National Security and Investment Bill (Twelfth sitting)

Simon Baynes Excerpts

Committee stage
Thursday 10th December 2020 Public Bill Committees

[Chi Onwurah]

I am grateful for that intervention. First, it shows that the hon. Gentleman is paying attention, which in itself is something to be welcomed. If I may say so, it also shows that he is taking lessons from my hon. Friend the Member for Southampton, Test. We have considered the matter and this is the correct use of the term “may”. I shall go into more detail later, but this is not about prescribing what the Secretary of State must look at; it is about giving greater clarity, particularly to those who will come under the Bill’s remit. One of the expert witnesses put it very well. Those who will come under the Bill’s remit need to get a sense of what the Government mean by national security, not in a specific and detailed definition.

[Simon Baynes (Clwyd South) (Con)]

Would the hon. Lady not agree that there is danger that the new clause would start to try to define in a prescriptive way what a national security risk is, whereas the point of the Bill is that it enables the Government, the Secretary of State and the relevant parties to judge what is a risk? That goes back to the point that my hon. Friend the Member for North West Norfolk made about “may” and “shall”. As far as I can see, the new clause should use “shall”, given what the hon. Lady is trying to achieve, but I accept the point about how such legislation is worded. There is a danger that, by listing all these clauses, we imply that other aspects of danger to national security are not included. I am not sure that it would achieve anything. In many ways, it might obfuscate rather than clarify, although I fully accept that her intention is to clarify.

[Chi Onwurah]

I thank the hon. Member for that intervention, which I think was made in the proper spirit of the Committee, by seeking to improve the Bill, help the Secretary of State, and help those who will be affected by the Bill to understand it. The hon. Gentleman is quite right that there is a trade-off.

During the expert evidence sessions, we heard both from those who felt that there should be a definition of national security and from those who felt that there should not. However, if my memory serves me, they all tended to agree that there should be greater clarity about what national security could include. For example, Dr Ashley Lenihan of the London School of Economics said:

“What you do see in regulations is guidance as to how national security risk might be assessed or examples of what could be considered a threat to national security.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 38, Q42.]

We also heard that in the US the Foreign Investment Risk Review Modernization Act 2018 provides for a “sense of Congress” on six factors that the Committee on Foreign Investment in the United States and the President may consider—the term “may” is used well here—in assessing national security: countries of specific concern; critical infrastructure, energy assets and critical material; a history of compliance with US law; control of US industries that affect US capacity to meet national security requirements, which is very important; personally identifiable information; and potential new cyber-security vulnerabilities.

My argument is that if we look at examples from elsewhere, we see indications of what can be included in national security without having a prescriptive definition. That is exactly what the new clause tries to set out. It states:

“When assessing a risk to national security, the Secretary of State may have regard to factors including”,

and then it gives a list of factors, which I shall detail shortly.

The question, “What is national security?” is entirely unanswered, for Parliament, for businesses looking for clarity, for citizens looking for reassurance, and if hostile actors are seeking to take advantage of any loopholes in how the Secretary of State construes national security. I do have sympathy with the argument that we should not be prescriptive and limit the Secretary of State’s flexibility to act by setting down a rigid definition of national security that rules things out. That is the spirit of the new clause. It does not rule out the Secretary of State’s flexibility or set a rigid definition; it simply does what other countries have done well, as our experts witnesses have said, by giving a guide on some factors that the Government might consider, while allowing many more to be included in national security assessments. This is critical in order to give greater clarity to businesses puzzled by the Government’s very high-level definitions of espionage, disruption or inappropriate leverage.

--- Later in debate ---

[Sam Tarry]

Absolutely. This is not about being particularly anti-China, but it is the strongest example of where we have heard evidence of things that are under way. I will continue with a few more examples. I think this is important, because we are trying to draw back the curtain on exactly what is going on.

[Simon Baynes]

I perceive a similar issue in new clauses 5 and 1: being prescriptive in this way causes problems, because what happens if a new, potentially dangerous, acquirer appears on the scene who is not incorporated within the terms of the measure?

[Sam Tarry]

I thank the hon. Member for that intervention, which goes back to what the hon. Member for Arundel and South Downs said. That is why this needs to be looked at regularly enough to be on top of the process. Obviously, threats change. Countries rise and fall and their agendas and Governments change, but we know that in some instances countries are actively making moves to invest in technology companies in such a way that might not be caught by some of the provisions in the Bill. We feel that being more stringent here would allow the Secretary of State more powers to keep, in some ways, a better eye on exactly what is going on.

Perhaps I should explain a little what I mean by that. One of the things that we are trying to uncover and drive at with the new clause is the importance of some of the ways in which venture capital firms are being used, particularly by the Chinese and by some companies. For example, in Cambridge and Oxford—two important tech hubs for our country—start-ups are regularly invited to pitch ideas to the Chinese state investment company. Nothing particularly untoward is happening there, but it is quite interesting that Chinese investors are particularly interested in talking to emerging biotech, internet of things, artificial intelligence and agri-tech companies.

Why is China particularly interested in those areas? The publicly available “Made in China 2025” strategy to become an economic superpower says that the first three things that the Chinese are interested in are biotechnology, the internet of things, and artificial intelligence. It is quite clear that there is a specific move by the Chinese—this could be replicated by other countries, whether it be Russia or others—but it is not as obvious as, “This is a state company that is going to come in and invest.” They will be taking part in buy-ins of some of the companies. This is something that has already happened.