National Security and Investment Bill

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

[Baroness McIntosh of Pickering (Con)]

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

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

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

--- Later in debate ---

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

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

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

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

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

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

--- Later in debate ---

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

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

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

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

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

[Lord Naseby (Con) [V]]

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