CFIUS-UK? UK Government Announces New Foreign Investment Measures


On 11 November 2020, the UK Government announced its long-awaited and far-reaching proposed reforms to its existing powers to scrutinise foreign investment in the UK, especially in relation to sectors deemed to be particularly sensitive from a national security perspective.  In summary, the National Security and Investment Bill (“NSIB”) increases significantly the Government’s existing enforcement powers, by essentially introducing a standalone, CFIUS-style[1], foreign investment regime.[2]

Whilst NSIB is not limited to transactions involving foreign investors, the Government’s press release makes clear that the measures are targeted at “potentially hostile foreign direct investment”. This new regime is especially important for foreign investors considering transactions in the sectors covered by the measures and will require a case-by-case analysis to determine whether a filing is triggered and/or the likelihood of the transaction otherwise being called in for review.

Overview of New Measures

A standalone foreign investment regime, akin the U.S.’s CFIUS regime, has been publicly considered by the Government for some time, including the Government’s July 2018 White Paper.  However, on their face, the measures contained in the NSIB are much more wide-ranging than those previously discussed by the Government.  Key features of the NSIB are set out below:

Key implications for investors

Together with a very broad jurisdictional scope and no safe harbours, the measures contained in the NSIB will capture a very wide range of transactions.[5]  Acquisitions of minority interests and asset acquisitions are also within the remit of the new regime.  Given the wide range of sectors impacted by the new regime and the lack of any jurisdictional safe harbours, notwithstanding its assurance that the new measures will be targeted and proportionate, the Government will in practice have a broad jurisdiction to review a significant number of transactions with a UK nexus.  As a result and given the retroactive nature of the measures, where a transaction has any UK nexus this new regime will need to be factored into deal viability issues, contractual conditionality and transactional timetabling at an early stage.

[1] CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons, in order to determine the effect of such transactions on the national security of the United States.

[2] The NSIB will be subject to Parliamentary debate and amendment before being passed into law. In the interim period, foreign investors considering investments in the UK will need to be mindful of the planned reforms, given that the Government will have the ability to “call in” transactions for review where a transaction has occurred following the introduction of the Bill (i.e., any transaction entered into after 11 November 2020). Notwithstanding any subsequent amendments as the NSIB passes through Parliament, the measures contained in the NSIB brings the UK into line with its international peers with respect to foreign investment regimes.

[3] At this stage, it is understood that the Government expects some transactions in the following 17 key sectors will face mandatory notification: civil nuclear; communications; data infrastructure; defence; energy; transport; artificial intelligence; autonomous robotics; computing hardware; cryptographic authentication; advanced materials; quantum technologies; engineering biology; critical suppliers to government; critical suppliers to the emergency services; military or dual-use technologies; and satellite and space technologies.

[4] These sanctions will apply to breaches of the mandatory notification obligation and also instances of non-compliance with interim orders and information requests relating to transactions subject to the voluntary notification regime.

[5] The Government’s Impact Assessment estimates that the new regime would result in 1,000-1,830 transactions being notified per year.  To put this in context, only 12 transactions have been reviewed prior to the introduction of the NSIB on national security grounds since the pre-NSIB regime was introduced in 2003.  A new Investment Security Unit within the UK’s BEIS will be set up to review relevant transactions.


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National Law Review, Volume X, Number 318