National Security and Investment Bill

Darren Jones Excerpts

2nd reading & 2nd reading: House of Commons
Tuesday 17th November 2020 Commons Chamber

[Darren Jones (Bristol North West) (Lab)]

Before I begin my remarks, I should declare my interests as chair of the all-party parliamentary group on technology and national security and the parliamentary internet, communications and technology forum APPG, whose members will no doubt have interest in the Bill; as the chair of a global network of legislators interested in artificial intelligence regulation called the Institute of Artificial Intelligence; and lastly, in my capacity as Chair of the Business, Energy and Industrial Strategy Committee, I have had discussions with the management of ARM, its founder Hermann Hauser and the CEO of Nvidia about the proposed takeover.

I support the Bill and thank the Secretary of State for briefing me on its contents last week. The ability to scrutinise foreign investment and to intervene when there are national security interests is not only a critical function of the state but an increasingly important one, given the impact of technology and data on every part of our economy and our infrastructure, and the use of that avenue to cause harm to Britain’s interests. It is on that basis that we should have a robust scrutiny function, but it should also be finely balanced with the transparent, clear and pro-investment framework brought forward under this Bill. I agree with other colleagues around the House that, by international standards, Britain has been a bit of a laggard in recent years in bringing forward a robust foreign investment regime, and that is why we support the Bill, but I have a few questions today, which I hope the Minister might try to answer in summing up.

First, on the definition of sectors, the 17 sectors identified include some dual-use functions such as quantum computing, which at this point in its development seems obvious and indeed is in line with the recommendations of the Science and Technology Committee inquiry into quantum computing in the last Parliament, when I was a member of that Committee. However, as has been noted, other sectors are identified merely as “artificial intelligence” or “energy”. Artificial intelligence, for example, is a general purpose technology that will increasingly apply to every aspect of our economy, so how we ensure robust and clear definitions will clearly be important.

It has been noted that there is a risk under the Bill of over-reporting as an insurance policy. I wonder whether lessons could be learned from other regulators—for example, by introducing regulatory sandboxes within the units in the Department where interested individuals might be able to come to set forward in advance the transaction and get some initial advice on whether it falls within the definitions. If it does not, I think there will be a risk of over-reporting, but also of court cases that dispute the definitions, which, in their own right, can be fairly limited in statutory instruments and will probably not apply to every circumstance. I reaffirm the comment from the Opposition Front Bench on engaging with Parliament on the sector definitions under the statutory instruments—and not just with Parliament as a whole but with the relevant Select Committees, including my own. I also note the interest of my hon. and right hon. Friends from the Science and Technology Committee, the Foreign Affairs Committee and the Defence Committee in this matter.

Secondly, on the definition of national security, there has been some debate in advance of the publication of the Bill on whether the Government were intending to go beyond national security and to look at broader economic or jobs-related issues. As my right hon. Friend the Member for Doncaster North (Edward Miliband), the shadow Business Secretary, said from the Dispatch Box, we think that there is some legitimacy to Ministers having a right to intervene when, for example, a major employer or a sector that is strategically crucial to the British economy is under threat from a legitimate overseas acquisition that could have an impact on British jobs or British industrial capacity. I welcome the comment that this is a broader industrial strategy conversation and note the Department’s intention to rewrite that, as previously advised before Christmas, although it will presumably now take longer. I look forward to that broader debate, but I agree with colleagues on a cross-party basis that at least some legal structure around the definition of national security would be helpful, for reasons I will come on to later.

Thirdly, this is not just about mergers and acquisitions; as the Government’s Project Defend assessment has shown, there are very long supply chains relating to critical national infrastructure, through which components are sourced from companies in jurisdictions about which Ministers might legitimately have national security concerns. I would be interested to hear whether Ministers plan to expand the scope of the Bill or bring forward other legislation in future to deal with supply chain intervention, in addition to or alongside merger and acquisition issues.

I also note that while clause 7 of the Bill covers all the corporate vehicles such as limited liability partnerships, trusts and limited companies, it excludes individuals. This is probably very limited, because individuals would not want to take on the liabilities of buying big companies, but I am sure there are potential cases where individuals will buy intellectual property or assets in their own individual right, whether it is a licence to intellectual property or actual property, as my right hon. Friend the Member for North Durham (Mr Jones) mentioned, and they would fall out of the scope of this Bill. I would be interested in the Minister’s view on that.

Fourthly, the application of the Bill applies from the date of presentation, not from the date the Bill becomes law. It would be useful, given that this is now the regime in the UK, for the Department to set out what current takeovers will be subject to it. Colleagues have mentioned the ARM-Nvidia takeover, which of course is important to the British economy. I understand from press reports that the Department has not felt able to confirm whether that will be subject to this legislation, but I think it would be in Ministers’ interests to be quite clear about that.

Equally, I would stress again the comments from the Opposition Dispatch Box about the length of retrospectivity. Five years seems a very long time, and I would be interested to understand why a period of five years has been adopted by the Government. One of the attractive natures of the British economy is our policy stability and the way in which the rule of law functions, and I share the concern that five years is a long time. There could be a change of Government, a change of Ministers, a change in leadership in the unit in the Department or a change in the view on national security that could start to unwind a transaction many years after it had gone through. Ministers need to consider that carefully.



Fifthly, we are still waiting for confirmation of the Government’s intentions for our post-Brexit competition and state aid policy regime. Ministers have been quick to table statutory instruments to say that the European regime will not apply from 1 January but have not yet set out what will. The Bill is implicated in that process. It is the start of a post-Brexit state aid and competition policy. If the Minister feels able to give us a bit of a glimmer in his closing remarks about when the details of our post-Brexit competition and state aid policy might be published, I would be grateful.

Lastly, I am not entirely clear what the assessment process is under the Bill. In previous examples, such as the hostile takeover of GKN by Melrose, in which I declare a constituency interest, the national security assessments were undertaken by the Secretary of State for Defence and, perhaps for fair reasons, were done without much oversight or transparency. Given that all those sectors will now be subject to national security assessments, will it be the Ministry of Defence, the Department for Business, Energy and Industrial Strategy, the intelligence services or another body that undertakes them? It would be useful to have some transparency about who is making the assessment and how the Secretary of State will ultimately balance very difficult decisions.

In sum, I will support the progress of the Bill. I share some concerns about the speed and why it has been brought forward so quickly, and I reiterate my point about the statutory instruments, therefore, being an important part of parliamentary scrutiny when they are introduced. I hope that Ministers will engage fully in the consultation process with stakeholders to ensure that the new framework is not only fit for purpose but gets the crucial balance right between national security concerns and maintaining Britain’s leadership as a pro-investment economy that fits with our broader regulatory position post Brexit.

National Security and Investment Bill

Darren Jones Excerpts

Consideration of Lords amendments
Monday 26th April 2021 Commons Chamber

[Sarah Olney (Richmond Park) (LD) [V]]

In common with other hon. Members who have spoken tonight and on other occasions, the Liberal Democrats support the broad principles of the Bill. It is sensible, at a time of geopolitical uncertainty and increasingly globalised trade, to have provisions for the Secretary of State to intervene in business transactions where those transactions may have a bearing on national security. It is important, however, that the parameters of such a Bill are carefully drawn to ensure both that the transactions that may pose a threat can be caught, and that undue constraint is not placed on transactions that ought to be able to proceed freely.

The concerns raised about the Bill have focused on the fact that many of the definitions in it can be drawn too widely, and that the powers of the Secretary of State to call in transactions can be triggered too easily. That creates an environment of uncertainty for investors, as a wide variety of activities come into the scope of the Secretary of State’s powers. That will potentially act as a brake on investment, and at a crucial moment, when we are looking to strike new deals with global partners to replace the trade we are losing as a result of leaving the European Union.

I therefore welcome Lords amendments 11 and 15, which would require the Secretary of State to provide an explanation for choosing to exercise the powers granted to them. That seems to be a rational compromise. Instead of attempting to frame more precisely definitions and powers that will quickly become outdated as technology and trading practices progress, we would maintain the wider definitions but explain how and why they were being exercised.

That would provide a framework of precedent that investors could refer to when assessing investment risk. It would provide a much greater degree of transparency and accountability to the Secretary of State’s decision making. We have all seen the value of greater transparency over the last few weeks. Adopting these amendments would show that the Government were attempting, in good faith, to regain public trust after that trust has been shaken by recent revelations.

There is a distinct danger that the Bill, without amendment, will leave the Secretary of State vulnerable to pressure from those whose interests go beyond national security. We have seen this Government act to help developers avoid taxes, bankers win access to Government schemes, and shell companies win multimillion-pound personal protective equipment contracts. There is a very real danger that the UK’s reputation as a safe and orderly place to do business may be undermined, and these amendments offer the Government an excellent opportunity to restore our reputation once more. I very much hope that the Minister will take it.

The Bill is valuable and necessary, but it is only part of what is required to boost the UK’s attractiveness as a global trading partner. The scrapping of the industrial strategy in the last month and the continuing failure to construct a workable plan for achieving net zero are holding the UK back from being able to achieve all that it is capable of achieving as we emerge from the difficulties of coronavirus.

[Darren Jones (Bristol North West) (Lab) [V]]

I will focus my remarks on Lords amendments 11 to 15 to clause 61, which, as we have heard, have arrived from the other place on the basis that the BEIS Committee, which I chair, does not have the access to the intelligence information that it would need in order to adequately scrutinise the Investment Security Unit in the BEIS Department. Let me start by thanking their lordships for their highly informed debate on this issue and their hard work in drafting these amendments.

It is a matter of fact that the Intelligence and Security Committee has a level of security clearance and powers to demand classified information that no other Committee of this House has, including my own. I was therefore surprised to learn that the Government were not going to update the memorandum of understanding with the ISC to extend its remit specifically to include the Investment Security Unit. That is why their lordships have sent us these amendments, which I have no issue with. On that basis, I commend the Chair of the ISC for his eloquent speech this evening. However, the Government have made it clear to my Committee and to the House that they have no intention of supporting the amendments, and nor will they be extending the memorandum of understanding in respect of the ISC.

The Secretary of State did agree with me in Committee that the Bill extends the powers of the Government to intervene in the market and that adequate scrutiny of that function is therefore important. On that basis, my Committee has received a letter from the Secretary of State, which we will formally report to the House tomorrow morning, setting out three key points. First, my Committee will be guaranteed appropriate levels of information and briefing to understand why Ministers have acted in the way they have—this is noting the points made by the ISC Chair this evening. On that basis, my Committee and the Department will enter into a new MOU to reflect this. Secondly, the Secretary of State will brief me, as Chair of the Committee, on Privy Counsellor terms, as required. Thirdly, the Science and Technology Committee, which also has standing in this area, will be recognised as sharing the scrutiny responsibility, alongside the BEIS Committee, in addition to the work of the ISC. I welcome the comments made by the Chair of the Science and Technology Committee in this evening’s debate.

My Committee has discussed this issue and wants to ensure effective scrutiny of the wide-ranging and important powers in the Bill. Given that the Government are unwilling to support their lordships’ amendments this evening, and therefore having the main scrutiny responsibility resting with the BEIS Committee, the agreement to enter into a new MOU with my Committee, and to ensure the Chair’s briefing on Privy Counsellor terms, is the next best available option. The BEIS Committee will continue to serve the House in holding the Department to account, and we will of course make it known if we are unable to do that effectively. I therefore look forward to hearing the Minister, when he sums up the debate on the Floor of the House this evening, reconfirming the commitments made by the Secretary of State and promptly agreeing the MOU in due course.

[Paul Scully]

I very much appreciate the spirit and detail with which this issue has been covered in the Chamber today and the consideration that has come from the other place. I am glad that we have been able to bring forward a number of amendments to improve the Bill, ensuring that we can keep the certainty for business and are responsive to the needs of business, while clearly keeping that central focus on national security. It is so important that we keep the flexibility in the definition of “national security”, in order to future-proof the Bill, while none the less making sure that businesses and potential investors in this country know exactly the competitive regime we have here.

That goes to the point made by my hon. Friend the Member for Gravesham (Adam Holloway) about PsiQuantum. Quantum computing is an exciting technology. The Bill tackles national security, but we must also ensure that the UK is a competitive, good home for technologies such as quantum computing, not least by making sure that we can unleash innovation, and make the UK the science superpower that is the envy of the world, with people wanting to come to build quantum technology units here in the UK, through our use of research and development and by ensuring that we are competitive in all our offerings, while being able to protect businesses for our national security.

I appreciate the kind words of the shadow Minister, the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), and indeed those of the hon. Member for Aberdeen South (Stephen Flynn) when he talked about my coming to this place. Indeed, not only did I follow my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) in leading on this Bill, but I stole his flag for my office, for fear of missing out otherwise when I am on my Zoom calls, because that does symbolise the vaccination process and the fact that the Union has come together—the UK has come together—in an amazing programme.

I am really keen to tackle two more points. The hon. Member for Richmond Park (Sarah Olney) talked about flexibility versus scrutiny, which I have already talked about. She mentioned that she did not want other countries or other businesses to undermine the UK economy. Clearly, we do not have to go that far to have people undermining the UK economy; we have only to go to the Liberal Democrats for that. It is important that we do not allow that speculation—the sort of muckraking we heard from that contribution—to detract from what is a really important Bill for the UK national security regime, and from that optimism and confidence that is needed for attracting investment within this country.

I understand the concerns of my right hon. Friend the Member for New Forest East (Dr Lewis), but I reiterate the fact that it is for the BEIS Committee to oversee the work of the Department. The Committee is particularly well placed to consider how effectively and efficiently the regime interacts with business communities and investors.