National Security and Investment Bill (Twelfth sitting) Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Chi Onwurah
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National Security and Investment Bill (Twelfth sitting)
Chi Onwurah ExcerptsThursday 10th December 2020
(3 years, 11 months ago)
Public Bill CommitteesRead Full debate National Security and Investment Bill 2019-21 View all National Security and Investment Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 10 December 2020 - (10 Dec 2020)
Brought up, and read the First time.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I beg to move, that the clause be read a Second time.
It is a pleasure to see you back in the Chair, Sir Graham. I am also pleased that the Committee is now moving to the new expanses of new clauses. I see that Committee members have come fully prepared to deal with the environment in which we find ourselves. I should say, Sir Graham, that the previous Chair said that we should be able to put on as many coats as we liked. I think that that is much to be desired. Unfortunately, I left my office in a rush and forgot to bring my coat, as well as the Houses of Parliament Christmas jumper in which I invested only yesterday, in anticipation that it might be needed today. We shall have to take the temperature as an encouragement to press on.
Had we known that, regardless of the title of the Bill, it was actually the National and Security and Investment, and any improvements to the Enterprise Act 2002 we feel it is necessary to make, Bill, we might have ranged somewhat broader in our new clauses. We chose instead to focus on what we felt was absolutely critical to the good functioning of our national security framework. New clause 1 seeks to set out some of the factors that the Secretary of State may have regard to when making assessments under the provisions of the Bill. We recognise some of the implications of including a definition of national security. The Bill is called the National Security and Investment Bill, even if it does go somewhat beyond that title.
James Wild (North West Norfolk) (Con)
I note that the hon. Lady uses the word “may” not “shall” in the new clause. Can she explain why she opted for “may” in this instance?
Chi Onwurah
I am grateful for that intervention. First, it shows that the hon. Gentleman is paying attention, which in itself is something to be welcomed. If I may say so, it also shows that he is taking lessons from my hon. Friend the Member for Southampton, Test. We have considered the matter and this is the correct use of the term “may”. I shall go into more detail later, but this is not about prescribing what the Secretary of State must look at; it is about giving greater clarity, particularly to those who will come under the Bill’s remit. One of the expert witnesses put it very well. Those who will come under the Bill’s remit need to get a sense of what the Government mean by national security, not in a specific and detailed definition.
Simon Baynes (Clwyd South) (Con)
Would the hon. Lady not agree that there is danger that the new clause would start to try to define in a prescriptive way what a national security risk is, whereas the point of the Bill is that it enables the Government, the Secretary of State and the relevant parties to judge what is a risk? That goes back to the point that my hon. Friend the Member for North West Norfolk made about “may” and “shall”. As far as I can see, the new clause should use “shall”, given what the hon. Lady is trying to achieve, but I accept the point about how such legislation is worded. There is a danger that, by listing all these clauses, we imply that other aspects of danger to national security are not included. I am not sure that it would achieve anything. In many ways, it might obfuscate rather than clarify, although I fully accept that her intention is to clarify.
Chi Onwurah
I thank the hon. Member for that intervention, which I think was made in the proper spirit of the Committee, by seeking to improve the Bill, help the Secretary of State, and help those who will be affected by the Bill to understand it. The hon. Gentleman is quite right that there is a trade-off.
During the expert evidence sessions, we heard both from those who felt that there should be a definition of national security and from those who felt that there should not. However, if my memory serves me, they all tended to agree that there should be greater clarity about what national security could include. For example, Dr Ashley Lenihan of the London School of Economics said:
“What you do see in regulations is guidance as to how national security risk might be assessed or examples of what could be considered a threat to national security.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 38, Q42.]
We also heard that in the US the Foreign Investment Risk Review Modernization Act 2018 provides for a “sense of Congress” on six factors that the Committee on Foreign Investment in the United States and the President may consider—the term “may” is used well here—in assessing national security: countries of specific concern; critical infrastructure, energy assets and critical material; a history of compliance with US law; control of US industries that affect US capacity to meet national security requirements, which is very important; personally identifiable information; and potential new cyber-security vulnerabilities.
My argument is that if we look at examples from elsewhere, we see indications of what can be included in national security without having a prescriptive definition. That is exactly what the new clause tries to set out. It states:
“When assessing a risk to national security, the Secretary of State may have regard to factors including”,
and then it gives a list of factors, which I shall detail shortly.
The question, “What is national security?” is entirely unanswered, for Parliament, for businesses looking for clarity, for citizens looking for reassurance, and if hostile actors are seeking to take advantage of any loopholes in how the Secretary of State construes national security. I do have sympathy with the argument that we should not be prescriptive and limit the Secretary of State’s flexibility to act by setting down a rigid definition of national security that rules things out. That is the spirit of the new clause. It does not rule out the Secretary of State’s flexibility or set a rigid definition; it simply does what other countries have done well, as our experts witnesses have said, by giving a guide on some factors that the Government might consider, while allowing many more to be included in national security assessments. This is critical in order to give greater clarity to businesses puzzled by the Government’s very high-level definitions of espionage, disruption or inappropriate leverage.
Andrew Griffith (Arundel and South Downs) (Con)
The hon. Lady appears to be advancing two arguments simultaneously. On the one hand, I understand the argument about clarity, which is indeed something that many people would look for in this Bill. However, she also talks about flexibility and that we should not seek to tie the Secretary of State down to a particular, prescriptive definition at any point in time, which I think members on both sides of the Committee would agree on. Given that, I am genuinely confused as to why she would seek to advance this new clause, although I find its actual wording wholly unobjectionable. Perhaps the Minister will reply on this topic, because I think the record of these proceedings could provide that clarity without needing to press the amendment to a vote.
Chi Onwurah
I thank the hon. Gentleman for that intervention, which I found very helpful. If he believes me to be presenting both sides of the argument at once, perhaps that is because the Minister has been doing the very same thing so often during the past few sittings. As the Minister has often said, there is a balance to be sought between flexibility for the Secretary of State and clarity for the business community and other communities. This new clause goes exactly to the point made by the hon. Member for Arundel and South Downs, and strikes that balance. That is why—I will say it again—the new clause does not prescribe what national security is, but it does not leave a vacuum into which supposition, uncertainty and confusion can move.
The new clause gives greater clarity to citizens worried about whether Government will act to protect critical data transfers or our critical national infrastructure. Are those areas part of our national security, even though they are not covered by the Government’s proposed 17 sectors? The new clause provides assurance in that case and—this is important—sends a message to hostile actors that we will act to protect British security through broad powers applied with accountability. It should be clear that we also need to consider how this Bill will be read by the hostile actors against whom we are seeking to protect our nation, and this new clause will send a clearer message as to what may be included in that.
The factors highlighted in this new clause are comparable to guidance provided in other affected national security legislation, most notably the US’s Foreign Investment Risk Review Modernization Act 2018. Paragraph (a) would protect our supply chains and sensitive sites, in addition to acting against the disruption, espionage and inappropriate leverage highlighted in the Government’s statement of policy intent. We have heard from experts, and have also seen from very recent history—namely, that of our 5G network—that our strategic security depends not only on businesses immediately relevant to national security, but on the full set of capabilities and supply chains that feed into those security-relevant businesses. We cannot let another unforeseen disruption, whether pandemic or otherwise, disrupt our access to critical supply.
Paragraphs (b) and (c) look strategically at our national security, not with a short-term eye. We have heard consistently from experts that national security and economic security are not altogether separate. Indeed, they cannot be separated; they are deeply linked. A national security expert told us that a narrow focus on direct technologies of defence was mistaken and that instead we should look to the “defence of technology”. That was a very appropriate phrase, meaning not specific technologies of defence, but defence of technologies that seem economically strategic today and might become strategic for national security tomorrow.
The former head of the National Cyber Security Centre told us that the Government should have acted in transactions such as Huawei’s acquisition of the Centre for Integrated Photonics, rather than turn a blind eye because it did not seem to fit a narrow definition. We should not turn a blind eye any longer. With guidance from the new clause, the Government would act to protect our strategic security.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
The hon. Lady mentions Sir Richard Dearlove’s evidence to the Committee a couple of weeks ago. He made very clear that his opinion, as a former head of MI6, was that having a statutory definition of national security would be very prohibitive and do damage to what we are trying to achieve by getting this Bill on the statute book.
Chi Onwurah
Absolutely. That is why we are not seeking a statutory definition of national security. That is why we are seeking to include and to set out points that the Secretary of State may take into account. The hon. Member should recognise that the Government’s statement of intent is designed to give guidance as to how the Bill will work and be used in practice, and what might be taken into account. The guidance is there. It is just that it is very limited.
We are deliberately not seeking a prescriptive definition of national security. We recognise, as Sir Richard Dearlove did, that it can and must evolve over time. We are seeking to give greater guidance and to promote a better understanding of the remit of the Bill, so that it can be better interpreted and better implemented and so that all those who come under its remit can share that understanding. That is what other nations do. The new clause takes our security context seriously, and signals to hostile actors that we will act with seriousness, not superficiality.
Paragraph (f) bridges the gap between the Government’s defined sectors and focus and the critical national infrastructure that we already define and focus on in our wider intelligence and security work. It brings us in line with allies. Canadian guidelines list the security of Canada’s national infrastructure as an explicit factor in national security assessments. In Committee on Foreign Investment in the United States cases, Congress lists critical infrastructure among the six factors that the President and CFIUS may access.
The provision also acts on the agreement of the ex MI6 chief. In relation to having a critical national infrastructure definition in the Bill, he said:
“I would certainly see that as advantageous, because it defines a clear area where you start and from which you can make judgments”.––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November 2020; c. 24, Q31.]
Some of the interventions have been about whether the new clause hits the right spot between prescribing and defining what national security is and giving greater clarity and focus. We would argue that the evidence that I have just set out shows that it does.
Paragraphs (g), (h) and (i) recognise that national security is about more than a narrow view of military security; it is about human security, clamping down on persistent abuses of law—as other countries do—and recognising that a party that consistently abuses human rights abroad cannot be trusted to do otherwise at home. It is about knowing that the single greatest collective threat we face, at home and across the world, lies in climate risk. It is about acting on illicit activities and money-laundering threats that underpin direct threats to national security in the form of global terror.
I recognise that many Government Members have recently raised the importance of human rights, illicit activities, money laundering and climate change in our security. In the statement on Hong Kong this week, the Minister for Asia acknowledged that human rights should be part of our considerations when it comes to trade and security but said that he did not feel that the Trade Bill was the right place for such provisions. I argue that today’s Bill is the right place for them because it deals with our national security.
The new clause would show the world that the UK is serious about national security. We must protect our national security against threats at home and abroad, and build our sovereign capability in industries that are the most strategically significant for security. We must view security in the light of modern technologies, climate and geopolitical threats. None of those constrain the Government’s ability to act; they simply sharpen the clarity of that action, and its signal to the world.
When we began line-by-line scrutiny, I spoke of my astonishment that the Government’s impact assessment referred to national security as an area of market failure that therefore required Government action. I hope that the Minister can confirm that he does not believe that national security is an area of market failure, but that it is the first responsibility of Government. The new clause sets out to give bones to that assertion and to demonstrate to the world that we understand our national security and the interests at play in promoting and securing it, and that we will act decisively in the interest of national security, taking into account this range of factors to protect our citizens, our national interest and our economic sovereignty, now and in the future.
Peter Grant (Glenrothes) (SNP)
It is a pleasure to follow the hon. Member for Newcastle upon Tyne Central although I confess I was not quite able to pay attention to the early part of her remarks, because I was still reeling from the revelation that a born and bred Geordie is capable of feeling cold. I just hope that her constituents do not get to hear of it, or she might be in trouble at the next election.
Perhaps the aspect of the new clause that I am least comfortable about is the title. I think that is what is causing the problem. The title is “National security definition”, but what follows, thankfully, is not a definition of national security. Like a lot of people, I would love to be able to come up with a definition of national security that worked and was robust, but no one has been able to do that. The new clause, however, does not seek to prescribe what national security is, and despite what was said in some of the interventions, it certainly does not attempt to prescribe what it is not. It gives explicit statutory authority to the Secretary of State to take certain factors into account in determining whether and how, in his judgment, a particular acquisition is a threat to national security.
Chi Onwurah
I can only ascribe my lack of the usual Geordie central heating to being so far from home at the moment. I take the hon. Gentleman’s point about the new clause seriously, and I think he is right. The title misleads to the extent that we are not looking to define national security.
Peter Grant
If the hon. Lady thinks she is a long way from home—tell me about it.
There was discussion, and quite a lot of questions to some of the early witnesses, about whether we needed to give some kind of guidance on what national security is not. Some of us vividly remember—I think that the hon. Lady’s constituents will vividly remember—that there was a time when someone was a threat to national security if they were a coal miner who went on strike, or if they had a trade union membership card in their pocket and worked in the wrong places, such as in Government establishments that officially did not exist then. When we look at the honours that are still bestowed on the person responsible for those two abuses of the claim of national security, it can be understood why some of us are always concerned about giving any Government powers to act in the interest of national security unless clear safeguards are built in.
The other side of the coin is that I can foresee times when the Secretary of State might be grateful for the fact that the clause has been incorporated in the Bill. Let us suppose that someone wanted to take control of or influence a software company. I know that software is itself an area we would want to look at. We all know what can happen when the software that helps to control major transport systems goes wrong. We have all been affected by Heathrow terminal 5 effectively shutting down for hours at a time. When there is a major signalling fault caused by a software malfunction at one of the main London stations, the whole of the south-east can be clogged up for hours or even days.
Can that become a threat to our national security? I think there are circumstances in which it could. I can certainly foresee circumstances in which someone who wanted to damage the United Kingdom—for no other reason than wanting to damage its interests—might seek to do so by getting a way in that enables them to interfere with the code controlling software of the transport or financial services infrastructure, for example. It is not in the interest of any of us, at the point when a Secretary of State intervenes to stop such an acquisition, if the matter can be taken to court and it becomes necessary to argue that deliberately causing the national transport infrastructure to freeze is an attack on our national security. I cannot understand why anyone would want not to add a clause to the Bill to allow such an interpretation to be made if the Secretary of State saw fit.
Chi Onwurah
The hon. Gentleman reminds me that I should have mentioned either the impact assessment or the consultation response. I think the consultation response gives the deliberately induced software failure at Heathrow as an example of a failure of national security that the Bill would be able to circumvent by preventing hostile parties from owning that software company, without setting out how that would be part of the definition of national security that the Bill is seeking.
Peter Grant
I am grateful again for those comments. The hon. Lady has referred again to what is in the explanatory notes. Unless somebody has changed the rules, the explanatory notes are not part of the eventual Act of Parliament. In borderline cases, they may be used by a court to help to interpret what the intention of Parliament was when it passed a Bill, but as a general rule, the intention of Parliament is stated by the words in the Act as it is passed. If it does not say in the Act that a Secretary of State can take those factors into account, there will be an argument that will have to be heard and tried in court, if need be, that a Secretary of State should not have taken those factors into account.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)
I am grateful to Opposition speakers, the shadow Minister and the hon. Member for Glenrothes, for their contributions and to my hon. Friends the Members for Arundel and South Downs, for North West Norfolk, for Clwyd South and for West Aberdeenshire and Kincardine for their excellent interventions.
On new clause 1, it will not surprise the hon. Member for Newcastle upon Tyne Central that the Government’s position remains consistent with that of 1 December, when amendments relating to the new clause were discussed. Such amendments included, among others, proposals for the inclusion of a definition of national security in the statement made by the Secretary of State. The new clause seeks to create a new, exhaustive list of factors that the Secretary of State may take into account when considering whether something is a risk to national security.
Chi Onwurah
I am listening intently to the Minister’s response—given the great skills of the Committee he is taking the new clause in the right spirit—but it is not appropriate to say that we are presenting an exhaustive list when we specifically say, “this and other things”. It meant to be not an exhaustive list but a guide and a sense.
Nadhim Zahawi
I apologise. I will say instead that the clause seeks to create a non-exhaustive list of factors that the Secretary of State may take into account when considering whether something is a risk to national security for the purposes of the Bill.
The Bill as drafted does not seek to define national security. It also does not include factors that the Secretary of State will take into account in coming to a national security assessment. Instead, factors that the Secretary of State expects to take into account in exercising the call-in powers are proposed to be set out, as the hon. Lady rightly said, in the statement provided for in clause 3. A draft of the statement was published on introduction of the Bill to aid the Committee’s scrutiny efforts. The draft statement includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. That includes certain sectors of the economy and the types of acquisition that may raise concern.
While it is crucial for investors’ confidence that there is as much transparency in the regime as possible, there is self-evidently a limit to how much the Government can and should disclose in that regard given that the regime deals explicitly with national security matters. Nevertheless, the draft statement goes into some detail about the factors that the Secretary of State expects to take into account when making a decision on whether to call in a trigger event.
The new clause would instead place in the Bill, alongside the statement, a non-exhaustive list of factors that the Secretary of State may have regard to when assessing a risk to national security. That raises a number of issues. First, it is unclear what the benefit is of including a non-exhaustive list of factors that the Secretary of State may have regard to directly in the legislation as opposed to in the statement.
Nadhim Zahawi
I will happily take the hon. Lady’s intervention once I have gone through these points.
Secondly, the new clause would not replace the statement; instead, it would appear to sit alongside it. The Government think that would probably cause confusion rather than clarity, although I have no doubt that the hon. Lady and the Opposition agree that clarity for all parties will be crucial to the regime’s success.
Thirdly, by stating what may be taken into account when assessing a risk to national security under the Bill, the new clause indirectly sets out what can be a national security risk for the purposes of the Bill, and therefore what comes within the scope of national security—many colleagues pointed out some of the evidence suggesting that we should do exactly the opposite of that—which could clearly have unintended consequences for other pieces of legislation that refer to national security. The Bill requires that the statement from the Secretary of State be reviewed at least every five years to reflect the changing national security landscape. Indeed, in practice, it is likely that it will be reviewed and updated more frequently. We think that this is the right approach, rather than binding ourselves in primary legislation.
Fourthly, but perhaps most importantly, I note in this list that the Secretary of State may have regard to an ever-broadening set of suggestions that Opposition Members wish to be taken into account as part of national security. On Second Reading, the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), requested that an industrial strategy test be included in the Bill alongside national security assessments. I am afraid that an industrial strategy test is not the purpose of this legislation.
Nadhim Zahawi
I was referring to the shadow Secretary of State’s request on Second Reading that an industrial strategy test be included in the Bill.
As I was saying, factors that the Secretary of State may have regard to through the new clause are wide ranging. This is an important Bill about national security and national security alone. We do not wish to see an ever-growing list of factors for the Secretary of State to take into consideration. That would risk the careful balance that has been struck in this regime between protecting national security and ensuring that the UK remains one of the best places in the world to invest. The Government consider that the Secretary of State should be required to assess national security as strictly about the security of our nation. That is what the Bill requires. These powers cannot and will not be used for economic, political or any other reasons.
While I understand the objectives of the hon. Member for Newcastle upon Tyne Central, for the reasons I have set out I am not able to accept the new clause. I hope the hon. Member will agree to withdraw it.
Chi Onwurah
I thank the Minister for his response, not all of which was entirely unexpected. I also thank the hon. Member for Glenrothes for his speech and his interventions, which were very much to the point.
I feel that the Minister was, to a certain extent, doing what the hon. Member for Arundel and South Downs accused me of doing—I did say that I had learned so much from the Minister—which was arguing both sides of the question at once. He seems to be saying that there should not be any definition, but that if there needs to be a definition, it is already there in the statement that the Secretary of State has set out. Indeed, I have been looking for that statement, because I did not recognise it from the way the Minister described it when talking about giving detail on the types of national security questions that might arise.
In fact—the Minister may want to intervene on me on this—he seemed to imply that that statement included a list of factors. I do not think that it does, but he seemed to say that the new clause is not necessary because there is already a list of factors in that statement, and that the statement and the new clause would be in some way contradictory. I do not feel that that in any way reflects what is set out in the new clause. The new clause contains a list of factors to guide the Secretary of State. It is not an exhaustive list, but it gives considerably more of a sense of the understanding of national security than is to be found in the Secretary of State’s statement of intent. The Minister said that that could be changed at least every five years, and he argued that the list in new clause 1 appeared to be growing—this is a new clause, so I do not think the list can have grown. Our national security has changed, and the factors that determine it have expanded significantly. If we look at cyber-security, at artificial intelligence, at the threats that are coming from many different areas of the world and at the different state and non-state actors, we can see that that is absolutely the case.
Peter Grant
That is a valid point, but I do not think it is. The difficulty with the case-by-case basis is that it creates uncertainty and worry for the small business concerned. We are talking about a period of only six months. I do not really think that hostile overseas investors are waiting to pounce during those six months to gobble up small businesses in a way that will damage our national security. Let us face it: if they were going to do that in the first six months, they would be doing it now or they would have done it in the last six months.
I hear what the hon. Gentleman is saying, but the new clause is deliberately worded to explicitly recognise the importance of small businesses, particularly during this period. The Bill is likely to come into force at the exact time that small businesses will be trying to get back on their feet. They need all the help they can get. There is a danger that the way that the Bill could be implemented and enforced will be an unintentional barrier to their growth.
All that we are asking is that, for a short period, until smaller businesses get used to the new legislation, it does not allow them to go ahead with transactions that are otherwise prohibited and would otherwise be blocked by the Secretary of State. The Secretary of State will still have the full power to block those transactions or to impose conditions on them. It does not mean that an acquisition is legally valid if it would otherwise be void under the terms of the legislation. The only difference it makes is that it removes the danger of small businesses or their directors spending time defending themselves in court when they should be developing their business and helping to get the economy back on its feet. On that basis, I commend both new clauses to the Committee.
Chi Onwurah
I rise to speak briefly in support of additional support for SMEs. The hon. Member for Glenrothes is a champion of small businesses, which is a pleasure to hear. As he set out, and as has been set out in a number of the amendments that we have tabled in Committee, we are concerned to make sure that the seismic shift in our national security assessment with regard to mergers and acquisitions does not stifle our innovative but often under-resourced small businesses, which are such an important driver of our economy. New clause 2 reflects our intentions, particularly in amendments 1 and 11, to support and give further guidance to small businesses. I hope that the Minister and Conservative Members recognise the importance of supporting small businesses at this time through direct measures in the Bill.
Nadhim Zahawi
I thank the hon. Member for Glenrothes and the hon. Member for Newcastle upon Tyne Central for setting out the arguments in support of new clauses 2 and 3, which both relate to the treatment of small and medium-sized enterprises in the regime.
On new clause 2, the Government are a strong supporter of SMEs and have sought to provide a slick and easily navigable regime for businesses of all sizes to interact with. We are creating a digital portal and a simple notification process to allow all businesses to interact with the regime without the need for extensive support from law firms, which is a particular burden for small businesses. Furthermore, there is no fee for filling a notification, unlike many of our allies’ regimes, which in some cases charge hundreds of thousands of pounds for a notification. Consequently, we do not expect this regime to disproportionately affect SMEs.
Sam Tarry
I thank the hon. Member for that intervention. The word “regular” would clearly need to be defined in a way that did not overburden the new part of the Department that would oversee the regime, but that would provide the information on a basis that enabled the Minister to make decisions, and to be scrutinised on those decisions regularly enough that the regime was effective and did not lead to oversights.
Chi Onwurah
I thank my hon. Friend for his points on the new clause. The hon. Member for Arundel and South Downs may say that there is no reference to geography, but is it not the case that requiring a list of hostile actors might reflect geography as appropriate, and as the geography of hostile actors changes? Does the number of times that we have mentioned one country in particular—China—not indicate that geographical location can be an indicator of the likelihood of hostile actors?
Sam Tarry
Absolutely. This is not about being particularly anti-China, but it is the strongest example of where we have heard evidence of things that are under way. I will continue with a few more examples. I think this is important, because we are trying to draw back the curtain on exactly what is going on.
Nadhim Zahawi
My hon. Friend raises an incredibly important point, because, as he rightly says, factors other than the risk profile of the acquirer may determine whether an acquisition is subjected to greater or lesser scrutiny. It is also likely that any list would quickly go out of date. Entities in this space can change and emerge rapidly, especially if parties are attempting to evade the regime and the Secretary of State’s scrutiny. In addition, such lists being intentionally published or otherwise disclosed publicly could have significant ramifications for this country’s diplomatic relations and our place in the world, in respect of both those on one of the lists and those who are not on the list. Publishing the list may also give hostile actors information about gaming the system, to the UK’s detriment.
I would suggest that what the hon. Member for Ilford South describes would essentially be an internal and highly sensitive part of a national security assessment. While I appreciate the sentiment behind the new clause, I do not believe that it would be appropriate to set out such details in writing. It is, however, entirely reasonable for the hon. Gentleman to seek to reduce the burden on business where possible, in particular if the acquisition presents little risk and can be cleared quickly. I have an enormous amount of sympathy with that aim.
Chi Onwurah
I do not intend to make a speech, but I wanted to intervene on this particular point. A part of the source of the new clause is the Minister’s own comments. He said that national security was not dependent on a particular country. He is giving a lot of reasons why there cannot be a list, because of different actors, but does he recognise that national security may relate to a specific country? Has he woken up to the risks that particular countries may pose?
Nadhim Zahawi
I assure the hon. Lady that Her Majesty’s Government do exactly that, but the Bill is deliberately country-agnostic. Indeed, to give parties predictability on small business and to provide for rapid decisions where possible, the regime has clear and strict timelines, as we have heard throughout the debate. Additionally, clause 6 enables the Secretary of State to make regulations to exempt acquirers from the mandatory notification regime on the basis of their characteristics. Arguably, this places the strongest requirement on acquirers, such as where acquisitions by certain types of party are routinely notified but very rarely remedied or even called in. Taken together, these provisions are already a highly adaptable and comprehensive set of tools, so the list and its proposed use would be unnecessary and potentially harmful.
I shall touch briefly on national interests, which the new clause once again references. I have said before that the regime is intentionally and carefully focused on national security. That is specifically the security of the nation, rather than necessarily its broadest interests. This is therefore not the right place to introduce the concept of national interest, which would substantially and, we strongly believe, unhelpfully expand the scope of the regime.
In conclusion, with the strength provided by clauses 1, 3 and 6 already in the Bill, I am of the very strong opinion that the Bill already achieves its objectives. I therefore cannot accept the new clause and ask that the hon. Member for Ilford South withdraw it.
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—
Chi Onwurah
I will not take up the opportunity of a test. We have all learned a lot about air flows—in this room, at any rate—as we seek to maintain some heat. What we have not learned, though, is how the Minister believes the Bill can be improved. All our line-by-line scrutiny has yielded many assurances, compliments on our intention and, indeed, some letters, for which I am grateful, but no acceptance and not even the commitment to go and think about some of our constructive proposals, amendments and new clauses. I urge him to consider this new clause as an opportunity to show that he truly believes, as he said earlier, in the skills, experience and expertise of the Committee by reflecting on the potential for improvement.
The new clause returns to an earlier theme and would require—the Minister will be pleased to note that that is a “must”, not a “may”—an annual report to be prepared by the Secretary of State
“in accordance with this section”
and a copy of it to be provided
“to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.”
It sets out what should be in that report, such as the events, the number of entities, the nature of the risks and
“details of particular technological or sectoral expertise”
and so on. It would provide the Intelligence and Security Committee with information about the powers exercised under the Bill and allow closer scrutiny and monitoring.
The new clause reflects how we have consistently supported the need for the Bill. Our approach to the security threats we face is to push for change specifically to allow broad powers of intervention, but for those using those broad powers to be held to account by Parliament and through transparency. Our international allies do exactly that. The US requires CFIUS to produce a non-classified annual report for the public, alongside a classified report for certain members of Congress, to provide security detail to them, allowing congressional scrutiny while retaining sensitivity of information.
As I think the Minister acknowledges, the Government have been late in following where international allies and the Opposition have led with calls to better protect our national security, so he must not fall behind in following our calls for accountability and transparency. That is critical not just to ensure our security and wider parliamentary understanding of the nature of the threats we face but for accountability.
The Secretary of State is to be given sweeping powers. For the last time, I should say that we will go from 12 reviews in 18 years—less than one a year—to 1,830 notifications a year, which is more than five every single day. The Secretary of State will be able to intervene in every single such private transaction. It will be hard to bring claims against national security concerns in court, where the judiciary will understandably find it difficult to define national security against the Government’s definition. In that context, it is important to bring expert parliamentary scrutiny to the Government’s decisions. I do hope the Minister will reflect on that. Alongside a public report, the new clause would require the Government to publish an annual security report to the Intelligence and Security Committee so that we have greater accountability without compromising security.
I will say a few words about the evidence base and the reason for tabling the amendment. Professor Ciaran Martin said:
“I think that the powers should be fairly broad. I think there should be accountability and transparency mechanisms, so that there is assurance that they are being fairly and sparingly applied.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 81, Q96.]
My understanding is that the only accountability and transparency mechanism is the public report, which may be published, and the prospect of judicial review, neither of which provide for expert scrutiny on the security issues.
I also ask the Minister to reflect on Second Reading, where member after member of the Intelligence and Security Committee stood up to say that they felt that their expertise would be useful and helpful in the working of the Bill.
James Wild
The hon. Lady said that the annual report “may” be published, but in clause 61 it “must” be laid before the House, so there is no question that the annual report will be published.
Chi Onwurah
The hon. Gentleman makes a good point. It must be published, but the details that it sets out are limited. The reporting on other information, as I think the Minister has said, is something that is intended but is not required. We have requested that several other pieces of information be published, but the Minister has said that they may be.
The hon. Member for North West Norfolk is absolutely right that there will be an annual report, but that is a public report that will provide only the limited information set out in clause 61(2). Obviously, it will not provide anything that might have an impact on national security. With regard to what is published in the final notifications, for example, that can be redacted to take out anything of commercial interest as well as of national security interest. There is no requirement to report on any aspect to do with national security. Given that the only report is a public report, that is understandable. That is why we are proposing that a secure sensitive report should also be published and shared with the Intelligence and Security Committee.
The hon. Member for Tonbridge and Malling (Tom Tugendhat), the Chair of the Foreign Affairs Committee said that
“there is a real role for Committees of this House in such processes and…the ability to subpoena both witnesses and papers would add not only depth to the Government’s investigation but protection to the Business Secretary who was forced to take the decision”.—[Official Report, 17 November 2020; Vol. 684, c. 238.]
A member of the Intelligence and Security Committee also said that
“we need mechanisms in place to ensure that that flexibility does not allow the Government too much scope.”—[Official Report, 17 November 2020; Vol. 684, c. 244.]
As I have already noted, CFIUS has an annual reporting requirement.
The Chair of the Intelligence and Security Committee, the right hon. Member for New Forest East (Dr Lewis), has written to you, Sir Graham, and the other Chair of this Committee to ask a number of questions that he did not feel had been had been adequately answered by the Bill or its supporting documentation, and to place his Committee at the disposal of this Committee. He writes that the ISC continues to have a very real interest in the Bill and would have liked to have been included in briefings on it, and he asks about the investment security unit.
Nadhim Zahawi
I am grateful to the shadow Minister for her contribution on new clause 7, which seeks to require the Secretary of State to provide an annual report to the Intelligence and Security Committee, including detailed information relating to mandatory and voluntary notifications, trigger events that were called in and final orders made. In particular, it seeks to require the Secretary of State to provide details of factors relevant to the assessment made by the regime, including the jurisdiction of the acquirer; the nature of national security risks posed in transactions where there were final orders; details of particular technological or sectoral expertise that were targeted; and other national security threats uncovered through reviews undertaken under the Bill.
I am pleased that esteemed members of the ISC are taking a continued and consistent interest, including in relation to their role in scrutinising the regime provided for by the Bill. The Committee will be aware that clause 61 requires the Secretary of State to prepare an annual report and to lay a copy before each House of Parliament. That clause provides for full parliamentary and public scrutiny of the detail of the regime, which we judge to be appropriate and which does not give rise to national security issues when published at an aggregate level. I reassure hon. Members that that annual report will include information on the sectors of the economy in which voluntary, mandatory and call-in notices were given. It will also give a sense of the areas of the economy where the greatest activity of national security concern is occurring.
We intend to follow the existing, appropriate Government procedures for reporting back to Parliament, including through responding to the Select Committee on Business, Energy and Industrial Strategy. The ISC’s remit is clearly defined by the Justice and Security Act 2013, together with the statutory memorandum of understanding. That remit does not extend to oversight of BEIS work. I am sure that the BEIS Committee will continue to do a sterling job of overseeing and scrutinising the Department’s overall work. I welcome and encourage the ISC’s security-specific expertise, which the hon. Lady referred to, and its review of the annual report when it is laid before Parliament.
For the reasons I have set out, I am not able to accept the new clause. I hope that hon. Lady will agree to withdraw it.
Chi Onwurah
I thank the Minister for his response, but he did not address the issue scrutiny of sensitive aspects of how the Bill will work. I recognise that the ISC’s remit does not cover BEIS—that is the exact point of requiring such a report. As I think was discussed on Second Reading, the BEIS Committee will not scrutinise any sensitive information or information that is directly relevant to our national security. I am afraid that I cannot accept the Minister’s reasoning for his rejection of the new clause—namely, that it is effectively already covered by clause 61—so I will put it to a Division.
Bill to be reported, without amendment.