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?