As the UK Government published its second NSIA Annual Report – the first to cover a full year of NSIA reviews – earlier this summer, we have carried out some statistical analysis to highlight emerging trends from the operation of the regime. While NSIA processes have not been as burdensome as expected to date, investors from all countries, including the UK, should be mindful that the regime may impact their deal, particularly where it involves a designated key sector. Where transactions are cleared subject to conditions, we are beginning to see which types of remedies are most often imposed to mitigate national security concerns.
The new stand-alone national security vetting regime that was ushered in by the NSIA became fully operational in January 2022. It gives significantly expanded powers for the UK Government to scrutinise and, where necessary, impose remedies on certain acquisitions and investments that have national security implications. The regime applies to investments/ acquisitions by investors from any country, including the UK, and without any form of minimum turnover threshold or market share safe harbour. Since February 2023, the Chancellor of the Duchy of Lancaster has been the key decision maker.
The regime is still in its infancy, but we are beginning to see some interesting trends. Based on the UK Government's most recent NSIA Annual Report and our review of final order notices issued until 1 August 2023, we have identified three main takeaways and packaged them into a user-friendly deck of visuals:
- to date, NSIA scrutiny has not been quite as burdensome as anticipated;
- NSIA reviews tend to focus on the defence/ military sectors and links to China, but these are by no means the only areas of focus and UK investments should not assume that they will benefit from preferential treatment; and
- despite the regime's limited transparency, we can see that the protection of access to sensitive information/ technology and auditing/ reporting obligations are becoming a standard feature of the Government's typical remedies package.
