The UK’s New Year’s Resolution
The NSIA builds on existing legislation in the Enterprise Act 2002, which already enabled the Government to intervene on specified public interest grounds in transactions that are reviewable under UK merger control rules (and certain other deals involving media businesses and government contractors). However, the NSIA extends those powers in allowing the Government to scrutinise and intervene in a broader range of investments.
The NSIA is broad in scope and applies across all sectors of the economy. There is no minimum transaction value below which the regime does not apply. It applies to acquisitions of both entities and assets, including (in some cases) entities and assets located outside the UK. It also applies to purely “domestic” acquisitions that take place wholly within the UK.
The regime entitles the Government to “call in” a wide range of investments for investigation; where an acquisition raises a risk to national security, it empowers the Government to impose conditions, block it completely, or even “unwind” a completed deal. In most cases, notifying the Government is voluntary. However, from 4 January 2022, investments in 17 sensitive areas of the economy, including artificial intelligence and civil nuclear – termed “notifiable acquisitions” – can trigger a mandatory notification requirement.
The UK Government has 30 working days to review a proposed acquisition after it has accepted a notification as complete. Completing a notifiable acquisition without Government approval may result in civil and criminal sanctions, and the acquisition will be automatically void as a matter of UK law.
Rather than act as a deterrent to investment, the Government hopes the NSIA will cement the UK’s reputation as a world leading and attractive place to invest by providing greater transparency and a more simple, efficient clearance processes for relevant acquisitions. However, the regime raises several challenges for dealmakers, including as regards the scope of the mandatory notification obligation and how the Government will exercise its new powers. Only time will tell if the UK’s new year’s resolution for 2022 lives up to aspirations.