National Security and Investment Bill

Lord Grimstone of Boscobel Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, there is something going around my mind now about letting foxes out of their glass cubes—I am not sure how dangerous that is.

These amendments would allow for undertakings to be accepted instead of a final order—a case well made by the noble Lord, Lord Lansley. During Committee in the other place, Dr Lenihan from the LSE said:

“There are many cases in which a threat to national security can be mitigated by agreements and undertakings without needing to block a deal.”


Perhaps the Minister could inform the House what thought was given to that proposal.

As we have heard, Amendment 71 is in a way a probing amendment to learn more about the type of person the Secretary of State could appoint to supervise a final order. We will be particularly interested to hear the Minister’s reply on this. What sort of specialism would be involved? Would the person need to have any relevant training, background or experience? It would be interesting to know how they would be selected and whether the job description would be included in the report that would in any case be made, so that one could see the basis on which the selection happened.

Clause 26(4) states:

“Before making a final order the Secretary of State must consider any representations made”.


We are interested in what exactly is meant by the word “consider”. Would that be part of a dialogue, perhaps as part of the negotiations, or simply a requirement that representations are in the dossier submitted to the Secretary of State for ratification? Assuming that the representations had not been successful—if there were a final order, that would presumably be against the wishes of the parties—it would be interesting to know whether the reasoning for rejecting them would be noted and reported on elsewhere, possibly to the ISC. It would be important for someone to be able to reflect on the decision-making that had taken place.

[The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)]

My Lords, I start by extending my thanks to my noble friend Lord Lansley for these amendments. I also thank other noble Lords who have spoken; all I think welcome the broad thrust of the Bill even if they wish, quite rightly, to probe certain aspects of how it will work.

I begin by addressing Amendments 45, 68 and 69. Amendments 68 and 69 would allow the Secretary of State to accept “undertakings” from the acquirer

“as the Secretary of State deems appropriate to remedy, mitigate or prevent any risk to national security”,

rather than issuing a final order or a final notification. Amendment 45 would then, as I read it, make a consequential change to Clause 13 in respect of notifiable acquisitions so that those which are completed otherwise than in accordance with the final order or the agreed undertakings are void.

The Bill as drafted allows the Secretary of State two options once he has exercised his call-in power: first, to issue a “final order”, which contains remedies. I would add here that remedies are not necessarily just black and white—they could have a whole set of actions incorporated into them; some noble Lords may not fully have comprehended that. Secondly, the Secretary of State can issue a “final notification”, which states that no further action is to be taken under the Bill.

Undertakings proposed by my noble friend in these amendments would come into force when the undertakings were accepted. They could be varied or superseded through the Secretary of State accepting another undertaking, replaced by a final order made by the Secretary of State at any time, or the Secretary of State would be able to release the acquirer from their undertaking.

I am grateful that my noble friend is seeking to expand the options available to the Secretary of State but, as I hope to explain convincingly in just a moment, the Secretary of State does not need these additional options. Undertakings would not be appropriate because the Bill already provides the dual benefit of certainty for parties while giving the Secretary of State the “teeth” needed to enforce a regime built around our national security.

The Bill includes the ability for the Secretary of State to establish the terms of any remedy through the power to make final orders. I emphasise that point again. The terms of a remedy may require someone to dispose of part of something or to do something in relation to one bit of an undertaking but not another. It is a comprehensive term which allows all sorts of matters to be included within it. Indeed, the Bill states in Clause 26(5)(a) that a final order may require a person

“to do, or not to do, particular things”.

I am advised that that is a strong statutory footing which the Government consider is both required and sufficient for remedies under this regime.

My noble friend Lord Lansley was right on the button when he said that this gives the Secretary of State all that he requires. The Secretary of State does not need any additional powers because this power gives him all that he might conceivably want to do. Of course, before the Secretary of State determines his final order, he is likely to engage with parties to an acquisition—acquirers and others—to explore potential remedies.

However, it is right for the purposes of national security that these remedies—once they have been considered, and once they might have been discussed and looked at—should then be able to be imposed through a final order rather than assented to by the Secretary of State. We believe that this imposition is necessary because the matters that we are dealing with here are matters of national security. The Bill as drafted provides the Secretary of State with the power to impose remedies through a final order or to take no further action under the Bill, which is all that is required.

With Amendment 71, my noble friend addresses an important part of the Bill; namely, the carrying out of activities pursuant to final orders. The execution of final orders is of course vital to ensure that any remedies imposed by the Secretary of State have their desired effect. There would not be much point in just imposing orders if they were not carried through afterwards. This amendment seeks to make explicit a requirement that anyone who will conduct, or supervise the conduct of, activities mandated by final orders must be “suitably-qualified”. While I appreciate the good intention of my noble friend, I do not believe that this amendment would add anything substantial to the Bill.

First, the Secretary of State is unlikely to appoint someone who could not conduct or supervise the conduct of activities mandated under the final order. It would be daft of him to put someone in to do the job who was not qualified to do it. Why would he or she wish to do that? To do so may undermine the Secretary of State’s remedy; the remedy may not be carried out in full or in part if the person is not qualified, which would be against the decision that the Secretary of State has made. It is therefore very much in the Secretary of State’s own interests that the person appointed has to be “suitably-qualified,” even if the Bill does not say that specifically. I take it for granted that that is what the Secretary of State would want to do.

Secondly, the Secretary of State will be subject to public law duties when providing for a person to be appointed. Those public law duties will require him to act reasonably and take into account all relevant considerations. This would include whether the person is suitably qualified to undertake the task. He would be failing in his public law duties if he appointed someone who was not so qualified.

Thirdly, should it be helpful to noble Lords, I am happy to state categorically on the Floor of the Committee that the investment security unit will comprise eminently qualified people of the right skills and experience. For example, if a particular case requires someone qualified in chartered accountancy or in audit, the Secretary of State will appoint somebody who has those qualifications to carry out what is required.

For these reasons, I believe that although noble Lords are trying to be helpful in putting forward the amendments in this group, they are unnecessary. What they seek to do is already covered by the powers that exist in the Bill, and I hope that my noble friend will feel able to withdraw Amendment 45.

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I have received one request to speak after the Minister from the noble Lord, Lord Fox.

[Lord Fox (LD)]

My Lords, I thank the Minister for his answer. I want to follow up on his last point. There is a certain ambiguity in his answer around where this person would be drawn from. In one sentence the Minister referred to the ISU and in the next sentence he referred to drawing on a particular power. It is not clear: is this a standing group of people who will be set in or will people be seconded from other companies or pulled in from other departments? A little more sense of what the source of these people is would give us more security around this.

[Lord Grimstone of Boscobel (Con)]

My Lords, I thank the noble Lord for that question. It will be horses for courses. It will be either qualified people from inside or, if a person from inside does not have the qualifications, someone will be drawn in from outside and appointed to do it. The test will be to make sure that the person you ask to do the role has the capabilities and the qualifications to do it. I say yet again: why would the Secretary of State wish to do other than to appoint somebody who is qualified to do this task?

[Lord Lansley (Con)]

I am grateful to my noble friend the Minister for his responses to this short debate, and indeed to those who participated in it. It was helpful to elaborate some of the issues, although I am not sure that we solved many of the questions that were posed.

My noble friend correctly deduced that I did not see Amendment 71 as needed. It was designed to find out who these people are. Although my noble friend did not say so, the implication is that they are the staff of the department, working in the investment security unit. In a sense, that tells us already that, when we come on to think about some of the implementation of this and the annual reports and so on, we are dealing not only with a flow of cases through the investment security unit but with a continuing role for the unit in the scrutiny and the conduct of the activities that are the subject of final orders. I hope that we will be dealing with only some dozens of final orders a year, but it will build up over time since many of these final orders in relation to entities will have a continuing relationship.

I did not expect the “suitably-qualified” question to arrive at any other answer than that they are civil servants recruited into or drawn from the department, but if they were other than that, it would be very useful for us to be told. I am assuming that they are not.

On the question of undertakings, as I surmised at the outset, the Secretary of State has all the powers the Secretary of State requires. The point, however, is that when making final orders, it may be flexible from the Secretary of State’s point of view, since the Secretary of State can include anything the Secretary of State wishes to include in it. However, it is not necessarily flexible from the point of view of the people affected, since once the order is made, the flexibility has completely disappeared. What is flexible about undertakings is the ability of the acquirers to make commitments at the time they are contemplating an acquisition in order to bring those two things together to enable the acquisition to continue—the noble Lord, Lord Fox, made that point, perfectly reasonably. If we want to promote investment and to assist those who are acquiring entities and assets in the United Kingdom, other foreign direct investment jurisdictions such as the US allow for mitigation agreements. The American one does not impose orders, or rarely does so. There may still be merit in having the flexibility to enter into agreements with acquirers rather than imposing orders on them. I am surprised that the Government have simply dismissed that possibility. Having it on the statute book does not mean that Ministers have to use it, but if it is not on the statute book, they cannot do it. That is why we are thinking about it at this stage.

However, in the light of what my noble friend says by way of the powers in the Bill, I suppose that at this stage it is probably best to beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town (Lab)]

The lead amendment, Amendment 48A, would introduce a streamlined form for mandatory notification, and Amendment 67B would make any time limit for an information notice not less than three working days. That seemed a sensible—I think the word used was “pragmatic”—proposal.

Turning to the interesting Clause 30, the Minister in the other place said,

“final orders, in exceptional cases … when we are administering taxpayers’ money—may bring about financial difficulty for the affected parties”,—[Official Report, Commons, National Security and Investment Bill, 8/2/20; col. 288.]

which is why Clause 30 allows the Secretary of State to give financial assistance to an entity through a loan guarantee or indemnity as a consequence of making a final order.

It would be interesting to know a little more about the whole of this, as we have heard, and when a potential recipient might know that they were even in line for such help. How early in the process would it be indicated—not the actual decision but that that was a possibility? Or is it like Father Christmas appearing at the end?

As we have heard, the figure of £100 million is interesting, and it is interesting that there is no regulation-making or guidance-providing requirement such that guidance on the use of the power might have to be, if not agreed by Parliament, at least provided and open for debate and scrutiny. Will such guidance exist and how many cases a year are envisaged involving £100 million? Who would make the decision and how, as has been asked, and will it be reported in a timely manner—or, indeed, at all?

If this is the Government’s desired outcome, it seems that Clause 30 does not provide for any financial assistance in the case of an interim order. Perhaps the Minister could outline the thinking behind that, given that an interim order could also impose major costs on a British start-up or prevent an acquirer investing in one if it was thought that that investment might increase the acquirer’s level of influence unduly and trigger the next stage. There could also be the loss of a business-critical investment. It would be useful to know the thinking behind making money available to cover one sort of loss but not another. I look forward to hearing more of the thinking behind how this would work in the Minister’s response.

[Lord Grimstone of Boscobel (Con)]

My Lords, first, I thank my noble friend Lord Hodgson of Astley Abbotts for tabling Amendments 48A, 67B and 67C. I hope that the transaction he referred to had a happy ending.

Amendment 48A seeks to make it explicit that a streamlined mandatory notification form may be provided for in regulations if a person has previously submitted a mandatory or voluntary notification to the Secretary of State. The Bill requires a mandatory notice to be submitted to, and receive clearance from, the Secretary of State prior to the completion of a notifiable acquisition. Clause 14(4) provides for the Secretary of State to prescribe the form and content of a mandatory notice in regulations.

The amendment would amend the regulation-making power to make it explicit that such regulations could provide for those who have previously submitted either a voluntary or a mandatory notification form to submit a streamlined form. I am pleased to say that we are completely aligned with noble Lords who want the process under the Bill to be as streamlined as possible. As the Minister for Investment, looking to the interests of investors, I completely endorse that. I reassure noble Lords that the regulation power as drafted already provides for that.

In addition, the Government are designing both the voluntary and mandatory notification forms with business in mind, while ensuring that the Secretary of State receives the information that he needs to decide whether to issue a call-in notice in relation to a proposed notifiable acquisition.

I stress that the Government are keen to ensure that all the forms are clear and simple to complete. A draft notification form was published for comment during the Commons passage of the Bill, and the Government continue to engage interested parties to test the ease of completing the forms and the clarity and relevance of the questions.

Amendment 67B seeks to create a floor for the minimum time which the Secretary of State must provide to a party for responding to an information note. The minimum floor proposed is three working days. As noble Lords will be aware, Clause 19 provides for an information note which the Secretary of State may issue to require any person to provide information which is proportionate in assisting the Secretary of State in carrying out his functions.

An information notice may include a time limit for providing the information and the manner in which the information must be provided. An information notice must specify the information sought and the purpose for which it is sought, as well as the possible consequences of not complying with the notice.

It will be in the Secretary of State’s interest that any party from whom information is required is provided appropriate time for collecting and providing such information, or else confirming that they do not possess it. Providing insufficient time for doing this will only lead either to incomplete information being provided or to information being provided in a form which is more difficult to analyse. It might also lead to unwelcome outcomes, such as a party undertaking due diligence as to whether they possess the relevant information, but there then being insufficient time for them to establish that with certainty.

It is with these issues in mind that I assume that my noble friend tabled his amendments. I reassure him that the Secretary of State will already have the appropriate incentives to allow appropriate time for a response, and that, more widely, public law duties will require him to take a reasonable approach in setting a time limit for responding to an information notice under the Bill.

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[Lord Fox (LD)]

My Lords, I thank the Minister for his thorough answers. In his answer on Clause 30, the Minister referred to “affected parties” and did not rule out the aggressor, as well as the target, from potential compensation—or mitigation, as I think the Minister described it. Am I right in assuming that the aggressor might also feel that they are eligible for mitigation?

Secondly, the nature of that mitigation seems to rule out the Government taking a share in a potential company, rather than simply bailing it out. Given that this Government have already spent $500 million taking a 20% share in OneWeb, which was not even strategic, why would they not leave themselves open to taking a share in a company so important that they felt they needed to prop it up?

[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for that question. I will give him an additional example of where this power or type of power might be used. As I stressed earlier, it is not a general compensation power and will only be used in instances where the public interest, particularly national security interests, require it. As I also said earlier, any financial assistance would be subject to Treasury consent and would have to be shown to provide value for money. For example, if the Government provided a loan, it would normally have to be at market rates. The clause does allow the Secretary of State to bail out any business, either directly or surreptitiously, through soft loans.

Equally, the aim is not for this Bill to cause businesses financial distress, nor do we anticipate it doing so. The Secretary of State—this is the key point—may make a final order only if he “reasonably considers” that it is “necessary and proportionate” to address an identified national security risk.

Let me give an example. A case might arise whereby an asset has to be secured to prevent the national security risk of someone else getting hold of it. The Secretary of State might have imposed a final order that blocked a trigger event of a UK company that was working on unique or world-leading technology. If the company could not immediately find an alternative buyer, and if the collapse of the company could itself pose a national security risk, the Secretary of State could consider using this power. In such a situation, the Secretary of State may decide that he or she wishes to provide financial assistance to ensure that the company could continue operating until an alternative acceptable buyer was found. As such, this power will be used only in very tightly drawn circumstances where doing so is clearly in the national interest.

[Lord Clement-Jones (LD)]

My Lords, I know that the Minister is trying to be as helpful as possible by tying down the way Clause 30 will work. However, “tightly drawn” is not how I would describe its wording, so I assume he is really saying that it is the risk of judicial review hanging over the Secretary of State that keeps him honest in the circumstances. That is not a very good place to be when you are dealing with a Bill of this kind.

The other aspect is transparency. The noble Lord did not really explain the reason for the threshold of £100 million. He said it was for transactions—or compensation, if you like—and financial assistance under £100 million in aggregate would have to be reported for the annual review. However, if it was £99 million, say, that would not apply and it would not be subject to a separate report; it would just be aggregated along with all the financial assistance given over the course of the year. Why?

These powers are very wide; we need to know how they are being used and what direction the financial assistance is going in. Therefore, simply drawing a line at £100 million does not seem to be very satisfactory in the circumstances.

[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord, Lord Clement-Jones, for his question, and I understand the concerns that he raised.

I will first deal with the £100 million figure. Of course, that is a lot of money for the Government to have to spend without having to report to Parliament. However, I assure noble Lords that, in order to offer this level of financial assistance, the situation would have to be truly extraordinary. The only circumstances I can envisage where the Secretary of State would need to use this power would be for some of the most significant nationally important firms. The significant nature of these firms means that they may be large, so the Government have put in this reasonable cap of £100 million. Personally, I would be very surprised if anything like that were spent. However, of course, any spending under this power will be subject to Treasury consent, as I have said—and the Treasury does not rush forward with money for departments in situations like this.

I have to say—and, in a sense, apologise—that the nature of national security makes it very hard to predict where some of these issues might arise. However, where they do and where national security is an issue, it is important that the power is there, provided that it is only ever used responsibly and respectively.

[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

As there are no further speakers, I call the noble Lord, Lord Hodgson of Astley Abbotts.

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[Baroness McIntosh of Pickering (Con)]

I thank my noble friend Lord Lansley for tabling these two amendments. I would like to speak to Amendment 63, which gives me the opportunity to raise an issue raised with me, and I am sure with other noble Lords, by the Law Society of England. I put a direct question to the Minister in summing up this small group of amendments. Can he confirm that the Government have actually considered, and have regard to, the impact of the sheer large numbers of filings that they may receive on the new regime’s ability to dispense with these filings in a timely manner? My noble friend has done us a great service here by highlighting the level of information required in the first instance or that may be required at a later date.

The estimated volume of filings stated in the impact assessment, deemed to be between 1,000 and 1,830 transactions notified per year is, in the view of the Law Society, an underestimate. That is because, for reasons that my noble friend gave, there is likely to be a very large number of voluntary filings and requests for informal guidance, especially when the regime is new and businesses are accustoming themselves to its requirements. In my view, the Law Society has raised legitimate concerns, which are reflected in these two amendments. Can I have a reassurance that there will be sufficient resources to deal with the sheer number of requests that are expected to avoid delays and burdens for businesses, which could be avoided in this regard?

[Lord Grimstone of Boscobel (Con)]

My Lords, I extend my thanks to my noble friend Lord Lansley for his Amendments 50 and 63. I shall deal first with a couple of points that have been made. If a voluntary notification is incomplete, it is not effective. That may mean that the Secretary of State may choose to exercise his call- in powers at some point in future in relation to that.

My noble friend Lady McIntosh asked whether we had underestimated the number of transactions that were likely to come before the unit. She referred to the work that the Law Society has done on that. All I can say is that we have thought about this carefully, and I am happy to repeat the assurance that we will make sure that the unit is fully resourced. If the number is greater than we anticipate, the resources of the unit will have to be expanded to cope with those greater numbers.

I extend my thanks again to my noble friend Lord Lansley for Amendments 50 and 63 which both relate to the information that must be provided as part of a notification. Clause 14 sets out the mandatory notification procedure and Clause 18 the voluntary notification procedure. Both clauses provide powers to the Secretary of State, by regulations, to prescribe the form and content of a mandatory notice and a voluntary notice respectively. Both clauses also provide that the Secretary of State may reject a notice where it does not meet the requirements of the clause, or the requirements prescribed by the regulations.

These amendments seek to make it clear that the Secretary of State can reject a mandatory or voluntary notice where information relating to either a notifiable acquisition or a trigger event has not been provided despite being specified as required in regulations. These amendments also seek, as a result, to ensure that any such regulations include a requirement to provide the information about the notifiable acquisition or trigger event needed to make a call-in decision.

I am happy that I can reassure my noble friend, I hope completely, that the Secretary of State absolutely intends to use the regulation-making powers under both these clauses to prescribe both the form and content of mandatory notices and voluntary notices. Indeed, our view is that the regime simply cannot work and will not work without such regulations being made. The primary entry mechanisms into the regime are based on notification, so it is vital that we are clear with businesses and investors about what information they must provide and in what format.

That is why, ahead of Committee in the other place, we published a draft of the information likely to be required as part of a mandatory notice or voluntary notice. I continue to welcome comments from noble Lords about that draft, but I think I can reassure my noble friend that information about notifiable acquisitions and trigger events will certainly form part of such requirements.

With that said, I fear that my noble friend’s amendments would therefore be duplicative in this instance. Clause 14(4) and Clause 18(4) allow the Secretary of State to make these regulations. Clause 14(6) and Clause 18(6) allow the Secretary of State to reject a notice where it does not meet the requirements specified in the regulations. The Government consider that this approach provides the powers that the Secretary of State needs to reject a notice where insufficient or the wrong information has been provided, whatever the final notification forms look like.

I hope my noble friend is reassured by my explanation of these clauses and the Government’s general approach on this matter, and I hope, therefore, that he feels able to withdraw his amendment.

[Lord Lansley (Con)]

I am grateful to my noble friend. I think he slightly confused two things together at the end, in talking about insufficient or wrong information. If there is wrong information, then clearly a notice can be rejected. The question about the sufficiency of information is the point I am coming back to. My noble friend was quite clear on—and I think it is very clearly set out—what it is the Government expect to be provided by way of information for these notices. The question is: why should they have a power to reject a notice on grounds that they require more information beyond what has been asked for in the material that has already been published? That is the power they are taking.

If the Government say—as my noble friend Lord Callanan said—one must set out who the chief executive is, and someone puts their given name but not their family name, they can reject it. The point is, however, that that was specified in the regulations. The question is: does it require his other information, and what is the other information? People might reasonably say, “You have rejected it because I did not provide the information that you required, but you didn’t tell me you required it.” That is my problem.

I will go away and think about this a bit more; maybe it is not important enough for us to persist with. For the moment at least, I will make my point and beg leave to withdraw Amendment 50.

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[Lord Grimstone of Boscobel (Con)]

My Lords, I am grateful to the noble Baroness, Lady Hayter of Kentish Town, the noble Lords, Lord West of Spithead, Lord Rooker and Lord Butler of Brockwell, and my noble friend Lord Lansley for their amendments on the role of the ISC in relation to the national security and investment regime. I assure the noble Baroness that she will hear my own words rather than those of the noble Lord, Lord Callanan.

I start by saying that I have the deepest respect for the expertise and experience of the noble Lords who have spoken in the debate this evening. I have listened to what they have said carefully and with great attention. However, despite the eminence of those who have spoken, I fear that I may disappoint them in this speech.

I assure noble Lords that the Government are committed to publishing information in relation to the regime that properly balances the desire for information with protecting national security. I shall come back later to the important point about parliamentary scrutiny and accountability. What I am saying also takes account of the existing position in relation to scrutiny of the Department for Business, Energy and Industrial Strategy, BEIS.

These amendments represent a number of approaches to requiring the Secretary of State to provide sensitive information to the ISC. Amendments 78 and 79 would in practice require him to create a confidential annexe to the annual report. Amendment 82 would require an additional, separate confidential report to be provided to the ISC. Amendment 70 would require him to share intelligence relevant to a final order with the ISC and not to make that order until the ISC has reported to Parliament on it.

Amendment 86 would extend the remit of the ISC through amending the Justice and Security Act 2013 to enable the committee to scrutinise the operation of the Investment Security Unit. As we heard, Amendment 90 seeks to relocate the Investment Security Unit, within six months of the Bill becoming law, from the Department for Business, Energy and Industrial Strategy to the Cabinet Office. It would also establish a wide-ranging advisory board to the Investment Security Unit, which should include, but not be limited to, representatives from relevant government departments, security and defence organisations, and business bodies.

I will address Amendments 78, 79 and 82 together. The reports proposed under these amendments would contain very similar information, including in relation to mandatory and voluntary notifications, trigger events that were called in and final orders made. In particular, they would require the Secretary of State to provide details of factors relevant to the assessments made by the regime. These include: the jurisdiction of the acquirer; the nature of national security risks posed in transactions when there were final orders; details of particular technological or sectoral expertise that was targeted; and other national security threats uncovered through reviews undertaken under this Bill. I note that similar proposals were put forward in the other place and it is perhaps not surprising that my views on this align closely with those expressed by the Parliamentary Under-Secretary of State for Business and Industry at the time.

I respectfully draw noble Lords’ attention to Clause 61, which requires the Secretary of State to prepare an annual report and to lay a copy of it before each House of Parliament. This clause provides for appropriate scrutiny of the regime. We judge this to be appropriate, because that information does not give rise to national security issues when published at an aggregate level. It will also rightly give a sense of the areas of the economy where activity of the greatest national security concern is occurring.

Of course, it is right that there is also wider scrutiny of the work of BEIS and the work of the unit within BEIS. We therefore intend to follow the existing appropriate government procedures for reporting back to Parliament, including through responding to the BEIS Select Committee, which, I have to say, does an excellent job of scrutinising the work of the department. Indeed, I note that the BEIS Select Committee can and does handle sensitive material; for example, on our civil nuclear programme. The UK’s merger control regime under the Enterprise Act 2002 currently includes screening on national security grounds, and this function is overseen by the BEIS Select Committee.

In case there is any doubt of this—and coming back to the specific point that the noble Baroness made—there is no barrier to the BEIS Select Committee handling highly classified material, subject to agreement between the department and the chair of the committee on appropriate handling. The BEIS Select Committee will be able to see all the material that it needs in order to make its assessments within its role.

I argue that it is the right committee to oversee the work of the investment security unit within the broader remit of BEIS. We should not forget that the BEIS Select Committee is as much a part of our structure of parliamentary scrutiny and democratic accountability as the ISC. With great respect, I would not want any of our comments to appear to be disparaging to the work of the BEIS Select Committee and the very valuable scrutiny work that it does.

I believe that the BEIS Select Committee is excellently placed to consider how effectively and efficiently the regime interacts with the business community and investors. It can also ensure that the NSI regime does not create disproportionate impacts on the economy, and, with its business expertise, it is able to scrutinise whether the regime is effective in scrutinising relevant acquisitions of control. I have to say, with deep respect, that I would therefore question some of the narrative I have heard that suggests that the BEIS Select Committee is not well placed to scrutinise the NSI regime.

I turn back to the ISC. There are, of course, no restrictions on the ISC requesting further information from the unit or from the Secretary of State for matters where it falls under the remit of that committee. The Intelligence and Security Committee’s remit, however, is clearly defined by the Justice and Security Act 2013, together with the statutory memorandum of understanding. I know that this irritates noble Lords, but that remit does not extend to the oversight of BEIS’ work. I therefore welcome and encourage the Intelligence and Security Committee’s considerable security-specific expertise and its review of the annual report when it is laid before Parliament.

Before turning to Amendment 86, I will first revisit precisely what the Justice and Security Act 2013 provides for. I remind noble Lords that this Act sets out the role of the Intelligence and Security Committee alongside a memorandum of understanding. The Act sets out that

“the ISC may examine or otherwise oversee the expenditure, administration, policy and operations of … the Security Service … the Secret Intelligence Service, and … the Government Communications Headquarters.”

The Act also provides that:

“The ISC may examine or otherwise oversee such other activities of Her Majesty's Government in relation to intelligence or security matters as are set out in a memorandum of understanding”


agreed between the Prime Minister and the committee.

The present memorandum of understanding states that the ISC is, in addition, responsible for overseeing the activities of parts of the Ministry of Defence, parts of the Cabinet Office—including the National Security Secretariat and the Joint Intelligence Organisation —and the Office for Security and Counter-Terrorism. The ISC must report to Parliament annually on the discharge of its functions, and may make such other reports as it considers appropriate concerning any aspect of its functions. Redactions are agreed by the Prime Minister for any material that may prejudice the functions of the intelligence agencies or of other parts of the intelligence and security community.

Extending the remit of the ISC to oversight of the investment security unit would be a substantial amendment. In particular, the Justice and Security Act currently refers only to intelligence agencies, of which the investment security unit is not one. Noble Lords will have seen the strength of feeling in both this House and the other place concerning the role of the investment security unit in relation to the national security and investment regime—I am well aware of this. I understand that this proposed new clause is the result of careful consideration and an attempt to find a compromise, and for that I am grateful to my noble friend. However, for the same reasons that the Government have cautioned against other amendments that seek to provide for a more formal role for the ISC in relation to the NSI regime, I cannot accept it.

Amendment 70 seeks a similar privileged role for the ISC but in a way that, I have to say, would present additional problems. The Bill as currently drafted requires the Secretary of State, as the sole and quasi-judicial decision-maker, to follow clearly and tightly defined timescales and to handle sensitive information from a range of sources. Requiring the ISC to review every final order before it could be made would risk adding substantial delays into this process, harming both national security and business certainty.

The Government have faced amendments seeking for a national security assessment to be completed in one-third less time on large and complex acquisitions, for the purpose of limiting any wait by business. This amendment, however, while at the end of the process—and while final orders will, of course, be more limited in number than national security assessments undertaken—seeks to add potentially significant further delay without a clear benefit. There is also a risk that, depending on how long it takes the ISC to produce its report, the Secretary of State could be timed out of making a final order at all, as the tests for extending the assessment period do not currently allow for an extension due to ISC scrutiny. It would also, I think, be an unprecedented role for a parliamentary committee, although I have no doubt that others such as the noble Lord, as an ex-Cabinet Secretary, will have a much better sense of precedent in this area.

The report laid before Parliament, which this amendment would require, would be based solely on intelligence. It would therefore likely need to be so highly redacted as to make it uninformative. I can instead assure the noble Lord that, in making a final order, the Secretary of State will draw on information and expertise from across government, including the intelligence agencies, to ensure that he has all the information he needs.

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[Lord West of Spithead (Lab)]

My Lords, I am a poacher turned gamekeeper, as a fully signed-up member of the rolled-up trouser-leg and funny handshake brigade. For many years in the intelligence world, I hated the thought that government, Parliament or anyone else could look at my intelligence; how much nicer not to give any of that away. I am very glad that system does not work in this country. We have set up a mechanism whereby Parliament can see that highly sensitive intelligence that all of us involved in that world are immediately nervous when anyone touches. Of course if you have that intelligence, you want to hang on to it and not tell other people about it. It sounds to me as though the BEIS Select Committee will be delighted that it is to be the one making all the decisions based on the intelligence that it has. I do not really like that as a way of going forward. I could say a lot more about the response from the Government because I am not very happy about it.

Can the Minister look again at this debate and what has been asked for, because it seems very sensible for the ISC, which after all was tasked in the Justice and Security Act to do exactly this? The BEIS Committee was not. It is not too much to ask that this is looked at; it sounds very sensible.

[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for his courteous comments. Of course I will review the contents of this whole debate to see whether there are any lessons that I can learn from it.

[Lord Rooker (Lab) [V]]

My Lords, I much regret that, due to my own IT incompetence, I was unable to speak today. However, I say to the Minister as politely as I can that he has completely misread the House, and I think he will have to look at this again. The ISC is not a bog-standard Select Committee. I have a question for him, based essentially on the speech of the noble Lord, Lord Janvrin, which I do not think he referred to. How could rumours about government action in respect of a private company which may be market-sensitive be dealt with to public satisfaction unless the ISC has oversight? It would not matter if the ISC reports were redacted; Parliament would accept that; the media would accept it. The Government have a democratic licence to operate only because of Parliament. The Minister should go away and, before Report, explain to those who have spoken and other Peers where the Government’s democratic licence to operate is in this respect, having ruled out parliamentary scrutiny in a very precise way.

[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for his comments. I apologise to noble Lords if they feel that I have misread the mood of the House. The key point that I want to make in response to him is that the BEIS Select Committee—I say it again—is part of our parliamentary scrutiny and has democratic accountability in the other place. The Government are not avoiding scrutiny of the investment security unit; they are putting it somewhere where they believe that the scrutiny will be most effective, looking at the work of the unit in the round. They believe that the most effective overall scrutiny of the ISU will be found in the BEIS Select Committee.

[Baroness Hayter of Kentish Town (Lab)]

I have a couple of questions for the Minister. He said that the remit of the ISC under the 2013 Act does not cover the work of BEIS. If that is the case, that justifies even more an amendment to the Bill to amend the 2013 Act to put in such a provision. If the Government wanted to do it, that would be the way. I do not think that we should use the law as an excuse. The law can be changed; we are making an Act now.

I have just double-checked the names, but can the Minister confirm that the current members of the BEIS Select Committee are not all even privy counsellors and certainly do not have security clearance which goes beyond Privy Council? Can he confirm that there is no House of Lords Member on the BEIS Select Committee? Can he also confirm that nothing that we have done in any of these amendments to give the ISC a role removes the role of the BEIS Select Committee—in other words, it can still look at the industrial or investment parts? We are not taking those away from it, so it would continue to have the role that he has spelt out for it, but we are adding another bit. Can he confirm those three points?

[Lord Grimstone of Boscobel (Con)]

I thank the noble Baroness for those questions. First, I repeat that there is no barrier to the BEIS Select Committee handling highly classified, top-secret material. Appropriate arrangements can be put in hand to ensure that the members of that committee have access, after processes have been gone through, to that material. Secondly, of course, the committee is a committee of the other House —that is self-evident. I come back to my core point. Where the agencies which report to the ISC have done work of relevance to this, the ISC will be able to speak to them about such work, but that is very different from the ISC being responsible for monitoring the work of the ISU, which goes far wider than the responsibilities of the ISC. I have deep respect for the opinions that have been put forward, but I am afraid that I do not agree with them.

[Lord Campbell of Pittenweem (LD)]

My Lords, I am grateful for the opportunity to remedy an omission from my earlier remarks, to some extent stimulated by the response of the Minister. During my time in the other place, I was a member of the Trade and Industry Committee, the Defence Committee and the Foreign Affairs Committee. Unless things have changed very considerably, in my time as a member of these committees we were never admitted to intelligence of the quality which is available on a daily basis to the Intelligence and Security Committee. We were never required to sign the Official Secrets Act, which is an obligation incumbent upon those who wish to serve on the Intelligence and Security Committee.

Since the nominations are made by party leaders, it is not unknown for reservations to be expressed about the reliability of a possible member of the Intelligence and Security Committee, the result being that the leader of the party in question determines to withdraw that nomination. To suggest that the quality of information available is the same in Select Committees on security matters as that available to the Intelligence and Security Committee is to misunderstand the different obligations incumbent on membership.

[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for these comments and in no way want to second-guess the deep experience that he has on these matters. But I repeat yet again: there seems to be a worry that BEIS Select Committee members will not have sufficient security clearance to be able to do the work required of them. I repeat from this Dispatch Box that there is no barrier to BEIS Select Committee members handling top-secret and other classified material, subject to agreement between the department and the chair of the committee on appropriate handling. I am not sure that I can say more than that, but they will be able to have the information they need to carry out their functions.

[Lord Butler of Brockwell (CB)]

My Lords, I am grateful for this debate. I am afraid that I have to say to the Minister that, while he may have used his own words in answer to the debate, he used the brief that would have been used by the noble Lord, Lord Callanan. I do not want to decry the work of the BEIS Select Committee at all, but the Minister gave the game away when he said that access to highly classified intelligence for the Select Committee would be based on an agreement between the chair and the Secretary of State. The Secretary of State would control it. In that case, Parliament would be in the position of Glendower in “Henry IV”, who says:

“I can call spirits from the vasty deep.”


So you can, is the reply:

“But will they come when you do call for them?”.


Under the memorandum of understanding, the Intelligence and Security Committee has a right to get the intelligence that it needs. A Select Committee of the House of Commons does not have that similar right.

What has run through this debate, from everybody who has spoken apart from the Minister, is that we want one simple thing. We want to make proper use of a tool that is there for Parliament and has been created for this purpose: the Intelligence and Security Committee. There are various ways of doing it, as has been made clear. It could be by annual reports; it could be by changing the terms of reference, which can be done so easily; it could be a transfer to the Cabinet Office, which would bring it within the terms of the ISC.

I suggested that this should be a real-time operation. If I may say so, the Minister misrepresented that. There is no reason why that should extend the time necessary for the assessment. The Intelligence and Security Committee will be looking at one thing—the highly classified intelligence on which the Secretary of State is acting—and reporting on that. That is not a huge job. The ISC could say quite shortly that it was satisfied, and 99 times out of 100, I think, it would say that there were good grounds for the order that the Secretary of State was proposing to be make. I think that could quite easily be done within the 30 days allowed under the Bill for the assessment. It would not even need to make use of the 15-day extension.

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Moved by

[Lord Grimstone of Boscobel]

75: Clause 53, page 33, line 6, leave out from “followed” to end and insert “when a provision of or made under this Act requires or allows a notice, order, notification or document of any kind to be given or served.”
Member’s explanatory statement
This amendment ensures that the power to make regulations in clause 53(1) in relation to the procedure for service of documents extends to cover all of the different types of notices, orders and documents under the Bill.

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[Lord Grimstone of Boscobel (Con)]

My Lords, I turn to the amendments relating to information sharing and data protection. As always, I am grateful to my noble friend Lord Lansley, who we know examines these Bills with such a critical eye that nothing can escape his eagle gaze. The first amendment relates to Clause 54 and seeks to require the Secretary of State, when deciding whether to disclose information to an overseas public authority, to have regard to whether there is a reciprocal agreement with the country or territory to whose authority the disclosure would be made.

As this clause is about sharing information, I believe that my noble friend is envisaging the reciprocal agreement with another country or territory to be in relation to the sharing of information for a specified purpose, such as facilitating the exercise by the Secretary of State of his functions under the Bill or the prevention or detection of crime. Clause 54(7) specifies certain considerations that the Secretary of State must have particular regard to when deciding whether to disclose information to an overseas public authority. It includes consideration of whether the law of the country or territory to whose authority the disclosure would be made provides protection against self-incrimination in criminal proceedings corresponding to the protection provided in the UK, as well as consideration of whether the matter is sufficiently serious to justify making the disclosure. The clause permits the Secretary of State to disclose information but, I stress, does not require him to do so.

The Secretary of State, as often elsewhere in the Bill, will be subject to public law duties when deciding whether to share information with an overseas public authority under this clause. These duties include a requirement to take all relevant considerations into account, although this will obviously depend on the facts of each case, and whether there is a reciprocal agreement in place. In some circumstances, for example where information is to be shared for the purpose of protecting national security, it may well be appropriate to proceed in the absence of a reciprocal agreement. When deciding whether to disclose information to an overseas public authority, the Secretary of State will also be bound by the data protection legislation provisions, which include certain restrictions in respect of international transfers of personal data and consideration of appropriate safeguards. There is therefore no need to include additional restrictions in the Bill.

I turn to Amendment 77, which relates to Clause 57. It seeks to ensure that when considering whether a disclosure or use of information pursuant to a duty or power under Parts 1 to 4 of the Bill would contravene the Investigatory Powers Act 2016, the duty or power itself would need to be taken into account. A similar provision exists in relation to consideration of whether a disclosure or use of information would contravene the data protection legislation. Clause 57 states that the provisions in Parts 1 to 4 containing a duty or power to disclose or use information do not authorise a contravention of the data protection legislation as defined in the Data Protection Act 2018. The clause also sets out that such a duty or power to disclose or use information does not authorise contravention of Parts 1 to 7, or Chapter 1, Part 9, of the Investigatory Powers Act 2016. That Act contains provisions about conducting interception, including restrictions on use and disclosure of intercepted information. These are standard provisions included where legislation concerns the use or disclosure of information.

To reassure my noble friend, there is no call for the Secretary of State to consider the duty or power to disclose or use information under the Bill to determine whether a particular disclosure or use pursuant to it would contravene the Investigatory Powers Act. This will simply require consideration of what the relevant provisions of the Act prohibit, and none of the prohibitions turns on whether a duty or power exists or its terms. In comparison, the data protection legislation provides a framework for processing personal information but allows for other provisions, such as those found in the Bill, to specify more details about the use or sharing of personal information. Therefore, a duty or power to disclose or use information under the Bill will need to be taken into account when considering whether a disclosure or use of personal information pursuant to it would contravene the data protection legislation. As explained, this is not required when considering compatibility with the Investigatory Powers Act, due to the differing nature of the legislation.

Therefore, while I understand the objectives of my noble friend and his desire, as always, to be helpful, for the reasons I have set out, I am not able to accept these amendments, and I hope that my noble friend will agree to withdraw or not move them.