National Security and Investment Bill

Baroness Bloomfield of Hinton Waldrist Excerpts

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

[Lord Grantchester (Lab)]

I welcome the probing of Amendment 7, in the names of the noble Lords, Lord Hodgson and Lord Clement-Jones, on the extent of five years in which the Secretary of State may issue a call-in notice once a trigger event has taken place.

The debate on how long this period may need to be and the reasons behind these decisions has been interesting. When the Government originally consulted on this, the period was much shorter. The Minister will need to answer why it has changed and been extended for such a long period, as well as the other questions raised. Indeed, five years is a far horizon in today’s fast-moving world—even if it is not long enough for some, often unpopular, Government to be able to continue in office.

Could this length of time threaten the policy stability of the economy across many sectors as well as give rise to unnecessary anxiety for businesses, especially in relation to retrospective elements previously discussed? However, the interpretation of Clause 2 may be that the Secretary of State is unaware of the trigger event but that the intentions of the parties have not materialised. The clause is rather unclear, and I appreciate the remarks of the noble Lord, Lord Lansley, in his interpretation. I would certainly welcome the Minister’s reply.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank my noble friend Lord Hodgson for his amendment, which intends to shorten the time limit for the Secretary of State to call in trigger events which have already taken place. The Bill as drafted allows the Secretary of State to call in trigger events up to five years after they have taken place. This ensures that the regime powers can be applied to completed trigger events which have given rise to, or which may give rise to, risks to national security but which have not been notified to the Secretary of State.

The length of five years is important to give the Secretary of State sufficient time to become aware of the trigger event and to make it difficult for the parties to keep the trigger event hidden. However, the proposed change from five years to two would make it easier for hostile actors to hide their acquisitions and effectively time-out the Secretary of State. It would increase the incentives to keep an acquisition quiet or inactive, as hostile actors would need to do so for only two years.

While not necessarily straightforward, this is clearly easier—both practically and financially—than keeping an acquisition hidden for a longer period. For example, if a hostile actor acquires an entity and intends to merge it with their existing operations, there are practical costs of not doing so within five years. They would not be able to merge IT, payroll, HR, et cetera, or take advantage of that entity and its assets. Likewise, if a hostile actor acquired an entity for its technology, that technology might well be obsolete in five years, so they would need to use their acquisition now to get the benefit.

In the Government’s view, five years strikes the right balance between creating a substantial disincentive for efforts to obfuscate and conceal relevant acquisitions while giving legitimate business certainty that they will not be called in after that period. Importantly, this approach puts us into line with our international partners. For example, in Germany a review may be initiated up to five years after the purchase agreement. It is in line with other countries, including France and Germany, and we believe that it is appropriate. Indeed, it is shorter than some partners, including the USA and Japan, which have no time limits. Further, a five-year reach-back period applies only to trigger events which have completed or which will complete after the introduction of the Bill, contrary to what some observers have suggested. That is to say that no acquisition which has been completed prior to 12 November 2020 may be called in under the Bill.

As helpfully noted by my noble friend Lord Lansley, in the Bill the five-year period is tempered by the requirement for the Secretary of State to call in a completed trigger event within six months of becoming aware of it. This further reduces the time limit for intervention and creates greater certainty for parties to a relevant acquisition. If there is doubt, parties should submit a voluntary notification to the Secretary of State. This will give them certainty on whether their trigger event will be called in.

Before I conclude, in response to my noble friend’s query relating to whether final orders can require the unwinding of acquisitions, that is very much within the scope of the power. The order, however, makes commands and may not deal with practical arrangements. How remedies are given effect will be for parties to finalise, subject to the requirements of the order.

My noble friend Lord Lansley asked about the nature of the acquirer. To clarify, the five-year backstop applies to the date on which the acquisition itself took place. Circumstances where the identity of the acquirer is not known until some time after the trigger event took place are precisely why the reach-back period might be important in certain cases. In circumstances where a notification was given and false or misleading information was given about the true identity of the acquirer, the Bill already provides that the Secretary of State can re-examine such cases.

With reassurance provided for business, knowing that we are acting in line with allies, and for the reasons I have set out, I hope my noble friend will withdraw his amendment.

[Lord Hodgson of Astley Abbotts (Con)]

I am grateful to my noble friend for her reply. I do not think I heard whether future pre-emptive actions under the new regime will be the subject of a statutory instrument or will just happen from the Secretary of State’s desk. Perhaps, she could answer how this or the other House will know what is happening.

I am grateful to everybody who spoke on this. It is obviously a tricky area. I am grateful to the noble Lord, Lord Clement-Jones. Undesirable, uncertain and impractical—I could not have put it better myself. I am grateful to the noble Baroness, Lady Bowles, for drawing attention to the question of the difference between two years and five years, and what will happen in that three-year period other than causing uncertainty among investors. The noble Lord, Lord Fox, raised very practical points.

Let me meet my noble friend Lord Lansley some of the way. I do not think that this will happen very frequently, but, like the noble Baroness, Lady Bowles, I am not convinced that the three additional years are really needed. The point my noble friend makes, which has certainly eluded the Law Society, is the interplay between the six-month trigger and the five years. In the tech sector, these companies grow like Topsy: they are nothing now, and they will be quite big very quickly indeed. You could have a situation where some event, ex post, could have been described as a trigger event but was not picked up as such at the time. It is unfair for people to have that uncertainty lasting for five years. The Secretary of State could say, “I never became aware of that, so I have more time to start the unwinding process, as long as it isn’t within the five-year period.” I see my noble friend’s point, and I accept that it is a rare occasion, but I still think there is something to be teased out about how the different pieces fit together, particularly in sectors of the market where very fast growth occurs.

I would be grateful if the Minister could tell me about the statutory instruments and how publicity of pre-emptive actions is to be provided.

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

Does the Minister wish to respond?

[Baroness Bloomfield of Hinton Waldrist (Con)]

I will respond in writing.

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

The Minister is saying she will respond in writing. Is the noble Lord, Lord Hodgson, withdrawing his amendment?

--- Later in debate ---

[Lord Hodgson of Astley Abbotts (Con)]

Was it the fact or just the implication?

[Baroness Bloomfield of Hinton Waldrist (Con)]

No, I will respond to the noble Lord in writing.

[Lord Hodgson of Astley Abbotts (Con)]

Okay, that is fine. We need to go away and put my noble friend Lord Lansley in the blue corner and the Law Society in the red corner and see how we get on. In the mean- time, I beg leave to withdraw the amendment.

--- Later in debate ---

In the area of IP, of course, this would anyway be quite hard to quantify. While expanding the mandatory notification regime to assets may be a worthwhile step for easily identifiable strategic assets, such as land, the application to ideas and information could be extremely problematic. There is also the issue of the 15%, although it is not referred to in these amendments. For Wellcome, the overlap of that very low-capture area with the possibility of other things being added to the list causes it concern. I hope that, in light of that, the Minister will agree to meet me and the Wellcome Trust, because it would be better if we could capture and sort out these worries at this stage, rather than when the Bill becomes an Act. This is, as noble Lords know, an organisation well experienced in exactly the areas we are talking about, so I think its advice would be of considerable help to the Government, as well, as I say, of trying to get rid of the problem before it emerges.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I welcome Amendment 14 from my noble friend Lady McIntosh of Pickering, and Amendment 94 from the noble Lords, Lord Fox and Lord Clement-Jones, which overall seek further consultation and scrutiny on Clause 6 regulations. Perhaps I may say at the outset that we would be delighted to meet the noble Baroness, Lady Hayter, to discuss the concerns of the Wellcome Trust, which, as she said, is a world-class research organisation and worth hearing.

Perhaps I may begin by clarifying for the benefit of the Committee that while acquisitions of land are in scope of the call-in power, they are not in scope of the mandatory regime. Acquisitions of land, as with assets more widely, are expected to be called in only very rarely.

I turn first to Amendment 14, tabled by my noble friend Lady McIntosh of Pickering. It would require the Secretary of State to consult relevant stakeholders before making any regulations under Clause 6. Those regulations are of significance as they define the scope of the mandatory notification regime. As such, the Secretary of State has already consulted on sectoral definitions for the qualifying entities proposed to be in scope of the mandatory regime, and further engagement is planned with particular sectors in advance of turning these definitions into draft regulations. Again, I echo my noble friend’s apologies that the information on sectoral scope arrived only as we came into the Committee. The consultation was extensive and lasted from November for eight weeks. We received 94 responses and have not yet finalised all the sectoral definitions. Further targeted engagement to refine these definitions will be made in advance of laying regulations. The Secretary of State will therefore undertake consultation where appropriate.

I can reassure my noble friend Lady McIntosh and the noble Lord, Lord Bruce of Bennachie, that, given the importance and potential complexity of any future regulations under Clause 6—defining and bringing new advanced technology sectors into the regime, for example—it is difficult to foresee many instances in which consultation of relevant stakeholders will not be required. As such, there is no need to create a requirement in statute to cater for this. Public law duties already create the right incentives.

The second amendment to Clause 6, Amendment 94, proposed by the noble Lords, Lord Fox and Lord Clement- Jones, would require the Secretary of State to lay before Parliament a proposed draft of any regulations made under the clause for 30 days before the draft regulations themselves are laid and are subject to the approval of both Houses. Amendment 94 would also require the Secretary of State to identify a committee to report on the proposed draft regulations and then himself report on his consideration of the committee’s recommendations. The Bill as drafted provides for regulations made under Clause 6 clause to be subject to the affirmative resolution procedure.

While I take the points made by the noble Lord, Lord Fox, that these statutory instruments cannot be amended, they can be declined, as we have seen a small number of times in the past. This ensures an appropriate balance whereby the mandatory regime can be quickly updated should new risks to national security emerge, while still giving Parliament appropriate oversight by requiring it to approve the regulations.

In its report on the Bill published on 22 February, the Delegated Powers and Regulatory Reform Committee concluded that,

“there is nothing in the Bill to which we would wish to draw the attention of the House.”

So, although I was in some way surprised to see the noble Lords’ amendment tabled in relation to Clause 6, in disagreement with the judgment of the committee, we can agree that the powers of the Bill are necessarily drawn widely in order to make the process more efficient. I believe that the committee recognised the careful balance that the Bill strikes in Clause 6 and other clauses between allowing the Secretary of State the flexibility to ensure that the regime is effective in protecting our national security while providing sufficient opportunity for parliamentary scrutiny and input.

I welcome the opportunity to discuss this matter further with noble Lords. However, for the reasons I have set out, I cannot accept these amendments and ask that they be withdrawn or not moved.

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

My Lords, I have received two requests to speak after the Minister: from the noble Baroness, Lady Hayter, and the noble Lord, Lord Clement-Jones.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for her response but I do not think that she has quite got to grips with the full concern about this. It is not so much that there has not been consultation about the current sectors; there has been an extensive consultation and the Government have come back with their views and have explicitly said that they may change them even further. Yet they are still going to return to Parliament with a pure affirmative process. It is not as if parliamentarians will be able to change it. The stakeholder discussion and consultation is going forward as she said, but there is no guarantee that when that set of regulations is passed there will be proper debate in the House, nor will there be thereafter if the sectors are changed and made more specific, less specific, added to—whatever. There is no guarantee that consultation will take place.

The Minister said that there are the right incentives. That is a bit thin. If that is the guarantee of government consultation, it is not very solid, and even then, Parliament is entitled to have a view about the width of those sectors in the light of changing circumstances. It might have different views about new risks emerging, to use the Minister’s phrase. Therefore, it would be entirely legitimate to have that debate if those regulations were revised. The Minister has not got the nub of the concern in all of this.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I reiterate that we will continue to consult widely on important changes that merit further scrutiny. The Government care deeply that we get these definitions accurately put into the Bill before it receives Royal Assent.

[Lord Fox (LD)]

I anticipated the Minister’s answer on the subject of time, and 30 days is 30 days, but the Government have shown that they are relatively adept. If there really was a national security emergency requiring quick action using other means, a statutory instrument with a debate in Parliament would act as a plug. My noble friend Lord Clement-Jones made the point that there is such significance, particularly around this list but also around the other elements of Clause 6, so I hope that the Minister will read Hansard and at least find some way of moving towards the very valid arguments that she has heard today on both amendments.

National Security and Investment Bill

Baroness Bloomfield of Hinton Waldrist Excerpts

Committee stage
Tuesday 9th March 2021 Grand Committee

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank my noble friends Lord Lansley and Lord Vaizey, and the noble Lord, Lord Clement-Jones, for these amendments. They seek to clarify and reduce the scope of the regime in relation to asset acquisitions. The Government expect that the majority of trigger events of national security interest will be traditional mergers and acquisitions, but the Secretary of State must also be able to intervene in the rare circumstances where acquisitions of individual assets, rather than entities, may raise national security risks. The Bill as drafted provides that land, tangible moveable property and intellectual property fall within scope of the regime as qualifying assets; this has a degree of extraterritorial application.

Amendments 22 and 28 seek to restrict the inclusion of land as a qualifying asset only to land located within one mile of a sensitive site, and to require the Government to create an online checking service to identify land that is regarded as sensitive. Amendment 23 seeks to exclude “business as usual” procurement, such as the purchasing of software licences or standard network equipment, from the definition of a qualifying asset. Amendment 38 aims to ensure that intellectual property licences that do not permanently transfer ownership of the IP to the licensee are not treated as an acquisition of control over that IP.

I will first turn to Amendments 22 and 28. In limited cases, the acquisition of land can give rise to national security concerns, in particular, but not limited to, proximity risks. The UK Government do not publish the location of the sites in the UK that they consider sensitive from a national security perspective. To do so would give rise to risks to national security: it would serve as a directory for hostile actors who wish to acquire land proximate to sensitive sites, as well as actors who wish to harm us in other ways. Acquisitions of land and other assets that do not pose a national security risk can be pursued with no expectation of being called in. Parties who are unsure or believe that the land in question may be proximate to a site where the Secretary of State is likely to have concerns can voluntarily notify and receive clearance if no national security risks arise.

Risks to national security can also arise from acquisitions of control over land more than one mile from a sensitive site. Indeed, the US regime under the Committee on Foreign Investment in the United States, to which my noble friend referred and to which the amendment alludes, includes a limit of more than one mile for some sites. For example, if we are concerned about a hostile party having a good line of sight to a sensitive site, a plot of land sitting atop a hill more than a mile away might still present an excellent view and the associated security risks. Although most land-based risks are expected to relate to proximity to sensitive sites, not all will. In particular, the Secretary of State will be entitled to take into account the intended use of the land, which may be divorced from any proximity concerns.

I will now turn to Amendment 23. Noble Lords are right to argue that, in most cases, there is unlikely to be a risk to national security from the acquisition of control over intellectual property that is generally and widely available on the commercial market, but such a scenario cannot be ruled out. As set out in the draft statement provided for in Clause 3, which was published alongside the Bill, the Secretary of State expects to intervene only very rarely in acquisitions of any assets. The draft statement lists intellectual property in relation to which the Secretary of State expects acquisitions to be more likely to give rise to national security risks, although this does not include intellectual property that is easily available.

Turning to the detail of the amendment, there is no generally recognised definition of an asset being

“generally and widely available on the commercial market”.

For example, it does not specify where or to whom the asset should be available. It may be that certain intellectual property is in general widely available but is not generally or widely available to certain parties. We may wish to ensure that those parties continue to struggle to access that intellectual property.

I now turn to Amendment 38. As currently drafted, an acquisition of control over intellectual property does not require the acquirer to gain ownership of that IP. This is because acquisitions of control over intellectual property, where the asset is being licensed on a non-permanent basis, can still give rise to national security concerns. Such an exemption could allow hostile parties to use licensing arrangements to avoid the regime, for example by leasing intellectual property for an arbitrarily long period of time rather than buying it.

Temporary access to sensitive intellectual property may, for example, also allow a hostile party to copy and transfer abroad parts of it. Of course, the licensor may have some level of control over the use of its intellectual property, and any assessment of a possible risk to national security would take this into account. However, in the same way that there is no guarantee that a party selling sensitive intellectual property would ensure that the sale does not give rise to national security risks, there is also no guarantee that a party licensing intellectual property would do so.

By way of conclusion, I appreciate that these amendments are motivated by a desire to limit how assets are covered by the regime without adversely affecting the Secretary of State’s ability to protect national security. They would effectively limit the scope, but they would also inadvertently expose our national security to additional risk, which I have confidence is not the aim of my noble friend. In answer to the question posed by the noble Lord, Lord Grantchester, about how many notifications we expect to arise from procurements, the number is expected to be very low, and we will indeed publish guidance on those procurements.

For these reasons, I hope that the noble Lord will withdraw his amendment.

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

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

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

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

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

[Baroness Bloomfield of Hinton Waldrist (Con)]

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

[Lord Clement-Jones (LD)]

My Lords, I bow to my noble friend’s much superior knowledge on intellectual property issues. I entirely agree with her. That is a good reason for keeping provisions about intellectual property broadly speaking as they are. My noble friend pointed out to me that nowadays even Rolls-Royce engines are licensed as opposed to sold, because so much data is given off by their operation. That is proprietary in itself. So it is very difficult to distinguish between an outright sale and a licence in commercial life.

I wanted to come back because I did not think that the Minister was quite positive enough on Amendment 23 from the noble Lord, Lord Vaizey. I laughed out loud; that particular response was like an episode of “Yes Minister” because it tried to draw distinctions that were not particularly helpful in the circumstances. Somebody was being extremely clever when they put the paragraph together, but I do not think it pushes back the argument why that day-to-day type of software —that sort of absolutely bog-standard commercial licence equipment—should be captured in the definition of a qualifying asset. I will look very carefully at that very well-crafted paragraph again before Report.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I am grateful for those comments. They will be noted.

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

My Lords, I would never put my noble friend the Minister in the same paragraph as “Yes Minister”. She is a far classier act than that and a wonderful and effective force in your Lordships’ House. But, in a hesitant fashion, I will say that, when listening to the Government’s response, my concerns continued to grow. It seems that their position, which is perhaps understandable, is that they have crafted a Bill that covers every conceivable transaction. Then they will see how it works in practice, over the next couple of years, and gradually narrow it down. That was the tone of the response that I got from my noble friend Lord Callanan. When my noble friend Lady Bloomfield was responding, I began to wonder whether the sale of an iPhone to a Chinese government official in a phone shop in Westfield in Shepherd’s Bush would count as a transaction.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

Let us try to get this done in five minutes.

I thank the noble Baroness, Lady Hayter, and my noble friends Lord Lansley and Lord Vaizey for tabling these amendments. I will begin with Amendments 36 and 88, which concern the Bill’s effect on higher education. Amendment 36 seeks to exempt from the regime the use of qualifying assets where that use is conducted wholly within the activity of a UK-based higher education or research institution. Amendment 88 seeks to introduce guidance to explain some of the Bill’s provisions in relation to higher education.

First, I intend to provide some general assurance to the Committee about the asset powers under the Bill. There are no asset transactions that must be notified to the Secretary of State as assets are not subject to the mandatory notifiable acquisitions regime. To quote the statement published on introduction, interventions in asset transactions by the Secretary of State are expected only in

“the headline sectors in which national security risks are more likely to arise than in the wider economy”.

The draft statement states more broadly:

“The Secretary of State expects to intervene very rarely in asset transactions.”


In relation to higher education, I assure the Committee that we do not generally expect the acquisition of qualifying assets for exclusive use by UK-based research or higher education institutions to give rise to national security concerns.

Indeed, to go further, the use of assets where there is no acquisition of a right or interest resulting in control over a qualifying asset would not even constitute a trigger event, although my understanding is that Amendment 36 seeks to go wider than this. We do, however, expect national security risks to arise in the higher education and research sectors sometimes. For example, hostile actors could seek to set up a UK-based research organisation and acquire sensitive assets through this vehicle, or enter into some form of agreement with one and gain control over sensitive assets that way. Exempting such acquisitions from the regime would therefore create a notable gap in the Secretary of State’s ability to safeguard national security.

Turning to the likelihood of the Secretary of State calling in acquisitions related to contract research, consultancy work and collaborative research and development, and the request for guidance, I point the noble Baroness to the three levels of risk set out in the draft statement. The intention of the statement is to provide guidance on the expected use of the call-in power by the Secretary of State. The three levels of risk in the statement give a hierarchy of how likely the Secretary of State is to call in an acquisition. The most likely areas of concern are “core areas”, “core activities” and “the wider economy”. Acquisitions in “core areas” are likely to be of most interest to the Secretary of State. “Core activities” are likely to fall within the “core areas” but may also fall outside them. This covers the sectors proposed to be set out in regulations under Clause 6. The Government have consulted on the definitions of the sectors to be covered by Clause 6 and published their response at the beginning of this Committee. “The wider economy” concerns everything else. The Secretary of State considers these areas unlikely to pose risks to national security. Therefore, they are unlikely to be called in under the NSI regime. I am confident that higher education and research institutions will be able to assess their activities and decide in which of these three areas of risk they fall.

I want to take a moment to assure the Committee that BEIS consulted Universities UK, the University Alliance and the Russell group on the national security and investment White Paper, published on 24 July 2018. They were very helpful. Of course, since the introduction of the Bill, as my noble friend Lord Lansley noted, BEIS has continued to engage with a number of research and academic institutions, including the Russell group. The Government very much appreciate the Russell group’s ideas on inclusion for guidance.

Turning to strategic security partnerships and domestic partners, the Bill deals only with acquisitions of control over qualifying entities and assets; it does not regulate these strategic security partnerships specifically. Any acquisitions of control made by such a partnership will be subject to the Bill in the same way as any other qualifying acquisition—namely, the Secretary of State’s likely interest in them is illustrated in the draft statement under Clause 3.

I now turn to Amendment 40 in the names of my noble friend Lord Vaizey and the noble Lord, Lord Clement-Jones. This amendment concerns Clause 12, which provides supplementary provisions about trigger events, including details about when they take place. The amendment seeks to make it clear that, in relation to the creation or potential creation of a new qualifying asset, a trigger event can take place only upon the creation of that asset.

The Government also consider that acquisitions of control over qualifying assets can take place only from the point of their creation, whether in tangible or intangible form. I reassure the noble Lords that the Bill as drafted provides for that. They will, however, be aware that the Secretary of State’s call-in power applies both to trigger events which have taken place and to those which are “in progress or contemplation”. The point at which a trigger event is in progress or contemplation will clearly depend on the facts of the case, but it could include circumstances where research and development partnerships are agreed, and it is abundantly clear what assets are to be developed and what control the funder will be acquiring over them.

We think that this is the right approach, as the primary focus of this regime is acquisitions of control over existing entities and assets. We cannot hope to know the future and how technology and national security risks might develop in every circumstance, so it is right that control of new assets can occur only once they have been created.

With the arguments I have outlined against the amendments in this group, I ask that noble Lords agree not to press them.

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

Before I call the noble Lord, Lord Lansley, to respond, I need to make the Committee aware of the Procedure Committee’s guidance about five hours of sitting, which expired five minutes ago. I do not want to put pressure on the noble Lord to respond on a very detailed debate, but if his response is brief we can probably include it. If not, it might be that the Whip needs to consider moving an adjournment.

National Security and Investment Bill

Baroness Bloomfield of Hinton Waldrist Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, this sounds like a “me too” moment, because we also have tremendous sympathy with the amendments, especially after hearing the concerns of stakeholders in the research sector about the uncertainty around the time for notices to be decided by the Government. As we have heard, their concerns reflect others from business and investors.

Could the Minister explain why a default approval should not be included in the Bill if organisations have not heard back within a particular timeframe? She will probably know about the important process for clinical trials involving medical products prescribed in the Medicines for Human Use (Clinical Trials) Regulations. In that case, where no notice is given or where further information is requested within 60 days, the clinical trial is treated as authorised. I am not suggesting that these are two exact types of decision, but that default authorisation in legislation seems to be one we might look at. I am interested to know whether the Government have looked at a similar default approval to add here. Perhaps the Minister could say what sort of advice the Government have had on whether that would work here.

On Amendment 67, could the Minister indicate whether 30 days is right for such a process? It would be useful to know the Government’s thinking on the expected average turnaround time for a call-in notice.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I am grateful to my noble friends Lady Noakes and Lord Hodgson of Astley Abbotts for their amendments, which, I believe with good intention, seek to bring further clarity to the status of acquisitions that have been notified to the Secretary of State after the end of the 30 working- day review period. In particular, they seek to provide that acquisitions notified to the Secretary of State are deemed to be cleared following the review period if the Secretary of State does not issue a call-in notice within that period. Both worry, as other noble Lords have, that such a transaction might be stranded in a so-called no man’s land. Amendment 43, from my noble friend Lady Noakes, would apply to both mandatory and voluntary notifications, whereas Amendment 67 from my noble friend Lord Hodgson of Astley Abbotts would apply just to voluntary notifications.

I think we are all agreed it is essential that businesses and investors have the clarity and certainty they need from this regime. That is exactly why we have included statutory timescales for cases—those covered by mandatory notification as well as voluntary notification —to be screened by the investment security unit. That is also why the Secretary of State is already required to give a call-in notice or issue a notification of no further action before the end of the review period in response to both voluntary and mandatory notification. He has no other option, and I hope that noble Lords are reassured by this. The Government consider that this is the right approach as it imposes a legal requirement on the Secretary of State to take a positive action to provide certainty one way or another. I do not believe that the default approval system suggested by the noble Baroness, Lady Hayter, would add to that certainty.

The Government do not think it would be in anyone’s interest to leave the situation ambiguous as to whether an acquisition has been cleared or requires further scrutiny, so I am pleased to be able to reassure my noble friends of the Bill’s functioning on these matters. Many of the businesses the Government have spoken to about the new regime have emphasised they would not wish to proceed with completing an acquisition without unequivocal confidence that they are cleared to do so. As such, it is not clear to me that my noble friends’ amendments would provide greater confidence in the business and investment communities.

For these reasons, I cannot accept the amendment, and I hope that my noble friend Lady Noakes will withdraw it.

[Baroness Noakes (Con)]

My Lords, I thank all noble Lords who have spoken on this group of amendments, especially my noble friend Lord Hodgson of Astley Abbots, who explained the interaction with Clause 2(2) and (4), and his Amendment 67, which I had not appreciated.

Apart from my Front Bench, we are agreed that there is a problem here. My noble friend the Minister explained why a time limit is put in the Bill. We understand that, but the Bill still does not give the certainty required: it does not deal with the position if the Secretary of State does not actually do something. We think the investment community is entitled to that certainty. One possibility is the default approval mechanism that the noble Baroness, Lady Hayter, referred to. We cannot just take it that because the investment community would like the certainty of a positive approval, we should let this Bill off from the ambiguity over what happens if the Secretary of State does nothing.

I shall read carefully what my noble friend has said in Hansard, but she should be aware that we will need to return to this on Report, because she has not satisfactorily dealt with the problem we have put to her. With that, I beg leave to withdraw the amendment.