National Security and Investment Bill

Lord Lansley Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

Moved by

[Lord Lansley]

39: Clause 11, page 7, line 36, at end insert—
“(aa) prescribe circumstances which are not to be regarded as gaining control of a qualifying asset which is the subject of an export control order under the Export Control Act 2002 and related provisions, and”Member’s explanatory statement
This amendment would enable the Secretary of State in regulations to set out where the control of assets under the Export Control Act should not to regarded as gaining control under this Act.

[Lord Lansley (Con)]

My Lords, this first group consists of two amendments, both in my name and both relating to the interaction of the export control regime with the investment screening regime. Amendment 39 would insert into Clause 11, which relates to the exceptions to the general definition of the control of assets, a power for the Secretary of State by regulation to prescribe where the control of a qualifying asset is not to be regarded as controlled under this regime. It would give the Secretary of State freedom to define circumstances where assets that are to be exported and are controlled by the export control regime would not be regarded as controlled for these purposes.

Amendment 87 is a bit more straightforward in that it would introduce a new clause requiring the Secretary of State when making final orders under the Act to take account of the effects of the Export Control Act and related provisions on that qualifying asset. Your Lordships will note in the Bill an interaction with the Competition and Markets Authority regime, but no similar provision is made for the interaction of the export control regime with this regime.

The Bill offers no substantive recognition of the interaction between the export control regime and assets under this regime. That is surprising, because paragraphs 3.85 and 3.86 of 2018 White Paper state—please forgive me, it is a fairly long quote:

“After the introduction of the reforms described in this White Paper, the export control regime will remain the key means of restricting trade in strategic goods where this might raise national security risks … The Government wishes to ensure that the new reforms are as proportionate as possible, and are not used instead of other, more targeted or proportionate policy levers. As such, where national security concerns relate solely or primarily to the export of goods, the Government expects that the export control regime would remain the primary means of protecting national security.”


The purpose of these amendments is to ask whether that is still the Government’s policy. If it is, why is it not reflected in the structure of the powers? Should it not be included in the Bill to make that clear?

The Minister may say that since the export control regime is under the control of Ministers, they have all the administrative means at their disposal to bring the two regimes together, whereas there is a separate statutory and independent agency in the Competition and Markets Authority. But that would not be transparent to those affected. I know from talking to people who would be affected that there is a long-standing relationship with the export control unit of the department and an understanding of how its powers are used. To the extent that that transparency and predictability are maintained explicitly, I think it would greatly assist those who are to be affected by these powers.

It is surely the case that Ministers, when making a final order, will take account of where qualifying assets are the subject of an export control order. That being so, I am looking not only for an assurance from the Minister that it is the Government’s intention to use the export control regime as the principal means by which the export of qualifying assets is controlled but for a recognition of this in some form in the legislation, to enable all those affected to be aware of the relationship between these two regimes and for it to be transparent. I therefore urge my noble friend to consider the merits of Amendment 87, which would introduce a new clause that simply did that without placing any constraint on Ministers. I beg to move.

[Lord Purvis of Tweed (LD)]

My Lords, I am grateful to the noble Lord for bringing forward these questions in such a characteristically forensic manner. The Committee will be aware that I have not participated in it so far, and I therefore intend to be brief and shall raise only a small number of questions seeking clarification from the Minister on the interaction with the Export Control Act 2002 and on an associated issue.

It has been fascinating listening to the contributions in Committee up to this point about some of the opacity in the interaction with the other legislation and, indeed, how the investment security unit will operate within the department that will cover export control licence applications, which will also make considerations on national security grounds and how they interact. It was interesting to note that in the House of Commons, on the Prime Minister’s Statement on the integrated review, Julian Lewis, the chair of the Intelligence and Security Committee, criticised the Prime Minister for not allowing there to be full scrutiny of how the investment security unit will operate. I know that my noble friend Lord Fox will raise this later and will lead on it.

How will that interaction be on the export licence regime? One area where there have been calls for the Government to have annual reports on the operation of this legislation was interesting, given the fact that under the Export Control Act 2002 there are annual reports, and there is clarity as to how many applications and the various different criteria for refusal or putting on hold applications. An interesting aspect of the Export Control Act 2002—and I reread the Explanatory Notes to the legislation after seeing the amendment from the noble Lord, Lord Lansley—is that, on one reading of the Act, which does not go into the same level of detail for defining companies as this legislation, it refers to people being part of the licence, for them and their knowledge and for their providing technical assistance. There certainly can be companies that operate almost exclusively on providing technical assistance, in the technical services industry in particular; they are covered by the Export Control Act for their work that they will then carry out, and the Government take a view as to whether that is something that should be considered as an export.

Secondly, there are companies that operate within hybrid technologies, as the Export Control Act indicated, for technologies and technical assistance, and controls can be imposed for the transfer of technology from the UK and by UK persons, anywhere and by any means. It is interesting that Section 4 of the 2002 Act says that,

“‘trade controls’ …means the prohibition or regulation of … their acquisition or disposal … their movement”,

and associated activities of any goods. The Minister may say that that means specific items, goods or technologies of a company but not the company itself—therefore, this legislation covers the company. It would be helpful if the Minister could indicate something about the interaction.

It struck me that, if any Government indicated that a certain technology or good required prohibition from being exported or their trade in that to be regulated, that would be considered under criterion 5 for national security grounds. What if the interaction of that company is then the subject of a review under this legislation, or indeed that parent company is taken over, or there are shares that meet the trigger requirement? What is the status of the export licences that that company has—because the Government have already indicated that they have sought and maybe made a decision on national security grounds? It is worth pointing out that we know from the annual report that last year there were 80 refusals on national security grounds under criterion 5 in the UK—it indicates for the national security grounds of the UK, the EU and other friendly countries. In the last set of discussions, it was interesting to hear about the interactions with decisions that other friendly countries make. The Export Control Act makes determinations for that.

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[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

First, I thank my noble friend Lord Lansley for these two amendments, which seek to ensure seamless integration between the new regime provided for by the Bill and the existing export control regime. I shall take his amendments sequentially.

Amendment 39 seeks to ensure that the Secretary of State can, through regulations, exempt from the regime certain acquisitions of control over qualifying assets that are subject to export control orders. Clause 11 provides for exceptions relating to control of assets. Subsection (1) sets out that acquisitions made by individuals for purposes wholly or mainly outside the individual’s trade, business or craft are not to be regarded as gaining control of a qualifying asset and are therefore excluded from the scope of the call-in power. This does not apply in relation to an asset that is either land or subject to certain export controls set out in subsection (2)(b).

Subsection (3) also provides a power for the Secretary of State to amend the list of assets that are outside the scope of this exemption or to prescribe other circumstances in which a person is not to be regarded as gaining control over a qualifying asset. That includes being able to prescribe circumstances in which the acquisition of an asset subject to export control legislation is not to be regarded as gaining control over a qualifying asset. Any use of this power in subsection (3) would, of course, be guided by the operation of the regime in practice and any patterns of activity that are observed. As such, I can therefore assure my noble friend that the Bill already provides for what his amendment intends to achieve.

Amendment 87 would require the Secretary of State to ensure that any interim orders or final orders made in relation to acquisitions of control over assets take into account controls imposed under the Export Control Act 2002 and related provisions. I thank my noble friend for his proposal and commend the intent behind it. It is, of course, very important that the Secretary of State’s use of the powers provided for by the Bill is in keeping with the Government’s measures under other legislation. The Secretary of State must take into account all relevant factors when making decisions about the use of interim orders and final orders.

The legal tests in the Bill require the Secretary of State, before making an order, to reasonably consider that the provisions of the order are necessary and proportionate for the purpose. In the case of final orders, that purpose is to address a risk to national security, and in the case of interim orders, it is to prevent or reverse an action that might undermine the national security assessment process. Whether controls have been imposed under export control legislation will be relevant to whether the envisaged provisions of an order are necessary and proportionate. For example, where export controls in relation to an asset are already in place, it may not be necessary or proportionate to make an order under this Bill prohibiting the transfer of the asset overseas, but this will depend on the facts of each case.

Addressing the questions of the noble Lord, Lord Purvis of Tweed, about why we need the Bill when we already have the export control regime, I say that the export control regime is a licencing regime for certain controlled goods. It is an important part of the safe- guarding of our national security and it sits well alongside the proposed national security and investment regime. The two regimes are distinct though, and do not perform the same role. For example, the export control regime does not provide the Government with the ability to scrutinise acquisitions of UK companies or direct the use of sensitive assets used in the UK, whereas of course the NSI regime would.

On the noble Lord’s points about standard individual export licences if they have been granted for an export, I tell him that a standard individual export licence is granted to one person to export specified items to a named recipient. If the parties involved precisely follow the terms of a standard individual export licence that has already been granted following an assessment of national security risks, it is unlikely that the Secretary of State would reasonably suspect that the export might give rise to national security risks. In this situation, it is unlikely that he would be able to call that export in under the NSI regime. However, it is important to say that any decisions would need to be made on a case-by-case basis. It is important that the Secretary of State retains the ability to call in and scrutinise trigger events involving the export of assets in the event that national security risks are present.

The noble Lord asked about Northern Ireland. Qualifying entities as assets in Northern Ireland sit within the scope of the Bill, and that ensures that there are no loopholes. A trigger event under the Bill is not based on the application of EU law. For completeness, I should also say that the Secretary of State will, in any event, be subject to public law duties requiring him to consider all relevant factors when deciding whether to make an order under the Bill. Therefore, where export controls are relevant, the Secretary of State will need to take them into account when making that order.

I hope that that has explained, for the benefit of the House, the interaction between the two pieces of legislation. With the explanations that I have provided, I hope that my noble friend will feel sufficiently reassured that his concerns have been taken into account, and that he will not press his amendments.

[Lord Lansley (Con)]

My Lords, I am grateful for each of the contributions to the short debate. They were helpful and, indeed, added to the questions. The noble Lord, Lord Purvis of Tweed, referred appropriately to the Export Control Act provisions. I remember that I was on quadrilateral committee in the other place, about 15 or 16 years ago, so I remember how these issues were considered at that time. Indeed, there was a level of parliamentary oversight of the export control regime, which may be something we refer to at a later stage. He raised some good points: I thought the point about the EU export control regime was a very good one. The noble Lord, Lord Grantchester, made an interesting point about the interaction with the Department for International Trade in this context.

If I understand my noble friend correctly, he is more or less saying that the power under Clause 11(3)(b) would enable the Secretary of State to prescribe, by regulation, such circumstances as necessary, so in that sense my Amendment 39 is not necessary. I agree; it is not necessary but certainly the explanation of the interaction between the two regimes is desirable. However, Amendment 87, proposing a new clause, perhaps drafted differently to make it clearer about the interaction between the two regimes—both at the point where a call-in notice has to be considered, as well as the point at which interim and final orders are made—would be very useful. What I have heard from my noble friend suggests that, by administrative means, using the powers in the Bill and under public law requirements, the Secretary of State will have regard to the export control regime when using his powers under this regime. That is undeniably true. I think we all knew that, but there is much more that we put into legislation, particularly with a new system, that helps people who are to be affected by it to look at it and understand how it works.

What I found deeply surprising was that such an important part of the Government’s policy intentions—that the export of goods should still be primarily controlled by an export control regime—was not even referred to in the Bill or in the Government’s response to the consultation. It is as if it did not exist, but it does exist and it is important, as the Minister’s reply suggested. I shall reflect on what he said, but it may well be that there continues to be a “desirable interaction” clause in the Bill that makes it very clear to all those affected that the export control regime plays a significant part in the control of qualifying assets where they are to be exported. However, based on what my noble friend said, I beg leave to withdraw the amendment at this stage.

Amendment 39 withdrawn.

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Moved by

[Lord Lansley]

45: Clause 13, page 8, line 21, leave out from “made,” to end of line 22 and insert “or in relation to which undertakings under section 26(1)(aa) have been accepted, that is completed otherwise than in accordance with the final order or the undertakings (as applicable), is void.”
Member’s explanatory statement
This amendment is linked to amendments in Lord Lansley’s name to Clause 26 which provide for undertakings to be accepted instead of a final order.

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[Lord Lansley (Con)]

My Lords, this group consists of four amendments, all in my name. The few who are watching our proceedings may be slightly confused that all the amendments they have heard have been moved by those on the Conservative Benches. I think three-quarters of the amendments on our Marshalled List today are tabled by Conservative Members. It is because we all support the Bill, and we want to make it work well. I note that our noble friends are commending our intent; I promise them that our intent is positive in all these amendments. Many of them, like those in this group, are about trying to understand the structure of the policy and probing some of the considerations that we thought might go into it.

Amendments 45, 68 and 69 relate essentially to the policy question of whether the Secretary of State should accept undertakings as an alternative either to issuing a final notification, meaning nothing is going to happen, or to making a final order, meaning specific things must be done. Why should the Secretary of State have an intermediate option? The lawyer’s answer is that he does not need it. Since the power in Clause 26 is that a final order

“may include … provision requiring a person, or description of person”

to do or not to do particular things, there is no limit to the power conferred under the Act. Therefore, almost by definition, the legal answer to the question of whether the Secretary of State needs this additional power is no.

However, as so often, we come back to the question of what, in practice, works best. In that respect, the Competition and Markets Authority, which works on both merger cases and public interest cases, can seek commitments and accept undertakings in view of making the equivalent of an order. It does that, first, because it can be quicker: a proposal can be accepted much more rapidly than using the process of examination necessary to arrive at a final order. Secondly, it can be structured in a way that is more flexible. It can be purposive—it can set out what the entity or the person controlling the asset would need to do to satisfy the Secretary of State to mitigate or prevent the risks.

Those undertakings could, therefore, be purposive and long lasting, whereas an order must be prescriptive, a bit like legislation. It will have to tell people precisely what they are going to do, or else—I fear that this may too often be the resort of Ministers—put someone in a position to make decisions about an entity or an asset in place of the people who actually control that company or asset. I will come on to that a little later in this group, on Amendment 71.

The potential for a purposive, flexible and speedy reference to undertakings, which has long been established in relation to the merger control and public interest regimes under the Enterprise Act, would be a good way of proceeding. This is not without precedence in other jurisdictions. For example, we have referred in our discussions to the Committee on Foreign Investment in the United States. The number of times the United States resorts to presidential decisions is very modest. The number of times it enters into what is known as a mitigation agreement is much greater. What I am looking for is something a bit like a mitigation agreement.

Amendments 68 and 69 to Clause 26 would insert the ability to accept undertakings. Under Amendment 45, if undertakings were entered into and not adhered to, the notifiable acquisition would become void. Therefore, Amendment 45 is consequential on Amendments 68 and 69. I am looking to find out why Ministers have rejected the option of undertakings, and whether this is something that should be in their armoury, even if they use it rarely.

Amendment 71 relates to the question on Clause 26, which states that the Secretary of State can provide for

“the appointment of a person to conduct or supervise the conduct of activities … with such powers as may be specified or described in the order.”

Who is this person? This is purely a probing amendment to find out. Is this person simply a civil servant operating on behalf of the Secretary of State in all circumstances, and would the Government have such persons available with the qualifications and experience necessary to undertake these functions? If they are not civil servants, who are they? Under what circumstances would they be brought in, and with what qualifications would they be equipped? At the moment, as far as I can tell from the policy material issued with the White Paper and the response to consultation, these questions have not been addressed.

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[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.

Amendment 45 withdrawn.

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[Lord Lansley (Con)]

My Lords, I am very grateful to my noble friend Lady Noakes for introducing this group of amendments. She has explained very well how we want to ensure that the greatest possible certainty and the least possible delay intrudes into these processes for investors. I have four amendments in this group. Amendment 51 probably relates to the next group so, if the Minister is content, I do not propose to speak to Amendment 51 now. It is almost consequential on Amendments 50 and 63 in the next group, and is linked to Amendment 50, so I will not refer to it now.

My Amendments 54, 64 and 66 are rather like my noble friend’s amendment in trying to explore much more specifically how these timetables work. Amendment 54 relates to mandatory notifications, and Amendment 66 to voluntary notifications, but they would have the same effect. Amendment 54 looks at the review period, which Clause 14(9) says is

“30 working days beginning with the day on which the notification under subsection (8)(a) is given to the person who gave the mandatory notice.”

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Moved by

[Lord Lansley]

50: Clause 14, page 9, line 6, at end insert “including as to the information required to be provided in relation to the notifiable acquisition.”
Member’s explanatory statement
The purpose of this amendment is to ensure that the requirement for information to support a decision by the Secretary of State will need to be specified in the Regulations.

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[Lord Lansley (Con)]

My Lords, there are just two amendments in this group. They are both to the same purpose. As I explained previously, one relates to mandatory notifications, the other to voluntary notifications. My noble friend the Minister answered on Amendment 51 in his response to the previous group, but for my purposes it is linked to Amendment 50 in any case, so I will touch on it.

Amendments 50 and 63 essentially raise two questions. The first relates to circumstances where somebody gives a notice to the Secretary of State and they meet the requirements in the regulations—they have looked and said, “To give a notice to the Secretary of State, I have to tell the Secretary of State A, B, C, D”, or however many pieces of information. That should be specified in the regulations. As the Bill is drafted, the Secretary of State can then come back to them and say, “Yes, you provided all the information required under the regulations, but you didn’t provide us this further information, which would enable us to make a decision whether to accept or reject your notice.”

The purpose of these amendments is to say that we should not arrive at that situation. Somebody starting this process with a notice should be able to rely on the information specified in the regulations to accompany a notice being sufficient to start the process definitely, one way or the other. That is why Amendments 50 and 63 say what they do. As my noble friend Lord Callanan said in response to the previous group, the two initial points—does it meet the requirements of the section and the requirements prescribed in regulations?—should be enough, but the amendments would add, to make it absolutely clear,

“including as to the information required to be provided in relation to the notifiable acquisition”

or the trigger event in the case of a voluntary notification, so that there is no uncertainty about this. The regulations should say what information has to be provided. If it is provided, then the notice should be rejected or accepted.

The second question that arises from this is on voluntary notifications. Since it is not explained in the Bill, what happens if the Secretary of State receives a voluntary notification, decides that there is insufficient information, rejects it, sends a letter to the person who supplied the voluntary notification saying “You didn’t give me additional information X, Y or Z”, and the person concerned then decides not to bother? What would the Secretary of State do about this? It is not a notifiable acquisition. If it were the Secretary of State would have a degree of control, but on a voluntary notice there is no such control. I do not see what happens when a notice is rejected under those circumstances.

Perhaps when my noble friend replies on this short group he would also explain why notices should be rejected because people have not supplied the Secretary of State with information that he did not ask for, and what happens if somebody makes a voluntary notification, the Secretary of State rejects it and they then do nothing about it. I beg to move.

[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.

Amendment 50 withdrawn.

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However, thus far, the Minister has declined to provide an assurance that the Prime Minister will update the MoU, that the new investment security unit will be added to it, that oversight equilibrium will be restored, and that Parliament will maintain its sight and sovereignty over a crucial part of national security. If there is no movement on this—and I find it extraordinary that there has not been—I will have no choice when it comes to Report but to move this amendment and divide the House.

[Lord Lansley (Con)]

My Lords, I will speak briefly to my Amendment 86 in this group and express my support for Amendments 78 and 79, in the name of the noble Lord, Lord West of Spithead. I will not repeat his arguments; I thought they were compelling. Amendment 86 would put the investment security unit of the Department for Business, Energy and Industrial Strategy into the remit of the Intelligence and Security Committee in the Justice and Security Act.

I am grateful to the noble Lord, Lord Fox, for supporting the amendment; I am sure he agrees with me on this. We would not need it if Ministers would permit adding the investment security unit of BEIS to the memorandum of understanding, as part of the remit of the Intelligence and Security Committee. If forced to, it would be better to amend the Act to put it into the remit, rather than to put something in the legislation that directly impacts the memorandum of understanding. That is not the way that the MoU should work.

I remind your Lordships that the memorandum of understanding, which was published with the annual report in 2013-14, said:

“The ISC is the only committee of Parliament that has regular access to protectively marked information that is sensitive for national security reasons: this means that only the ISC is in a position to scrutinise effectively the work of the Agencies and of those parts of Departments whose work is directly concerned with intelligence and security matters.”


That is precisely the point being made here: the ISC must complement the other committees, including the BEIS Committee, in its scrutiny of this work. As the footnote to the MoU said:

“This will not affect the wider scrutiny of departments such as the Home Office, FCO and MOD by other parliamentary committees.”


It is consistent with scrutiny of activity generally but, for scrutiny relating to intelligence and security matters to happen, confidential material may need to be supplied to the ISC and the ISC needs to have it added to its remit. I hope my noble friend can give us that assurance, if not today, on Report.

[Lord Campbell of Pittenweem (LD)]

My Lords, I too shall begin by declaring an interest, having been a member of the Intelligence and Security Committee for seven years, five of which were enhanced, if I may say, by the presence of the noble Lord, Lord Butler of Brockwell. I have a further advantage because I have been listening, along with other noble Lords, to the three preceding speeches in this debate, which have set out the principles clearly and powerfully against what appears to be intransigence on the part of the Government. At this point, therefore, I shall adopt what has been said by the noble Lord, Lord West of Spithead, with which I agree entirely. I am also influenced to some extent by the fact that your Lordships have been exemplary in the dispatch of business today. I have been watching from the pavilion, as it were, and it seems that the conduct of this Committee stage so far could be recommended or possibly even compelled for the Committee stages of other Bills.

There is nothing that I can usefully add to the arguments put forward by the three preceding speakers, but I can make one further contribution. In advance of the debate today, I consulted the 2013 report of the Intelligence and Security Committee entitled Foreign Involvement in the Critical National Infrastructure. The noble Lord, Lord Butler, and I were members of the committee at the time and the chair was Sir Malcolm Rifkind. Among other things, the committee applied its mind to the issue of Huawei, in particular to its entry into the United Kingdom market and the fact that in doing so it entered into contractual arrangements with BT. What happened was that BT did as it was supposed to do and advised the relevant government departments of the position, but the officials then communicated what had been brought to their attention by BT not to any of the Ministers with responsibility for national security but to the then Secretary of State at the Department of Trade and Industry. That was done on the ground that the only thing which appealed to the officials to draw to ministerial attention was the possible impact on British businesses.

That having happened, for quite a long time, Huawei enjoyed not a privileged but certainly an unremarkable position in the British economy. It was only some years later that it became clear that there were other implications to be drawn from its interest in the economy of the United Kingdom. At that point, the Intelligence and Security Committee deemed it appropriate to include it as part of the inquiry whose report I have described. As a consequence, the committee was able, as has been hinted at already, to come to a much better and more informed judgment about Huawei because of its access to intelligence that would not otherwise have been available either to committees or to Parliament itself. I recommend the report as a good illustration of how an inquiry of that kind should be carried out and how profitable, if you like, the consequences are of so doing.

The issue is clear. If, at the stage of the involvement of Huawei in the economy of the United Kingdom it had been understood and perused by those with access to a very high level of classified intelligence, perhaps, since the moment of Huawei’s arrival into this economy, there would have been a much greater understanding throughout government of the significance of its entry into the United Kingdom and the implications for security which that has necessarily involved. For these and other reasons that I have indicated previously, I support the amendment tabled by the noble Lord, Lord West of Spithead, to which I have added my name.

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Moved by

[Lord Lansley]

76: Clause 54, page 34, line 15, leave out “and” and insert—
“( ) whether the United Kingdom has a reciprocal agreement with the country or territory to whose authority the disclosure would be made, and”Member’s explanatory statement
This amendment would require the Secretary of State to take into consideration whether there is a reciprocal agreement in place when deciding to disclose information to an overseas public authority.

[Lord Lansley (Con)]

My Lords, this group should not take us very long. There are just two points in it. Amendment 76 relates to Clause 54, “Disclosure of information,” and in that clause, there is a power for the Secretary of State to disclose information

“to a public authority or an overseas public authority.”

When deciding whether to disclose information to an overseas public authority, under subsection (7) of that clause, there are two issues the Secretary of State must have regard to: the protection against self-incrimination in criminal proceedings; and whether the matter in respect of which disclosure is sought is sufficiently serious to justify making that disclosure.

Amendment 76 in my name proposes to add one further matter to which the Secretary of State must have regard—whether there is a reciprocal agreement with the country or territory concerned. It would not mean that where there was no reciprocal agreement the Secretary of State could not make a disclosure to an overseas public authority, but it should be something that he should have in mind.

I am glad that my noble friend is on the Front Bench because he will have fond memories of Amendment 77. It concerns the disclosure of information where a statutory gateway is made and how such a statutory gateway is to be considered alongside the prohibitions to be found in data protection legislation and in the Investigatory Powers Act. The amendment to Clause 57 covers this. My noble friend will recall that under the Trade (Disclosure of Information) Act 2020, where there was a power to disclose information that might contravene the data protection legislation, that would be prevented, but the duty or power in the 2020 Act was to be considered alongside that prohibition. We can see that in Clause 57(2)(a), which makes it clear that the duty to disclose in this legislation would not contravene data protection legislation or the provisions of the Investigatory Powers Act, but that the duty or power in this legislation must be taken into account.

Clause 57 puts that qualification alongside the data protection legislation, but it has not put it alongside the prohibitions in the Investigatory Powers Act; I do not know why. I know why it is there because we went through this on the Trade Bill. It is there because of the 2016 Supreme Court decision in The Christian Institute & Others v The Lord Advocate made it clear that the decision-maker should have in mind both the prohibitions and the powers in the Act, and balance the two together. In Clause 57(2)(a) this legislation enables the Secretary of State to balance the two. The question is: why not in the Investigatory Powers Act? If the answer is that under no circumstances would a prohibition under the Investigatory Powers Act be overridden by reference to the duty or powers in this legislation, I will be content with that. However, otherwise I do not understand why it is not included in Clause 57(2)(b) in the same way as it is in subsection (2)(a). I beg to move.

[Lord Fox (LD)]

My Lords, I rise to beat the rush and clamour to respond to these two amendments. Taking them in turn, from these Benches, Amendment 76 seems to make a relatively straightforward point. I will be interested to hear from the Minister what possible objection there might be to it. My suspicion about Amendment 77 concerns what normally happens to amendments like this tabled by the noble Lord, Lord Lansley. The Minister will say, “We do not need these powers because—”. I have looked at the legislation and I cannot find any evidence of where the “because” might be. I shall sit down and wait to find out.

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[Lord Lansley (Con)]

I am grateful to my noble friend for his response. I will read it carefully, but, if I understand it correctly, I entirely agree with him on the explanation of Clause 57 and the different approach to data protection legislation on the one hand and investigatory powers on the other, so there is no problem there.

To be perfectly honest, I do not understand the argument regarding Amendment 76. If my noble friend is resting his argument on the fact that there is a public law duty and that all relevant considerations must be taken into account, why does that not equally apply to the considerations specified in Clause 54? If they are to be specified there, I do not understand why a reciprocal agreement could not be properly included. It is a matter of policy as to whether it should or should not, and it seems to me that there is a good argument that it should be considered, but I will reflect further on that and, for the moment, I beg leave to withdraw Amendment 76.

Amendment 76 withdrawn.

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[Lord Grantchester (Lab)]

I am pleased to open this group of amendments by moving my Amendment 80, concerning the department’s annual report on this legislation. Generally speaking, Governments, regrettably, do not tend to offer widespread information in reports, whether annual or not—except, of course, where they consider that they heap praise on themselves.

Clause 61 can be made to look extensive, comprising as it does a total of 12 mandatory pieces of information—13, should the addition of the noble Lord, Lord Lansley, not be considered unlucky. This list can form the basis of information on the way the Government provide a dashboard to view the new unit. However, in considering how well it is performing and its relationship with and effect on the business community, any audit certainly needs to ask for the additional six listed in my amendment.

My Amendment 80 requires the Secretary of State to report on the time taken to process notices, which was part of our earlier discussion on the resource allocation to the new unit and the extent to which small and medium-sized enterprises are called in under the new regime. The amendment is about requiring a greater degree of accountability from the department regarding the investment security unit’s service standards and functions. It states that the report needs to include the aggregate time for decision-making, in both assessments and initial answers, acceptances and rejection notices, providing a measure to ensure that the screening process is working effectively and efficiently for SMEs.

Secondly, on elements of capacity monitoring, the amendment enhances the ability to take stock of the resources behind the unit’s work, so that Parliament and the public can appreciate the report as a mechanism for holding the Government to account for what will be a major new centre for merger investment screening for the security of the UK.

Thirdly, we are keen to maintain a business climate in which SMEs can thrive. It would be beneficial in this respect for the unit to track and monitor the focus of SMEs in its work. Information would be able to highlight any specific concerns and the experiences of the most innovative start-ups in their interactions with the new regime.

The general questions across the Committee regarding how the new unit will operate, be resourced, perform and impact those throughout the economy whom it will affect can be answered in the more comprehensive information that an annual report can offer. In addressing the Commons Committee, David Petrie of the ICAEW wanted to test the capabilities of the regime in an accountant’s way by assessing the reasonableness of his assumption that even 1,000 notifications a year amounts to four a day and a considerable workload. How will that work and what information must be provided to check it through the annual report? What will be the annual budget for this regime and what increase for the department will be necessary? Will the new unit be able to request and receive additional funding to meet the challenges it has yet to experience?

I will not steal the thunder of the mighty guns of my noble friend Lord West by saying much at this point about his Amendment 91, which is in this group. He has already spoken authoritatively on security matters. However, we are sympathetic to and support his amendment, as businesses in the defence sector have asked that the impact of the new regime on them be clarified. The amendment reflects the Defence Committee’s report on foreign investment, which called for banning investments in the UK’s defence supply chain from certain countries, namely, China and Russia. What is the Minister’s view on this?

In considering the annual report and the guidance my noble friend seeks for the defence sector, and the other reports undertaken under, for example, Amendment 78 or Amendment 82 in the name of my noble friend Lady Hayter, it would be helpful if the Minister could also outline the relevant interactions, not least with reports from the export control regime, in order to provide a comprehensive assessment. It would be unfortunate to find information disappearing into gaps between them and vulnerability opening up in the security screening process. I beg to move.

[Lord Lansley (Con)]

Noble Lords will be pleased to know that this is the last time they will hear from me in this Committee. My amendment is terribly simple. In so far as the annual report lists the number of final orders made, Clause 27 provides the power for the Secretary of State to vary orders or revoke them. One of the things that one might want an annual report to do is to enable one to understand the stock of orders as well as their flow. Therefore, I have suggested in Amendment 81 that the number of orders varied or revoked should be added to the list of subjects in the annual report.

[The Deputy Chairman of Committees (Lord Lexden) (Con)]

I call the guns of the noble Lord, Lord West of Spithead.