enterprise Act 2002 came into force, no Government of either colour has blocked a deal on national security grounds. However, it is still a necessary power to have. There might be some cases where a trigger event poses such an acute risk that it cannot be allowed to proceed in any form, and it would be irresponsible to leave our country unprotected.

Clause 27 provides important safeguards on the continued operation of interim orders and final orders. First, it requires the Secretary of State to keep interim and final orders under review to ensure that they are relevant and proportionate. Secondly, it empowers him to vary or revoke such orders. Thirdly, it compels him to consider any request to vary or revoke an order as soon as practicable after receiving such a request.

[Dr Whitehead]

Does the Minister consider that the arrangements in clauses 25 to 28 for variations, revocations and exemptions are a proper subject for inclusion in an annual report? As he will observe, clause 61 on the annual report states that the

“The Secretary of State must, in relation to each relevant period—

(a) prepare a report in accordance with this section”.

Although not specifically covered by the word “must” in the clause, does the Minister consider that the arrangements in these clauses are a proper subject for the annual report?

National Security and Investment Bill (Tenth sitting)

Alan Whitehead Excerpts

Committee stage
Tuesday 8th December 2020 Public Bill Committees

[Nadhim Zahawi]

I am very happy to come back to the hon. Lady on that point.

Clause 45 ensures that the Government are not unduly burdened with costs relating to the imposition of monetary penalties, which can be expensive. The clause enables the Secretary of State to recover the associated costs from those who are issued with a penalty notice. The amount demanded will depend on the circumstances of each case, but the Secretary of State will need to comply with public law duties in imposing the requirements and in fixing the amount. In particular, the amount will need to be proportionate.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Pursuant to the intervention of my hon. Friend the Member for Newcastle upon Tyne Central, will the Minister and his Department not only think about, but make a positive decision on, where the penalties go? I have in mind, as he will know, penalties relating to misdemeanours by electricity supply companies.

Those are routinely collected and distributed for good purposes—to keep people’s electricity bills down, among other things. Maybe the Minister will have a similar scheme that could be a good home for those penalties, so that they are turned around and put to good use.

[Nadhim Zahawi]

I am quite rightly grateful to my brilliant Whip for reminding me that the Bill contains the provision that the moneys be paid into the Consolidated Fund.

Clause 46 requires the Secretary of State to keep cost recovery notices under review and provides him with the power to vary or revoke a cost recovery notice as he considers appropriate. That will reassure businesses and other persons that cost recovery notices remain appropriate. Finally, it is important that the Secretary of State be able to recover the associated costs from those who are issued penalty notices. Clause 47 therefore provides for an effective range of consequences for non-compliance with a cost recovery notice, including the charging of interest, and acts as another important tool in the Secretary of State’s enforcement powers. I hope that the Committee will appreciate the rationale for clauses 40 to 47, which are essential for the effectiveness of the regime.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clauses 41 to 47 ordered to stand part of the Bill.

Clause 48

Enforcement through civil proceedings

Question proposed, That the clause stand part of the Bill.

[Nadhim Zahawi]

The regime relies on parties complying with information notices and attendance notices, and with interim orders and final orders. Those are crucial levers that the Secretary of State will use to identify, assess and address national security risks, so it is vital that he has appropriate powers to ensure that a person who is given such an order or notice complies with the requirements as set out.

The clause provides the Secretary of State with the power to bring civil proceedings for an injunction or other remedy to require compliance. The power applies whether or not the person is in the UK. Failure to comply with an order made by the court in those circumstances is likely to be considered contempt of court. We should not forget that any failure to obey an information notice or attendance notice, for example, could result in the Secretary of State having insufficient information to decide whether to call in an acquisition or carry out an effective national security assessment. Breaching the requirements of an interim order or final order may undermine the assessment process or harm national security.

Above all, I hope that the Committee will agree that the clause further strengthens the Secretary of State’s enforcement powers, playing a key role in ensuring the efficacy of the regime.

Question put and agreed to.

Clause 48 accordingly ordered to stand part of the Bill.

Clause 49

Procedure for judicial review of certain decisions

[Dr Whitehead]

I beg to move amendment 26, in clause 49, page 30, line 31, leave out “28 days” and insert “three months”

This amendment would extend the period within which applications for judicial review may be made from 28 days to three months.

[The Chair]

With this it will be convenient to discuss clause 49 stand part.

[Dr Whitehead]

I have not spoken other than to intervene, so the amendment gives me a brief opportunity to commend the heroism of my fellow Committee members for carrying on proceedings when most of them wish they were somewhere else because they are too cold. I hope that the authorities will consider ameliorative steps so that we can be a little warmer when the Committee meets on Thursday. Alternatively, Sir Graham, we may need to invent a new Standing Order by which the Chair can rule on whether Members have permission to remove their coats, rather than the customary jackets, before the beginning of proceedings. I am sure that would not be necessary if reasonable action were taken.

The amendment concerns what is referred to in the clause title: the procedure for judicial review of certain decisions. It would be helpful if the Minister clarified what the clause means for other decisions that are set out in the Bill but not included in the provisions for judicial review set out in this clause.

--- Later in debate ---

[Nadhim Zahawi]

I am happy to write to the hon. Gentleman on that, but my understanding is that individuals or entities that feel that they have been wronged by the actions of the Secretary of State can JR the Secretary of State.

[Dr Whitehead]

I thank the Minister for that clarification, which appears to suggest that the whole of the Bill, or the decisions in it, are in principle covered by the ability to bring a judicial review. He will know that under the Civil Procedure Rules 1998 there is some pretty clear guidance about the time limits for judicial reviews. Indeed, the CPRs state that claims must be lodged promptly and, in any event, no later than three months after the grounds to make the claim first arose, unless the court exercises its discretion to extend. The judicial review rules are pretty much governed by that three-month time limit.

In the clause, the framers of the Bill have taken out certain elements of the Bill. I mentioned some of them, including the attendance of witnesses and the power to require information. They have said that, while no new procedure has been put in place for reviewing certain decisions—that is, the normal rules of judicial review apply—the big difference is that any action must be brought within 28 days of the event, and not within three months, as is the case in the standard judicial review arrangements.

[Chi Onwurah]

I thank my hon. Friend for the excellent points that he is making, which give cause for concern and thought. Given the Minister’s earlier assertion that there was no need for a complaints procedure with regard to the provisions of the Bill, does my hon. Friend agree that neither the reporting requirement, which we have identified will not mean reporting on everything, nor the judicial review provisions, which we have now identified are not reviewable in the normal timescales for everything, will be sufficient to address the concerns of small and medium-sized enterprises? Does he also agree that that will clearly not be the case given the complexities that he has outlined?

[Dr Whitehead]

My hon. Friend makes an important point about the extent to which justice in such circumstances might be like the Ritz: open to everybody, but not necessarily quite as open to some as to others.

Certainly, that is the case with the time reduction applied to those particular things in the clause. Nevertheless, that reduction has to fit in with judicial review rules for everything else. That is, no new procedure is set out in the Bill, which is otherwise reliant on the standard judicial review procedures.

Hon. Members will see that elsewhere the civil procedure rules refer to the provision of skeleton arguments before a judicial review can be heard. Under those rules, such arguments must be undertaken within 21 working days of a hearing, which in practice means close to the 28 days in the clause, which are not as working days. Given the adherence to the rest of the judicial review rules, therefore, the 28 days can conceivably reduce to virtually nothing the period in which a person may apply for a claim to judicial review under the Bill.

Furthermore—this is what I think my hon. Friend was alluding to—given that brief timescale, it is important and I would say necessary to have a clear idea of when the event that caused the 28-day timescale to come in took place. I turned up an interesting article, one of Weightmans’ “Insights”, from October 2013, entitled “Is the clock ticking? The importance of time limits in judicial review”. The point made in that article is that getting the point at which the clock started ticking absolutely right is important.

I am not certain whether all the events specified in the clause have identical starting points. That is, is the starting point a trigger mechanism? Is the starting point the issuing of a notice? Is the starting point the receipt of a notice? If the receipt of a notice is delayed—and the judicial review procedure very much hinges on the actions of the Secretary of State in issuing notices—my hon. Friend can imagine that, for a small business, that could be very confusing and possibly difficult to adhere to. If it turns out that the point at which the 28-day clock starts to tick varies according to different provisions of the clause, descibed as the particular provisions that the Secretary of State has reserved for the 28-day reduction in judicial review, that will be pretty difficult for people to adhere to properly.

Judicial review is a very important part of the process; not that it would often be used, but it is important that it is there in the Bill. It is also important that the people affected by the arrangements have access to the judicial review process. The Government obviously recognise that by putting it into legislation. I am concerned not about the fact that it is in the legislation—it should be—but about whether placing certain areas of concern in the Bill under that 28-day heading has been completely thought out. If it has been completely thought out, why has it been thought out in that particular way? What is it about those things that requires the normal rules of judicial review to be reduced from three months to 28 days?

[Chi Onwurah]

I am sorry to interrupt my hon. Friend while he is in full flow, and I am immensely grateful for what I am learning about the intricacies of the judicial review process and the importance of understanding the initial timing and what the trigger event was. He mentioned that skeleton hearings must take place within 21 working days. Can he say a little bit more, for my understanding, about how those skeleton hearings affect the following timetables in the process?

[Dr Whitehead]

My hon. Friend somehow suggests that I have knowledge and expertise beyond my calling. I should say that I am not a lawyer, so I have only limited guidance to give her on this. However, from my reading of civil procedure rules, there are certainly elements, which I think relate to working days in some instances and to simple time in others, that are sub-time limits within the overall limit for judicial review. Civil procedure rules give those sub-limits as working practices for the operation of judicial review overall. The skeleton argument rule requires skeleton arguments to be put to the court within a certain period before the hearing takes place. If the hearing is delayed for a long time after the initial event, the 21 days apply before the court hearing. However, if the court hearing is close to the event, those sub-rules within the overall judicial review rules could affect quite substantially an individual’s remaining time to get their case together prior to the hearing.

--- Later in debate ---

[Nadhim Zahawi]

The point I was trying to make is that the uncertainty in any of those sections means that any party to a transaction can, if they feel they could frustrate the process because the outcome might not be advantageous to them, use the judicial review process to add to the uncertainty of a transaction. In addition, there is also a public interest in timely certainty and finality about decisions made under the regime that are, after all, imposed for the purpose of safeguarding national security. The 28-day limit is also in line with the current merger screening regime that the hon. Member for Southampton, Test asked about, where applications for the competitions appeal tribunal made under the Enterprise Act 2002 to review a merger decision must be made within four weeks, a time period chosen after public consultation. There may be some situations where, for legitimate reasons, 28 days is simply not enough. It is therefore important to remember that this Bill provides that the court may “entertain proceedings” that are sought after the 28-day limit, if it is considered that exceptional circumstances apply.

This shortened time limit and flexibility is for the courts to deal with exceptional circumstances. It strikes the right balance for this regime, in my view. It allows sufficient time for parties to obtain legal advice and mount a challenge, while also providing timely certainty about the effect of the relevant decision made under the Bill. I therefore hope that the hon. Member for Southampton, Test will withdraw the amendment.

[Dr Whitehead]

I have to be honest, I did not think that was very good. Let us start with who is shortening and who is not shortening. The Minister said that the Opposition seek to lengthen the period; no, the Opposition are not seeking to lengthen the period. The Government are seeking to shorten the period that is standard in the UK justice system as far as judicial reviews overall are concerned.

That is a very important point, because the Opposition are not trying to do something that is not an ordinary principle of British justice; the Government are trying to that. The Minister’s remarks could have applied to a lot of other areas, where it might be a bit inconvenient to have a judicial review being tenable for a three-month period after an event had occurred. However, it is not a question of inconvenience. Is a matter so important to national security that the 28 days can be justified under those terms?

The Minister has sought to justify the 28 days under the terms that there may be some uncertainty if there is a longer period for judicial review to be undertaken. He is potentially right about that, but not right as far as this Bill is concerned. He is right potentially as far as any application for judicial review is concerned, in all sorts of areas in this country. That is the problem of judicial review for the Administration, under any circumstances. When someone comes along and says, “I’m going to JR this,” a lot of people clap their hands and say, “That’s very inconvenient. It really does foul things up, because we would like to do this, that and next thing, but because we have been judicially reviewed, we have to carry out the procedure that is there.”

As several people have said in a number of different circumstances, the fact that the JR procedure is there and that often ordinary people have a reasonable amount of time to get their case together to undertake the JR process, is an important principle of the British justice system. The Minister has made no serious case for why these things should be so special under these circumstances. Interestingly, the consultation document did not make any case at all for the 28 days, other than to note that it was a shorter period. I am sorry to say that this appears to be a shortened period simply for administrative convenience.

[Chi Onwurah]

Does my hon. Friend think that shortening the JR period for administrative reasons is especially contentious, given that the judicial review process would be the only option for small and medium enterprises to complain about the way in which they are being treated under this process? The Minister says that their only option to make a complaint is effectively to JR it, yet they are given less time to JR it.

[Dr Whitehead]

My hon. Friend hits the nail on the head. In many circumstances, we are not talking about the sort of JRs that we hear about in the press, where a big corporation has been judicially reviewed on some subject by another large corporation, or some big body has judicially reviewed someone else about a planning decision.

National Security and Investment Bill (Eleventh sitting)

Alan Whitehead Excerpts

Committee stage & Committee Debate: 11th sitting: House of Commons
Thursday 10th December 2020 Public Bill Committees

[The Chair]

Before we begin, I remind the Committee to observe social distancing and to switch electronic devices to silent. The Hansard reporters would be grateful if hon. Members could email electronic copies of their notes to [e-mail].

Clause 53

Procedure for service, etc

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move amendment 29, in clause 53, page 32, line 30, leave out “may” and insert “shall”.

This amendment would require the Secretary of State to set out the process to be followed.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Dr Whitehead]

We start today’s proceedings with the most innocuous amendment imaginable—it is so innocuous that it is in the realms of “barely noticeable”. It is particularly innocuous in terms of the debates the Committee has already had on the use of the word “may” and the words “shall” or “must”. On this occasion, the amendment merely suggests that in subsection (1)—

“The Secretary of State may by regulations make provision for the procedure which must be followed in giving a notice or serving an order under this Act”—

“shall” should be substituted for “may”.

What is interesting about making provision for procedure that must be followed in giving a notice or serving an order is that the impact assessment assumes that that will be done and analyses how those notice-giving arrangements might work. The impact assessment assumes that the Secretary of State will do that, but the Bill does not state that the Secretary of State must do it.

I cannot think of any good reason why that change should not be made. I can see virtually no circumstances in which the current wording will do anything either way in relation to the issuing of the notices and what those notices might consist of. A requirement that the Secretary of State “shall” do those things would be an unalloyed advance in assuring that they happened. It would not have any consequences for national security or for company considerations, other than that companies might consider it rather more comforting that the Bill requires those details, which are important to them, to actually be produced.

The Minister can perhaps enlighten us on the wider issue. I have been on the other side, constructing and putting a Bill together, years ago in my brief but glorious—or inglorious but brief—ministerial career.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

Glorious.

[Dr Whitehead]

I think we can agree that it was brief. Bills would come to Ministers, fresh from the wells of construction and the pushing of pens to get them into good shape. I wonder whether there is a style guide, deep in the bowels of a building somewhere in Whitehall, that says, “Whenever the Minister is supposed to do something, write ‘may’ in small print.” It is such a long-serving style guide that people have forgotten why the word was ever put in the Bill in the first place.

The Minister would do a great service to the writing of Bills if he were able to say, “I don’t want to go along with the style guide. If someone is supposed to do something, I want to have that written in the Bill.” I appreciate that if the Minister were to say that when sitting around with a number of people who had a freshly minted copy of the proto-Bill in front of them, there would be much stroking of chins and suggestions of, “That is a rather brave method of proceeding, Minister.” But the Minister has the opportunity today, entirely divorced from all those influences, simply to say, “Yes, we will accept this amendment as a stake in the ground for the uprating of the style guide, wherever it happens to be.” That would be a great service to the Committee and to the nation, by getting us into a position where Bills are written to mean what they say and say what they mean.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I do not want to anticipate what the Minister will say, but he has said, with regards to similar amendments, that stating that the Secretary of State will do something does not mean that he definitely must do it. Does my hon. Friend agree that for the sake of clarity—for us in Parliament but also for businesses, particularly those affected by this—changing that one word would greatly improve the understanding of how the Bill will work?

[Dr Whitehead]

My hon. Friend is absolutely right. If I went to my bank manager, who had called me in about my overdraft, and I said, “I don’t need to say anything other than, ‘I may pay it back,’ but don’t worry, because I will pay it back,” my bank manager might be a little upset and might have something to say about it.

It is curious that we have locutions in the putting together of Bills that fly in the face of common-sense parlance. I agree with my hon. Friend that it really is no great defence to say, “Don’t worry. We don’t need to change this, because we are going to do it.” It would be far better all round if we were straightforward, accurate and clear and put this wording in the legislation, so that everybody knows what we are doing for the future. If, by so doing, the Minister can banish that style guide from the bowels of the building forever, that would be a great service.

[Nadhim Zahawi]

I beg you indulgence, Mr Twigg: I intend to speak first to clause stand part and then to amendment 29, which was tabled by the hon. Member for Southampton, Test. Clause 53 gives the Secretary of State the power to make regulations that set out the procedure that the Secretary of State must follow when giving a notice of, or serving, an order once the Bill becomes an Act. The level of detail that these provisions will involve is most appropriately dealt with in delegated legislation. That will also allow the provisions to be modified more easily if changes are deemed appropriate—in the light of operational experience, for example. I know all colleagues will share with me the wish for the unit’s operations to be as efficient and as slick as we can make them.

Examples of notices and orders include information notices, attendance notices, interim orders, final orders or penalty notices issued by the Secretary of State for non-compliance. The clause sets out what may be included in the regulations. For example, they may include the manner in which a document must be given or served and whether it is allowed to be served electronically—for example, by email.

Amendment 29 would require the Secretary of State to make these regulations, which returns, if I may say so, to the recurring theme raised by the hon. Member for Southampton, Test, about the difference between “may” and “shall”. At the risk of becoming predictable, my thoughts here carry certain echoes of our previous discussions.

As hon. Members will know, clause 53 gives the Secretary of State the power to make regulations that will set out the procedure that must the Secretary of State must follow when giving a notice or serving an order once the Bill becomes an Act. It is an entirely laudable objective to ensure that the Secretary of State provides those affected by this regime with the right information on the operation of the regime, and it is one that I shall always support. In practice, though, the amendment is unnecessary.

Although the Secretary of State may make regulations to that effect, in practice, for the regime to function effectively, he must do so. I assure hon. Members that the Secretary of State certainly does not propose to commence the regime without first making these procedural regulations. I therefore assure the hon. Member that the amendment is not required, as he and the Government seem to be in hearty agreement on the importance of such regulation. I ask him to do the honourable thing and withdraw the amendment.

--- Later in debate ---

[Chi Onwurah]

Warm exchanges. It is certainly something to be welcomed.

I would like to say a few words to clause 53 stand part. As my hon. Friend the Member for Southampton, Test observed, this is another example of a “may” rather than a “will”. The clause exists purely to enable the Secretary of State to make regulations—that is its function—and yet it places no requirement on the Secretary of State to do so.

While the Minister gave a warm response, saying that he and my hon. Friend are on exactly the same page and so on in our desires, I remind him that the Bill is not about our desires; it is about a legislative framework that protects our national security and gives, as much as possible, clarity and certainty to those impacted by it. It is because we recognise the importance of the clause that we wish it to have some effect in law, as opposed to being the gentle suggestion it seems to be at the moment.

[Dr Whitehead]

The Minister has used a bank manager defence. If my bank manager wrote to me to say, “You have an overdraft that you must pay,” and I wrote back and said, “Dear Bank Manager, I may repay my overdraft,” and then the bank manager called me in and said, “What is the meaning of this letter?” and I said, “Don’t worry, I will pay the overdraft soon. No problem. That letter stands,” that would be a problem for me, but apparently not as far as legislation is concerned. The Minister has effectively said, “Don’t worry. This is definitely going to happen. We are all agreed it will happen,” so why not write it in legislation?

I will not pursue this matter to a Division, because we have exhausted this mine in Committee. The Minister knows that this is not the first time I have raised this issue during the passage of Bills, and I will continue to do so because it is an important principle that legislation should say what it will actually do. Perhaps that is a bit basic, but that is what I think is important. I will indeed withdraw the amendment. I thank the Minister for his reply this morning, although it does not dent my crusading zeal for this particular change to be made in legislation generally. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 ordered to stand part of the Bill.

Clause 54

Disclosure of information

[Chi Onwurah]

I beg to move amendment 30, in clause 54, page 34, line 9, leave out

“which appears to the Secretary of State”

and insert

“which, on a reasonable enquiry, appears to the Secretary of State”.

This amendment would require the Secretary of State to only share information, acquired in the course of national security reviews, if the Secretary of State has first undertaken reasonable enquiry.

--- Later in debate ---

[Chi Onwurah]

I hope the Minister also agrees that we are moving to a much expanded national security screening regime. In 2002, Facebook was a year old or just being born. We are no longer in the place we were in 2002 when it comes to the issues of importance, volume, security and privacy associated with data and data sharing. I hope he will not rely on the 2002 Act as a justification, particularly as we are moving to an expanded national security screening issue and we are in a different data environment.

The strategy says that data is the economic engine, and we must be much better in assuring businesses and investors of their data protection. Instead of relying on appearances, the amendment holds up the standard of reason. Under it, the Secretary of State would have all the relevant powers of data sharing with relevant persons so long as the Secretary of State had reason, based “on a reasonable enquiry”, to think the person to be a relevant public authority.

It is critical that the UK has a national security regime that is grounded in national, competent exercise of state power to protect our security. The amendment would help to build success in that direction by removing a reliance on the use of appearance and instinct, by successive Secretaries of State, and grounding decisions in “reasonable enquiry” instead.

The expert evidence sessions provided support for that view. For example, Chris Cummings from the Investment Association said:

“There is so much around any investment process and the acquisition process that has to remain entirely confidential, that investors would require and would be looking for reassurance that these conversations could be held in the strictest of confidence and that nothing would appear until the right time.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 66, Q78.]

I ask the Committee to consider whether sharing data on the basis of appearances gives that reassurance.

The clause will give information-sharing powers to the Secretary of State. We recognise the importance of that, and we do not want to hinder it unduly, but we expect that the Secretary of State should, and importantly, should be seen to, exercise those powers on the basis of evidence. It is only right that we have clear evidential requirements. Although the 2002 Act uses similar language, it is right that we in this Committee clean up that language based on 19 further years of experience.

[Dr Whitehead]

I wonder whether my hon. Friend might be tempted to use a bank manager comparison here as well. If I was summoned by my bank manager to the bank, and he or she said, “It appears you’re overdrawn,” and I said, “Why do you think I’m overdrawn?” and he or she said, “I don’t know. It just appears to me that you’re overdrawn,” I might say, “Could you pursue reasonable inquiries to find out whether my account is actually overdrawn or not?” Does she agree that that is an example of the appropriate use of ordinary language, and that the Bill could be put into that state?

[Chi Onwurah]

I commend my hon. Friend on the extent to which he has used engagement with a bank manager to illuminate much of our discussion. He is absolutely right. To be honest, if any bank invited you to consider an overdraft on such a flimsy pretext, you would, I hope, change your bank, because you could not feel confident in it.

The serious point is that small and medium businesses and start-ups—our great innovation ecosystem in this country—can move, but we do not want them to move. We want them to stay in this country within the legislative framework. We want the new Bill to provide them with the reassurance and confidence that they need to help to implement the Bill effectively and to protect national security. My hon. Friend’s elegant example highlights the failings of the clause.

I anticipate that the Minister will talk about the language in the Enterprise Act. Not only is that 18 or 19 years old, which is one reason that this Bill has been needed for so long, but the person exercising the functions and powers in the Competition and Markets Authority is not a political appointee or political figure. The Bill refers to a political figure, the Secretary of State, so it is all the more important that he or she should be seen to act on the basis of evidence, not on the basis of appearance or instinct.

--- Later in debate ---

[Nadhim Zahawi]

Clause 56 places a duty on the CMA to provide information and any other assistance to the Secretary of State to enable him to carry out his functions under the Bill. For this regime to function effectively, the Secretary of State needs access to the right information at the right time to make decisions with the fullest range of available evidence.

The Competition and Markets Authority, by virtue of its position as the market regulator, will naturally have access to information that could be relevant to the decisions made by the Secretary of State. Although in practice we would expect the CMA to be entirely willing to provide support to the regime, and we have worked closely with it in drafting the legislation, the clause ensures that there is no doubt in law about the duty placed on the CMA to provide any information in its possession or any other assistance in its power when directed to do so by the Secretary of State, so long as the information or assistance is reasonably required to facilitate the Secretary of State’s functions under the Bill.

I therefore anticipate that the power in the clause—mirroring section 105(5) of the Enterprise Act 2002—would, in practice, be used only rarely, given the Department’s good working relationship with the CMA. I hope the Committee will appreciate that the clause is quite simply about ensuring that the Secretary of State has access to pertinent information relevant to the decision-making process.

[Dr Whitehead]

I note that the Minister has used precisely the opposite argument that he used for the last clause, relating to the word “must”. In clause 56, the CMA “must” give the Secretary of State information. [Interruption.]

[The Chair]

Order. Can we have just one meeting, please?

[Dr Whitehead]

Even though the Minister has worked well with the CMA, as he has just said, and is assured that the relationship will work well, he has put it into legislation just to make sure that it does.

[Matt Western]

My hon. Friend the Member for Southampton, Test has stolen my thunder—had I known that he was going to stand up, I perhaps would not have done so. It is interesting that paragraph (a) says “must” but paragraph (b) says “may”. Another valid point, beyond the semantics, is about the substance and the resource of the CMA, and whether there should be provision for that in the Bill. Can the Minister comment on the capacity of the CMA to support the demands and obligations set out in the clause?

--- Later in debate ---

[Nadhim Zahawi]

Clause 60 provides the Secretary of State and the CMA with absolute privilege against action for defamation as a result of the exercise of functions under or by virtue of the Bill. The clause has been included to ensure that the Secretary of State and the CMA have absolute privilege from defamation claims, on the basis that the function of the regime to protect national security is too important to be at risk or in any way curtailed by claims of defamation. It is, of course, not the Government’s intention to defame anyone through the regime or more widely. I hope that hon. Members will agree that this is an appropriate protection, supported by a well-reasoned regime that seeks to protect national security while supporting businesses and investors.

[Dr Whitehead]

I understand the purpose of the clause and, as the Minister indicated, the question of national security is very important. I can imagine circumstances in which the Secretary of State may, for example, suggest that a company is an agent of a foreign power. That might be seen to be defamatory, but in terms of the inquiry that is being undertaken the Minister should be protected against such an action.

However, the clause states that there is absolute privilege, which appears to suggest that the privilege could be exercised even on a wholly unreasonable basis—that is, the Minister could say or write what he or she likes about anybody provided it is under the cover of, or could be attached to the purposes of, the Bill. That seems a bit of a wide-ranging provision.

I appreciate what the Minister said on the provision, and that he has already said that it would not be his intention to defame anybody, but might he provide us with an assurance today, on the record, that notwithstanding the very wide scope of the Bill, he does not see the clause as an opportunity for the Secretary of State to wantonly defame anybody if they felt like it, and that it would be strictly used in terms of inquiries that were being undertaken for the purpose of the Bill, and not for any other purposes?

[Nadhim Zahawi]

I hope I have already made it clear that the Government would not intend to defame anybody. The reason for the clause is that there are various points in the regime where the Secretary of State will make statements that are, in effect, published and would include communications with other parties as well as those for general public consumption. He may therefore be open to such claims, which is why the clause is in the Bill.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61

Annual report

National Security and Investment Bill (Twelfth sitting)

Alan Whitehead Excerpts

Committee stage
Thursday 10th December 2020 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move, That the clause be read a Second time.

Hon. Members will be sad to know that I have failed in the ballot to be one of the 2,000 supporters to watch Southampton Football Club this Saturday. I will reflect on that, but I have already sat here for much longer than 90 minutes in near-freezing conditions, watching two equally matched teams slug it out together, so I am not too upset about it. That is the last thing I will say about the unpleasant conditions in this Committee Room.

I hope this clause will be seen as helpful to the Secretary of State and as an addition to the armoury of this Bill in dealing with the multitude of different circumstances under which influence may be sought, or technologies and sensitive information may be acquired, as we have discussed. It seeks to give the Secretary of State an exercisable power under the clause 1 call-in powers and it follows on from what my hon. Friend the Member for Ilford South said in the previous debate.

Start-ups may be invested in by venture capitalists, but those venture capitalists may turn out to be bodies that are effectively seeking to gain influence in the start-up or small company, by means of investing in it. They are not seeking to control it, or to control either the entity or the asset, in terms of the meaning in section 8 or 9, but to put themselves in a position where it is pretty impossible for those companies to resist providing information to that limited partner.

In the UK, British start-ups effectively rely on foreign investment. In 2019, 90% of large tech investment rounds included US or Asian investors, according to Atomico’s “The State of European Tech.” There are many circumstances in what we might call our UK venture capital ecosystem in which that kind of sourcing of funds is a regular state of affairs. Venture capital-reliant firms in this country are now receiving millions of pounds from Chinese investors, as my hon. Friend the Member for Ilford South has enumerated for us.

Those venture capital investments do not end up, and are not supposed to end up, with the seeking of material control of those companies. As I have said, it would be difficult—practically impossible—for that venture capital-based firm to deny its limited partner investors access to technological information from portfolio companies. In such cases, especially when limited partner investments in the fund take place after an initial trigger event, those would be missed by the Bill as it currently stands. Indeed, that is made tougher still by the fact that most venture capital funds do not publish the names of limited partners. So the Government would not even know when those investments happen and when access to information passes into potentially hostile hands. That series of circumstances is becoming pretty widespread in the high-tech world, and does not appear to be focused on very accurately by the provisions already in the Bill.

What the amendment seeks to do, as I have mentioned, is enable the Secretary of State—if it is considered by the Secretary of State to be an issue that warrants further consideration—to make regulations for the provision of that call-in power outside the terms of clause 9 of the Bill. I think that is a potentially very positive additional power that would reside in the Bill and would be an additional piece of armoury in the hands of the Secretary of State on the basis of what we think is a continuing expansion of investment which may have malicious intent to scoop up, by that venture capital arrangement, a slice of sensitive information.

I was thinking about the equivalent of Chinese dragons in “Dragons’ Den”, taking a portion of the company in return for having a hand in that company’s investments. In a sense, that is what venture capitalists will do under these circumstances. Although the control of the company, as we see in “Dragons’ Den”, remains very much in the hands of the person who has gone into the den in the first place, the investment in that company is nevertheless a source of very substantial leverage in what the company does, what information it provides and what sensitive information it gives out.

I offer this new clause in what I hope will be seen as a very constructive spirit. The clause endeavours to strengthen the Bill by providing a particular option to the Secretary of State, when looking at the entire landscape of how influence is sought, at how sensitive information may be provided and at how assets may effectively be acquired.

--- Later in debate ---

[Dr Whitehead]

I respectfully ask the Minister to reflect carefully on what I and the hon. Member for Glenrothes have said this afternoon. Whether or not the Minister thinks the new clause is one he can reasonably adopt, he has already accepted, in terms of what he says may be in the scope of the Bill, that this is a real issue. This is something that we have to think very carefully about and that, by its nature, is fairly difficult to pin down, because it relates to a series of actions that do not easily fit into the box of control or company takeover. It is much more subtle and potentially wide-ranging, but nevertheless it is something that we know is real. As my hon. Friend the Member for Ilford South said, it is happening in silicon valley, Germany and this country. It is happening in a number of places. Interests are being bought up not because of altruistic concern for the health and welfare of that particular start-up, but for other, much more worrying reasons than simply influence as a limited partner in a company.

I am pleased that the Minister put on record that he thought that the extension of this activity might be in the scope of the Bill already, although I think it is stretching what the Bill has to say to take that line. I hope he will not regret that. When he looks at what he has said about what he thinks is in the Bill, he may find, on reflection, that the new clause would have been more use to him than he thought. However, I am not going to press the issue to a vote this afternoon.

I hope the Minister will reflect carefully. He has already said on the record that he thinks that a number of these measures can be squeezed into the Bill. I hope he will not find that there are circumstances where he needs this method of operation but that it can, after all, not be squeezed into the Bill as well as he thinks it can be. I hear what he says and wish him the best of luck with squeezing things into legislation that perhaps were not quite there. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 7

Annual report to the Intelligence and Security Committee

“(1) The Secretary of State must, in relation to each relevant period –

(a) prepare a report in accordance with this section, and

(b) provide a copy of it to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.

(2) Each report must provide, in respect of mandatory and voluntary notifications, trigger events called-in, and final orders given, details of—

(c) the jurisdiction of the acquirer and its incorporation;

(d) the number of state-owned entities and details of states of such entities;

(e) the nature of national security risks posed in transactions for which there were final orders;

(f) details of particular technological or sectoral expertise that were being targeted; and

(g) any other information the Secretary of State may deem instructive on the nature of national security threats uncovered through reviews undertaken under this Act.”.—(Chi Onwurah.)

This new clause would provide the Intelligence and Security Committee with information about powers exercised under this Act, allowing closer scrutiny and monitoring.

Brought up, and read the First time.

[Chi Onwurah]

I beg to move, That the clause be read a Second time.

It is with some regret that I rise to move new clause 7, because it is the last new clause we propose to the Bill. It is a Christmas present to the Minister. Things have certainly been interesting since we began our line-by-line scrutiny. With your leave, Sir Graham, I will take this opportunity to thank all those involved in drafting the Bill, as well as the Clerks, who have worked so hard and played such an important role in helping to draft amendments and provide support to all members of the Committee. I also thank you, Sir Graham, for chairing it so admirably.

We have learned a great deal over the last couple of weeks. I have learned just about everybody’s constituency—