National Security and Investment Bill

Baroness Ritchie of Downpatrick Excerpts

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

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Bennett of Manor Castle. I welcome the noble Lord, Lord Woodley, to the House and congratulate him on his maiden speech.

The aim of this Bill is to reform the way in which inward investment into the UK is investigated to ensure that hostile Governments or other entities do not use it to undermine the UK’s national security. It follows calls for reform, including from the Intelligence and Security Committee of Parliament, to which the noble Lord, Lord West of Spithead, has already referred.

The purpose of this Bill is to prevent international economic crime impacting on major businesses in the UK, but a lot more bureaucracy and resources will be required to execute its provisions. Combined with the provisions in the Financial Services Bill, it will give the Government more legislative teeth with which to address economic crime and corruption. But will the legislation actually benefit businesses and university research? We are still in the Covid pandemic and it will take some time to come out if it.

The Government have argued that these powers are necessary because of the resurgence of state-based threats to national security and the risk of UK businesses being controlled by entities with close ties to hostile foreign Governments. It is important to stress that inward investment and global competitiveness should not be compromised as a result of these new measures, which are undoubtedly the result of private Chinese interventions in the digital sphere. We need to be open for business and to have a continued inward investment platform. As the noble Lord, Lord Dodds of Duncairn, has already mentioned, in Northern Ireland we rely significantly for our manufacturing and business sectors on foreign direct investment. We also work directly with the universities on technology transfer. It is important that those industries are not impacted or undermined further by these proposed legislative developments, because it would have major repercussions for our fragile jobs sector. Our fragile business economy—particularly the aviation sector—must not be further threatened. High-level research must be encouraged and supported.

I want to concentrate on several areas. First, we need to increase parliamentary scrutiny of how the Secretary of State may use the powers in the Bill. This has been referred to during debate on the various stages in the other place. Businesses need clarity about how the powers in the Bill would be used and the definition of national security. We also need to ensure that this is not straight-down-the-line protectionism. There needs to be a mechanism for greater reporting to Parliament about the use of the powers. The Intelligence and Security Committee should have a role. The Secretary of State should publish guidance about the Bill and the regulations made under it within six months of it being passed. Will the Minister ensure that government amendments come forward in Committee or on Report to address the need for greater parliamentary scrutiny?

It is also important that small and medium-sized businesses are not undermined. There is a fear that the notification process could become burdensome on such businesses, which would now fall within the scope of the new regime. The possible impacts on businesses of the new regime must be properly assessed, and legislative measures put in place to ensure that they are mitigated. Will the Minister commit to protecting small and medium-sized businesses in this way?

I turn to the position of universities which host incubators and start-ups. University research and innovation are vital for the UK. They have close links with inward investment and the business and industrial sectors. This must not be compromised as a result of these new legislative measures.

Like many other noble Lords, I have received a briefing from the University of Cambridge, which is involved with the business sector, especially with university technology transfer. I hope that the Minister and his colleagues in BEIS will find some solutions to deal with those issues.

Let us remember that national security has been invoked in the past in the context of Northern Ireland. This led to a major demolition company losing a big contract, with investment and job repercussions. All these issues must be addressed. We need to achieve a balance in the contents and proposals of this Bill.

National Security and Investment Bill

Baroness Ritchie of Downpatrick Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

I will listen with great interest to the Minister’s response. I assume that it will not be a matter for a Division now, but one that we must address on Report.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord King of Bridgwater. Unlike him and other noble Lords who have spoken on this issue, I do not have any particular expertise in the ISC or in intelligence and security matters. None the less, it is a privilege to follow the noble Lord, who, as a former Secretary of State for Northern Ireland, was fully aware of many of the intelligence and security issues. I will refer later to one which I think arose during his tenure as Secretary of State for Northern Ireland.

Notwithstanding that, I support the amendments in this group, the context of which was initially addressed at Second Reading by many of their movers: the noble Lords, Lord West of Spithead and Lord Rooker, and the noble Baroness, Lady Hayter. They all revolve around the need for parliamentary oversight and accountability, and thus the involvement of the Intelligence and Security Committee in Parliament.

I am concerned about the impact of inappropriate takeovers and dual ownership of firms that are key to the development of the UK’s infrastructure, including the digital sector. The gaping hole in parliamentary scrutiny and oversight needs to be examined and legislative provision made for it. That is where the hole lies in this legislation.

All noble Lords who have spoken have elaborated on the sensitive nature of investment issues involving other countries which may have a strategic or other ulterior interest in the UK. Those need to be subject to parliamentary scrutiny, particularly decisions on notifications that will be taken by BEIS. A strong case was made in the Commons for the Intelligence and Security Committee to be given an explicit role in scrutinising the outworking of the Bill, but unfortunately the Government rejected it. I thank noble Lords who have spoken and I agree with them. The Intelligence and Security Committee could do a proper and adequate job if it was given a report on how the powers in the Bill are or are not being used.

There is currently no provision for oversight of national security material on which decisions will be taken, hence my support for these amendments as they would expand the current reporting requirements to include reporting to the ISC, incorporating details of the national security decision-making process into the existing annual report in Clause 61, an issue already referred to by the noble Lord, Lord West of Spithead. It is vital that there is oversight of matters that Parliament cannot itself oversee. Oversight and parliamentary scrutiny are key in this respect.

The ISC was established in 1994. I recall that in 1987-88 a company in Northern Ireland that was allocated a demolition contract for Northern Ireland Electricity Service had its contract and its ability to act as a subcontractor withdrawn on national security grounds. It never found out the nature of those national security grounds. No doubt various views were attributed to it. This case was subject to legal proceedings, and the European Court of Justice eventually sided with the inappropriateness of the actions that the Government had taken. I honestly believe that if the ISC had been established at that time, it would have been able to examine papers associated with that case and to judge the appropriateness of the actions and the company. That parliamentary oversight was unfortunately not available at that time, but it is now available and should be utilised to scrutinise global contracts and notifications within the unit in BEIS.

Parliamentary scrutiny is not something that should be feared. It allows engagement, consultation and a degree of transparency, subject to the rules of confidentiality. I support the amendments in this group.

[Lord Janvrin (CB) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick. I speak as yet another former member of the Intelligence and Security Committee of Parliament. I strongly support the Bill, but there is a scrutiny gap which has been well identified in this short debate. Other speakers have made the key point in support of explicit oversight by the Intelligence and Security Committee of decisions taken under the Bill based on classified evidence from secret intelligence sources, and I strongly endorse those arguments.

I want to underline very briefly the important point of principle underlying these amendments. The ISC is a vital part of the intelligence agencies’ licence to operate in a democracy by making the agencies accountable to Parliament. It helps maintain public trust and confidence in the secret activities of the state. This obviously includes maintaining trust in government decisions about the activities of the intelligence community. Those broad decisions are taken in the interests of the nation as a whole, but maintaining public trust will surely be just as important when it comes to government decisions that may be narrower but could directly affect the future of individual British companies and the livelihoods of their employees.

The Bill will set up a regime that could materially change people’s lives in the wider interest of national security. However, as drafted, it does so without those people knowing for certain that any decisions based on secret evidence are not automatically subject to scrutiny and examination by the one committee of Parliament specifically set up to be able to do this: the ISC. This seems wrong in principle.

There is then the point of practice. I think we would all argue that effective scrutiny leads to better decision-making. The Minister in another place said that there is nothing to stop the ISC calling for evidence on a specific decision. That may be true, but is it practical? It calls to mind Donald Rumsfeld’s “unknown unknowns”: how does the ISC know which decisions to examine in detail? I question whether such a hit-or-miss approach to scrutiny would lead to better decision-making.

Amendments 70, 78, 79 and 82 all suggest means to provide effective ISC scrutiny. As has been pointed out, Amendment 70, in the name of my noble friend Lord Butler, has the merit of real-time accountability. This should be examined carefully, but the other amendments ensuring regular and automatic classified reporting to the ISC will, I believe, do much to ensure public trust in the processes of the Bill. As the noble Lord, Lord West, said, without one of these amendments, there would be no effective oversight.

I very much look forward to the Minister’s reply, and I hope he will be sympathetic to some kind of movement on this important issue. As I said at the beginning, this is a matter of trust.