National Security and Investment Bill

Baroness Hayter of Kentish Town Excerpts

Committee stage & Lords Hansard
Tuesday 2nd March 2021 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, it was clear at Second Reading, and again today from when the noble Lord, Lord Fox, began, that everyone across the House agrees that national security is the number one priority.

The discussion therefore is twofold. First, will what is, and is not, covered in this legislation be clear enough? Secondly, is the balance between security needs and the desire for economic growth, research, innovation and freedom to invest, correctly delineated? On the first issue, it is obvious that the new regime must be based on the best advice coming from across government, as well as on emerging and current threats, and the behaviour and developments of our adversaries. We will come in the next group to the definition of national security.

This first amendment is focused more on the second question that I posed. Will the unit take sufficient account of technology investment, research and innovation, and business opportunities, particularly for SMEs? From everything said at Second Reading and even today, that is an important discussion. We should not expect the Bill, nor its new unit, to be the generator of investment, research and development—that is for an industrial strategy—but the Government must have a careful eye on whether the workings of the Bill have a detrimental impact on technology investment and innovation, while ensuring that the economy does not override security interests. That is a difficult judgment. If it were not, there would never be any problems for the Government to solve.

I read today—others may already have been aware—of possible changes to the listings regime to help the City compete with New York, Amsterdam and Frankfurt in attracting fast-growth companies by creating an “agile” new economy focused on innovation and technology. We welcome such moves and attention being given to making Britain a more attractive place in which entrepreneurs can take companies public.

We hope that the proposals emanating from one of our colleagues, the noble Lord, Lord Hill, on relaxations on the use of dual-class shares, to allow founders to keep control over their companies by giving them deciding votes on decisions such as corporate takeovers, could work in harmony rather than at variance with the objectives of the Bill. I hope there will be an opportunity to discuss those interplays as we go forward.

In the meantime, we will consider future amendments that will look at whether the right procedures, definitions, timelines and so on strike the right balance as to workability in making those fine judgments between security and economic interests. However, this amendment is calling for the Secretary of State to be required to have regard to those other interests. The Minister will say that, of course, he or she is bound to do so. However, it is a question on which some assurance is needed and we look forward to the Minister’s view on that.

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

I am grateful to noble Lords, Lord Clement-Jones and Lord Fox, for their introductions to this debate. I thank them for proposing this new clause and for enabling a further discussion on the purpose of the Bill.

Amendment 1 seeks to establish an objective for the Bill and include a number of elements to which the Secretary of State must have regard when using his powers. Let me say at the start that the intent behind this amendment is to provide a clear statement of the scope of the Bill, to prevent so-called mission creep and give certainty to businesses and investors, while avoiding the pitfalls of attempting to define “national security”. However, the legal effect of the amendment presents us with a number of challenges.

The amendment would require the Secretary of State when exercising his powers under the Bill to safeguard national security in respect of economic and social harm, which is reasonable. It is indeed possible that economic or social harms could give rise to risks to national security, but so could other harms such as physical or military harm. For example, a hostile actor could use control over a piece of critical infrastructure to put UK citizens in physical danger or they could acquire companies in the UK defence supply chain and thereby degrade our military capabilities.

The absence of other harms in the factors listed by the amendment suggests that the Secretary of State may not use his powers under the Bill to safeguard national security from those harms that I have outlined. It is also unclear how he should have regard to the factors in subsection (3) of the proposed new clause. As the amendment does not say that they are to be regarded as part of national security, that would suggest the scope of the Bill is being expanded beyond national security. It is important to note that the government position on the issue of defining, wholly or in part, “national security” remains consistent with when amendments in a similar vein to this were discussed at Second Reading and in the other place; I have discussed that with the noble Lord, Lord Fox, previously. The Bill does not set out the circumstances in which national security is, or may be, considered at risk. That reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. It also does not include factors which the Secretary of State must or may take into account in assessing national security risks on the face of the Bill.

While it is crucial for investor confidence that there is as much transparency in the regime as possible, there is clearly a limit to how much the Government can and should disclose in this regard, given that the regime deals explicitly with national security matters. National security risks are multifaceted and constantly evolving. What may not constitute a risk today may well do so in future. We may find over time that such specificity becomes outdated. Indeed, as my noble friend Lady Noakes pointed out, it is enough of a challenge to ensure sufficient specificity in the objectives of the Bill, especially with regard to concepts such as those referenced in the amendment.

While I have nothing but gratitude for the noble Lord’s intention—to provide a specific objective for the Bill—it is primarily for the reasons I have set out that I am unable to accept the amendment, and hope that in the light of that he feels able to withdraw it.

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Moved by

[Baroness Hayter of Kentish Town]

2: Clause 1, page 1, line 10, after “security” insert “, including public order and public safety”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I shall speak also to Amendments 13 and 83. Perhaps I will take a little more time than usual over this because it is one of the central issues on which we wish to hear the views of the Committee and, indeed, the response of the Government.

Given that national security is clearly the Government’s priority, it is important that to make the Bill work everyone involved in its provisions and their interpretation are clear about how the Government see national security—its range and depth, if I may put it that way. Therefore, Amendment 13 seeks to establish the issues which should be taken into account because clear rules will be vital for businesses seeking funds, researchers, investors and the unit having to take decisions. They need to work on basically the same template.

Let me take a moment to say that the Government have published 112 pages today—the Minister expected someone to say it, so I may as well say it now—but his letter covering the first amendment arrived as he was speaking to it and the Written Ministerial Statement did not even refer to a policy statement that I gather has also been put out, according to my up-to-date information. I think the Committee will understand that we have not had time to digest this and we may therefore have to try to look at some important issues in that.

One of the points relevant to Amendment 13 is that this response states that several respondents indicated that “national security” should be clearly defined. We are therefore interested to know whether the Minister will listen to those concerns which, in a sense, is what Amendment 13 is seeking to do. It is not trying to define exactly what is national security nor, by implication, what is not. It is setting out how people tasked with scrutinising potential investments may approach the first question—“Might this risk our security?”—by listing the sort of factors to be considered. The “have regards”, while not an exclusive list, indicate to officials, the Secretary of State and those handling investments the matters which should be considered in any decision.

We absolutely agree that neither the Government nor Parliament should prescribe or limit what national security covers, as is long-standing practice, and therefore do not seek by this amendment to curtail the Secretary of State’s flexibility to act, but we nevertheless think that the other parties involved who will be impacted by this legislation need to know the range of issues which will be among those considered by the Secretary of State.

Amendment 13 provides a framework which is neither rigid nor exclusive. It simply does what other countries have done, what experts have recommended and what we have heard that people submitting comments to the Government have also said. The Law Society argues that without something like this, there is a risk that a Secretary of State could become exposed to political influence, and the Investment Association says that a better understanding of national security could help calm investors. Therefore, the amendment indicates factors that the Government might consider, such as the impact of a triggering event on defence capabilities or how a hostile actor might be enabled to gain access to critical infrastructure. I hope that the Minister will accept that Amendment 13 provides such a framework and flexibility to help alleviate the concerns that have been raised, particularly in the defence sector.

We are also keen to ascertain whether critical infrastructure is included in the Bill. As we know from the ISC report published last year, Russia has

“undertaken cyber pre-positioning on other countries’ Critical National Infrastructure.”

It would therefore be useful if the Minister could clarify whether that is covered in the Bill.

Later this month—the rumour is a week tomorrow but certainly while the Bill is in this House—we will see published the Integrated Review of Security, Defence, Development and Foreign Policy. Perhaps the Minister could confirm its publication date and that it will indeed be a week tomorrow. He nods—I think I am not going to get a yes that question. Can he also outline how the results of the analysis of that review will feed into the work of the new unit and its decisions on what constitutes a security threat? Will the review focus on the private sector and on the role that the Government see for business, as well as on how the interests of innovation both in academia and in business should be promoted?

Amendment 83, to which the noble Baronesses, Lady Northover and Lady Bennett of Manor Castle, have added their names, highlights the relationship between the review just mentioned and the objectives of the Bill and seeks a government statement on it. Given that the Government have said that the review will include the

“long-term strategic aims for … national security”,

there are questions about how these would align with the Bill’s new regime and how we are able to keep an eye on technological developments in the private sector while keeping pace with security challenges. What we do not want to see is an important new national security regime buried in BEIS which does not link with the UK’s wider and longer-term security concerns and priorities.

The ISC noted

“the extent to which economic policy dictated the opening up of the UK to Russian investment”,

whereas the Bill seeks to put security first and our investment needs second. As I said on the earlier group, it is an important but not always easy judgment to make. It is therefore essential that the Government’s view on security is considered by the BEIS unit and that Parliament is able to see how that is happening by way of the statement suggested in the amendment. That statement should focus both on how the Government will align the provisions in this Bill with the outcome of the integrated review and on how the UK will respond to identified threats, including new technology, biological weapons, cyber and misinformation. The reference to new technology is key since new weapon capabilities could as easily be developed in the private sector as in an MoD lab. The Government will need to procure these assets while preventing certain foreign states also purchasing them.

I return to Amendment 2, which probes whether public order and public safety are included within the Government’s view of national security. The similar German regime captures “public order” as part of its national security, while the Japanese regime applies equally to “public order and public safety” and to national security. Is the UK regime narrower than the approach taken by these other jurisdictions? Perhaps the major issue we want clarified within that is whether an investment which could have an impact on the working of our democracy would be covered.

Last year’s Intelligence and Security Committee report on Russia stated:

“The UK is clearly a target for Russia’s disinformation … Russian influence in the UK is ‘the new normal’ … It is clear that Russia … poses a significant threat to the UK”,


including “interference in democratic processes”.

With regard to elections, the discussion at the time of the publication of the report, which of course was written a whole year before it was published, was more on bots, messages, and so forth, the report noting that

“Russia has carried out malicious cyber activity … including attempting to influence the democratic elections of other countries”.

The Government’s own response concluded that

“it is almost certain that Russian actors sought to interfere in the 2019 general election through the online amplification of illicitly acquired and leaked Government documents.”—[Official Report, Commons, 16/7/20; col. 71WS.]

However, an external force intent on interfering with our elections could instead invest in the electronic gear that stands behind our pencil and paper voting, and perhaps pose a threat that way. Given, as the ISC report notes, the

“fusion of government and business”

in Russia, a business providing advanced IT for elections could have very close ties to that regime, or indeed to any other regime. Indeed, the Government’s response to the ISC noted that the Defending Democracy programme in the Cabinet Office includes consideration of

“direct attacks on electoral infrastructure.”

So the thinking is clearly there. Perhaps the Minister could therefore clarify whether foreign investment in democratic electronic infrastructure would come under the remit of the Bill. It is partly about what we think of as national security.

When the ISC covered this, it noted that

“the issue of defending the UK’s democratic processes … has appeared to be something of a ‘hot potato’, with no one organisation”—

I assume it meant within government—

“recognising itself as having an overall lead.”

Could the Minister outline how such responsibility and oversight will sit within the BEIS unit, such that investment in any democracy-related hardware or software could be included in its remit, and explain how the Government will overcome what the ISC describes as

“nervousness around any suggestion that the intelligence and security Agencies might be involved in democratic processes”,

given the committee’s view that

“Protecting our democratic discourse and processes from hostile foreign interference is a central responsibility of Government, and should be a ministerial priority.”?


The answer to the questions may indeed be no, but to have a discussion on national security and the future of our democracy and our safety without considering this seems to us to miss out a vital ingredient. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank the noble Baroness, Lady Hayter, for bringing forward this group of amendments. I will speak in particular to Amendment 13.

In preparing for this stage of the Bill we have received a number of briefings from outside bodies. Every single one has said, in the words of the noble Lord, Lord Clement-Jones, that the trawl is being done far too widely. The Government would not be drawn on that at Second Reading, and it is absolutely appropriate that we try to pin them down through this form of probing amendment.

In leaving the parameters drawn as wide as they are, it is fair to say that all those who have briefed ahead of today would prefer to see a strict definition of what national security is. Am I right in assuming that national security for the purpose of the Bill covers everything that is not defined or covered elsewhere? Water treatment, the water supply and air traffic are covered by other legislation, so does that mean they are not covered by the purpose of the Bill? Are we wrong to assume that the Bill covers critical infrastructure in the way the noble Baroness, Lady Hayter, set out? It would be helpful to know whether we have to work on a process of elimination rather than on a specific reference point such as a definition, as is set out in Amendment 13, which is quite wide in its own right, given its number of “have regards”.

The Law Society of Scotland states that

“national security itself is not defined within the Bill. We note that the Enterprise Act 2002 definition refers to EU legislation”.

Are we right to assume that that definition still applies, or can we safely assume that, because we have now left the European Union, it is no longer valid? A steer from the Minister would be very helpful in summing up this debate.

The Law Society of Scotland goes on to say that

“: it might be helpful to introduce a stand-alone concept appropriate to the current context. An exhaustive definition is likely to be neither possible nor desirable but a general delineation of the concept together with detailed additional guidance as to how this is likely to be applied would be helpful.”

Does the Minister intend to do that as the result of this amendment to date?

I, too, received the letter from the Minister within the last half hour, when I was on another call. In the normal course of events, I would have studied such a letter quite closely to enable me to prepare for today, so it is a matter of some regret that we have not had a chance to read it. Perhaps the Minister will cover its main points in replying to this little debate on this group of amendments.

I believe that either we should adopt something like Amendment 13 in the course of proceedings or the Minister should bring forward some definition of the Government’s own drafting during the proceedings, before the Bill leaves the House.

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[Lord Callanan (Con)]

If the acquisition in question poses a risk to national security, yes, there is the general power, but the point I was making is that, with regard to areas of political and national infrastructure, there are also separate powers in different pieces of legislation that would help to protect in those areas.

[Baroness Hayter of Kentish Town (Lab)]

First, I thank everyone for their contributions, which I found extremely helpful and thoughtful. In particular—this will not surprise the Minister—the Minister confirmed that it would be possible to call in any threat to democracy or anything like that. I am sorry he did not feel able to answer on when exactly the integrated review will be published, but we live in hope.

I was a bit disappointed that the Minister said that he did not want to define national security because it was long-standing government practice not to. My heart sank at that point, thinking that the Minister must have a better reason. Luckily, he did and he gave us answers other than, “It’s always been done that way”, which always seems to me a really bad answer. I am not saying I was completely persuaded by his answer, but it is a thoughtful and useful way of thinking about how we approach this. I hope it is not just because the Government would fear a JR if there are words that could be challenged over whether something should or should not have been brought in.

My fear is about the difference between the list and the call-in power. As the list will be mandatory, people will know what they have to do. Where investors, researchers or companies will probably have the biggest fear in respect of the call-in power is that they will not know in advance. I hope that we will come to the possibility of either safe harbours or a quick turnaround—though that does not get over the call-in power—because that seems the area of greatest uncertainty. We will probably have to return to that. In a sense, it is the same issue when it comes to critical national infrastructure. I guess I should leave it to those far more experienced in infrastructure to know whether those comments are helpful.

We heard a thoughtful and challenging response to the amendment from the noble Lord, Lord Lansley. If I understood him correctly, he suggested that we start at the back end: we discuss the assets; we discuss the acquirer; we look at the definition of control—which is the end part of the Bill—and use that to define national security in the front part of the Bill. I am bemused by whether that is the right way round; it may be, but by the time we have defined it, we may have got to it. It seems an odd way round to do things to have a Bill that has “national security” in its title and then to have to work through “Well, if it is that sort of asset owned by that sort of people to that sort of percentage” to decide that it comes into the category of national security. However, I want to read more carefully what the noble Lord said because the elements appear to be there, but it seems slightly upside down. The noble Lord also said:

“We know that Ministers are going to have regard … to that kind of issue.”


If we do, what is the harm in writing them down? He may know that Ministers would have regard to those issues, but will everyone else know what they are?

I have a lot more to think about having heard the wisdom expressed today. It is possible that we will want to come back to this issue on Report—maybe in a more refined way; I am sure that those who have read the Commons debates carefully will have noticed that my words were not all of my own drafting. I thank everyone who has contributed—more sincerely, perhaps, than in other debates. I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

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[Lord Clement-Jones (LD)]

My Lords, it was a pleasure to put my name to the amendment in the name of the noble Baroness, Lady McIntosh, because I think that I understand its intentions entirely. It is also a pleasure to follow the noble Baroness, Lady Noakes, and the noble Lord, Lord Hodgson, in their elucidation of what the amendment is about. I think the noble Baroness, Lady Bennett, has entirely misunderstood the essence of this amendment.

Earlier in Committee today we were trying to get some sort of definition of national security, and I think that the noble Lord, Lansley, in his inimitable way, managed to unpick that rather successfully. As far as national security is concerned, it is a mission impossible to try to carry everything in one bundle in a definition. This tries the other way on and, as the noble Lord, Lord Hodgson, said, it is designed to avoid mission creep. It is trying to make sure that the definition of national security is not used as a blanket term to cover damage to the economy and society. It has the huge benefit of simplicity; it tells us what is not in national security rather than what is in it. It clarifies that certain factors such as employment, reciprocal investment or trading opportunities, and protectionism will not be taken into account when assessing national security. If there was mission creep in the way that was described, it would undermine legal certainty and damage investor confidence in the way that we have heard from a number of noble Lords.

The Government have kept assuring us that this is not, in the words of the noble Lord, Lord Callanan, a national interest Bill but a national security Bill. That is exactly what this amendment is trying to ensure—that we do not have that all-encompassing national security definition used by lobbyists or others to try to bring things into the net. I have seen it happen in the United States. The CFIUS is absolutely that kind of spider-like operation that brings in all sorts of spurious transactions. I very much hope that we will keep this provision absolutely focused, and this amendment is a very good way of doing it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, we support the approach of this amendment. As we have all made clear, the new regime must focus on protecting national security. The clue is in the title of the Bill. The definition of national security has to take best advice from across the Government about the threats and behaviour of our adversaries.

While I hope the Government will monitor the impact of the Act on technological investment, innovation and SMEs—which I hope a different part of the Government is actively supporting—those interests, along with employment, investment and competition, cannot and should not trump national security, albeit that I hope that the Government would consider mitigating any detrimental domestic impact of placing security first if that were needed.

Clearly, concerns about any political pressure, rather than any disregard for the issues listed, give rise to this amendment. The tone and the purpose of it are ones that we share.

[Lord Callanan (Con)]

I thank everybody who has spoken in this debate and thank my noble friend Lady McIntosh of Pickering for tabling the amendment. It seeks to clarify that certain factors, namely employment effects, reciprocal investment or trading opportunities and the desire to protect UK businesses from international competition, cannot be taken into account in assessing whether a trigger event would give rise to national security risks. I was surprised to see that the noble Baroness, Lady Bennett, and my noble friend Lady McIntosh are now differing on some things. That is most unusual; it is something to be encouraged for the future.

My noble friend articulates a reasonable concern here: that a regime used to screen investment for national security purposes could be used to screen investments more widely. Indeed, the shadow Secretary of State, in his opening speech at Second Reading in the other place, argued that the Bill should include an industrial strategy test—I was therefore surprised to see the noble Baroness, Lady Hayter, supporting this amendment.

As such, I have some sympathy with the aims of this amendment. I can, however, reassure my noble friend that the Bill is about protecting national security, nothing more and nothing less. The Bill does not set out the circumstances in which national security is, or may be, considered at risk. As I said on previous groups, this reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. The Bill also does not include factors which the Secretary of State must or may take into account when assessing national security risks. Instead, factors that the Secretary of State expects to take into account in exercising the call-in power are proposed to be set out in the statement that we have provided a draft of and is provided for by Clause 3.

The draft statement, published upon introduction of the Bill, includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. This includes certain sectors of the economy, and the types of acquisitions that may raise concern. It does not currently state anything which the Secretary of State intends not to take into account with regard to national security. This is a conscious choice. If the Secretary of State were to start listing areas of the economy or types of acquisition that he considered unlikely to present national security concerns, I suspect that this would result in a long and dense document of little use. We judge that it is therefore more helpful for businesses and investors to set out where the Secretary of State is more, rather than less, likely to use the call-in power.

I understand, however, the concern that without a definition extraneous factors may be taken into account. My reassurance for my noble friend comes from the courts. Were the Secretary of State to seek to use the powers in the Bill for a purpose beyond national security, his decisions could be challenged in the courts through judicial review and could not be successfully upheld. It is with this judicial oversight in mind that the Secretary of State is constrained in delivering the purpose of the Bill. I am therefore confident that the Bill as currently drafted contains sufficient safeguards against inappropriate use of the regime, and that the Government are already providing a good amount of information for parties affected by the regime on its likely areas of focus.

I hope that my explanation, taken together with these points, provides sufficient reassurance to my noble friend, and that she therefore feels able to withdraw her amendment.

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[Lord Fox (LD)]

My Lords, as the noble Lord, Lord Lansley, said, government Amendments 37 and 75 are technical and Amendment 12 covers the ground of Amendment 11, so I will speak to the latter. I am broadly supportive. Clearly, this is an issue about “may”—my noble friend Lady Bowles and the noble Baroness, Lady McIntosh, asked the same question. If “may publish” means “may not publish”, where are we in this process, given that the statement is such an important part of setting out the modus operandi of the whole Bill? This is quite an important area.

I support Amendment 11 but it will be important to listen to the Minister’s response to decide how this might go forward in the next stage. I believe that some degree of accountability should not be left as an option to the Secretary of State; there should be an obligation on the Secretary of State to make that statement and, as the Government have said, to have the ability to remake it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, we welcome the Government’s Amendment 12 to make changes to the sectors statement in respect of feedback from stakeholders. Can the Minister confirm whether all the suggested changes that come back in that consultation will actually be published?

I will make a comment about the document that has arrived in front of us today because, in a sense, it gives a very good description of how good consultation works—never mind the timing; we have made that point—in relation to the degree of change that looks as if it is going to happen as a result of conversation on that particular issue. However, it then feeds into what happens if, had this been the statement, changes were wanting to be made. For example, what we have heard today, as a result of some very good consultation, is that the definition of AI has been narrowed significantly to focus on three high-risk applications: identification of objects, people and events; advanced robotics; and cybersecurity.

The interesting thing is what happens after you have had a consultation that has got the Government to rethink and that may then have other implications. In this case, with those changes, does this change the Government’s estimate of the number of notifications that that might give rise to, in relation to the change in definition? It is that sort of issue that might come up, and it would want the dialogue that I think is being referred to in the amendment, in relation to whether there is a second stage—if it is turned down, so to speak—about having to go on further. As such, how we handle the feedback is about both the transparency of what has come back in and the full implications of any changes that that has made.

We keep coming up with the figures where, even though the Government have increased the assumption of how many notifications there would be—less than 1% or so—the CBI and other commentators feel it would be much greater. As such, that degree of dialogue is needed in relation to consultation over these very big issues. Some assurance about the results of such a consultation, as well as a second stage, seems very helpful, along the lines in the amendment.

On the Government’s Amendment 75, it would be interesting to know what advice led to the change—we are not questioning it but wondering why it has been made—to extend the regulatory power from a notice or serving an order to include all documents as well. It would be helpful, certainly to me and possibly to other Members of the Committee, to know what other types of additional documents will thus be added to this regulatory power—could the Minister spell that out?

[Lord Callanan (Con)]

First, I thank my noble friend Lord Lansley for his Amendment 11. With the permission of the Committee, I will speak first to the three minor technical amendments that the Government wish to make to the Bill: Amendments 12, 37 and 75. Briefly, before I begin, I reassure the Committee that the Secretary of State must lay and publish a statement before using the call-in power.

Amendment 12 is to Clause 4, which concerns consultation and parliamentary procedure for the statement pursuant to Clause 3, in which the Secretary of State sets out how he expects to use the call-in power. At present, Clause 4 enables the Secretary of State to meet the requirement to carry out such consultation as he considers appropriate, in relation to a draft of the statement under subsection (1)(a), before Clause 4 is commenced.

However, it does not make it clear that the Secretary of State is able to make any changes that he considers necessary in view of the responses to that consultation under subsection (1)(b) before the clause is commenced. Amendment 12 clarifies this point, ensuring that stakeholders will be able to see a revised draft statement before it is laid before Parliament.

Amendment 37 is to Clause 11, which provides an exemption for certain asset acquisitions which would otherwise be trigger events. Subsection (2), however, provides that assets that are either land or are subject to certain export controls should not fall within the exemption, and subsection (2)(b) sets out the relevant export control provisions. One of these provisions, Article 9 of the Export Control Order 2008, was revoked on implementation period completion day as a result of EU exit by Regulation 4 of the Export Control (Amendment) (EU Exit) Regulations 2019, with which I am sure all Members are very familiar. The amendment would remove the reference to this revoked provision from Clause 11.

Amendment 75 is to Clause 53, which enables the Secretary of State to make regulations, subject to the negative resolution procedure, prescribing the procedure for giving notices and serving orders under the Bill. At present this clause enables the Secretary of State to specify how a notice or order must be given or served, but does not make it clear that these powers are intended to extend to all documents given under the Bill. The amendment would clarify that point, ensuring that the Secretary of State has the power to make regulations in Clause 53(1) in relation to the procedure for service of documents for all the different types of notices, orders and other documents under the Bill. These are relatively small tweaks to the Bill, and I hope that the Committee will see fit to agree to them.

Amendment 11 was tabled by my noble friend Lord Lansley, and I will begin by briefly setting out its context. Clause 4 sets out a consultation requirement and parliamentary procedure for a statement about the exercise of the call-in power which must be published before the Secretary of State may issue a call-in notice. It requires the Secretary of State, before publishing the statement, to carry out such consultation as he thinks appropriate in relation to a draft of the statement, to make any changes to the draft that appear to him to be necessary in view of the responses, and to lay the final statement before Parliament.

My noble friend’s amendment seeks to clarify the process by which the Secretary of State may publish a new statement if either House resolves not to approve the previous version that he lays before Parliament. The apparent stumbling block that the amendment seeks to remove is that the Secretary of State is under a duty to carry out such consultation as he thinks appropriate in relation to a draft of the new statement, and make any changes to the draft that appear to him to be necessary in view of the responses to such consultation. However, I point out that the Secretary of State must carry out such consultations as he “thinks appropriate”, according to Clause 4(1)(a).

The Bill therefore provides the Secretary of State with some measure of flexibility in deciding whether, for how long and how widely the draft statement should be consulted on. Therefore, the Bill as drafted does not in appropriate circumstances prevent the Secretary of State from publishing a new updated statement, reflecting the debate in Parliament, almost immediately without first undertaking a consultation if he does not think that a consultation is appropriate.

In short, while my noble friend’s amendment seeks to ensure that a new statement may be laid speedily if either House resolves not to approve the previous version, the Bill as drafted already allows for this. I am grateful that he has afforded me the opportunity to make the functioning of this clause clear. Therefore, in the light of the explanation that I have been able to provide, I hope that he will feel able to withdraw his amendment.

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[Lord Clement-Jones (LD)]

My Lords, there are distinct common factors in both these amendments. The proposers do not believe that the current way of approving regulations under Clause 6, purely the affirmative procedure, is satisfactory. That is because of the importance of the regulations under Clause 6. As we heard, they underpin the necessity for mandatory notification for certain types of transactions in 17 sectors and they can be changed. We heard, particularly from my noble friend Lord Fox, that the definitions of these sectors are highly complex.

My noble friend took the example of artificial intelligence, a technology I have taken considerable interest in. As he explained, machine learning technology permeates almost every single sector and every use for both consumers and businesses one can think of—fintech, edtech, regtech, you name it. Artificial intelligence permeates those, and the new description of the AI sector published in the government response today states:

“In narrowing the definition, the definition now provides further clarity for businesses and investors”.


However, the definition still covers:

“the identification of objects, people, and events; advanced robotics and cyber security.”

That is pretty broad.

The policy statement published today is also extremely helpful in emphasising the importance of Clause 6 regulations. The policy statement says:

“Under Clause 6, the Secretary of State has the power to make regulations to:… a) specify the description of a qualifying entity for the purpose of identifying a notifiable acquisition; …b) amend the circumstances in which a notifiable acquisition takes place … c) exempt acquirers with specified characteristics … d) make consequential amendments of other provisions of the Bill resulting from provisions set out in paragraphs (b) and (c).”—[Interruption.]


I hope that I am having some impact on the Minister, my Lords. The policy statement goes on to say:

“For the commencement of the regime, the Secretary of State intends to make regulations only to specify the sectors subject to mandatory notification.”


I underline “only” because you would have thought that was significant enough in itself. This is obviously a self-denying ordinance, but it is not a very large self-denying ordinance when you are dealing with the intricacies of those 17 sectors.

My noble friend Lord Fox has rightly quoted the Constitution Committee’s 2018 report The Legislative Process: Delegated Powers, which talked about the rubber-stamping of the Government’s secondary legislation. He also referred to my long life, and in my already long life I have been responsible for overturning a statutory instrument. The Blackpool casino was very much wanted by the citizens of Blackpool, so the SI for east Manchester was defeated by three votes in the House of Lords, and one of those votes was from the Archbishop of Canterbury—the former Archbishop of Canterbury, I am glad to say. It was I who put the Motion, and we passed it by three votes to deny the Government the right to build the casino in east Manchester. Unfortunately, the Government never came back with a proposal for Blackpool, and that is a sad piece of history. I do not know why they did not; it would have been a great place to build a casino.

However, that does show that, on a simple proposition, it is possible to have an effective debate. When you are dealing with 17 sectors and 111 pages of text, which are going to be the subject of this regulation, that illustrates that the form of affirmative resolution proposed in this Bill is not fit for purpose. This kind of super-affirmative procedure means that there would be a genuine debate on the regulations and the 17 sectors and their extent.

I have huge sympathy with the amendment of the noble Baroness, Lady McIntosh, because of course one wishes to see consultation among stakeholders. In an ideal world, one would like to see both that and the super-affirmative resolution. But, to be frank, consultation is not the same as, or a substitute for, proper parliamentary scrutiny. These are crucial regulations, and it is right that they are opened up for full debate in this way. I am probably going to embarrass the noble Lord, Lord Lansley, by saying that he said earlier we will have some debates about the sectors—well, not really, unless this amendment is accepted.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, as we have just been hearing, these notifiable acquisition regulations are significant and require proper oversight, not just from both Houses of Parliament but also from experts involved, and with the opinions of those experts being made available to legislators. It will obviously be important to ensure that the stakeholders to be consulted are knowledgeable and, if I may say it, at the cutting edge of technology.

--- Later in debate ---

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

My Lords, I have received two requests to speak after the Minister: from the noble Baroness, Lady Hayter, and the noble Lord, Lord Clement-Jones.

[Baroness Hayter of Kentish Town (Lab)]

I forgot to declare at the beginning that I used to work for the Wellcome Trust. It was 20 years ago, but I think it should still be noted.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for her response but I do not think that she has quite got to grips with the full concern about this. It is not so much that there has not been consultation about the current sectors; there has been an extensive consultation and the Government have come back with their views and have explicitly said that they may change them even further. Yet they are still going to return to Parliament with a pure affirmative process. It is not as if parliamentarians will be able to change it. The stakeholder discussion and consultation is going forward as she said, but there is no guarantee that when that set of regulations is passed there will be proper debate in the House, nor will there be thereafter if the sectors are changed and made more specific, less specific, added to—whatever. There is no guarantee that consultation will take place.

The Minister said that there are the right incentives. That is a bit thin. If that is the guarantee of government consultation, it is not very solid, and even then, Parliament is entitled to have a view about the width of those sectors in the light of changing circumstances. It might have different views about new risks emerging, to use the Minister’s phrase. Therefore, it would be entirely legitimate to have that debate if those regulations were revised. The Minister has not got the nub of the concern in all of this.