National Security and Investment Bill (Seventh sitting)

Katherine Fletcher Excerpts

Committee stage & Committee Debate: 7th sitting: House of Commons
Thursday 3rd December 2020 Public Bill Committees

[Chi Onwurah]

Amendment 17 addresses the unwinding of void transactions. Clause 13, which is the start of chapter 3 of the Bill, is concerned with the approval of notifiable acquisitions. It provides that:

“A notifiable acquisition that is completed without the approval of the Secretary of State is void.”

It is a short clause with only three subsections, of which that is the first. Subsection (2) says that the Secretary of State may approve a notifiable acquisition by giving a notification, making a final order, or giving a final notification under various clauses. Subsection (3) says:

“A notifiable acquisition, in relation to which a final order has been made, that is completed otherwise than in accordance with the final order, is void.”

I want to emphasise the consequences and impact of such a short clause. Our amendment adds a new subsection that says that the Secretary of State must publish guidance that covers

“consideration of the impact of a notifiable acquisition being deemed void…with particular regard to…consequential obligations, liabilities and rights in completed events;…who constitutes a ‘materially affected’ person…and…the informational and evidential standards that would underpin the requirement for completion ‘in accordance with the final order’ at subsection (3).”

The amendment effectively mandates the Secretary of State to publish guidance on how the mechanism of deeming non-compliant transactions void would work in practice. Once again, we tabled it genuinely in the spirit of improving the Bill, because this issue is potentially a hugely significant part of it. The two words “is void” have a huge impact, which needs to be unpacked. This is a constructive amendment; we want to ensure that there is clarity for small and medium-sized enterprises, and accountability to Parliament, on how the new powers will be exercised.

I know that the Minister rejected further new powers in the last amendment, but even without them these new powers are significant. We welcome the expanded powers to tackle national security concerns, but we need to ensure that they come with accountability and guidance. The ability for transactions to be deemed legally void where they have not been approved by the Secretary of State, or where they have not complied with the Secretary of State’s final order, has potentially huge repercussions. Again, it marks a radical shift from today’s regime under the Enterprise Act 2002 and from the Government’s White Paper.

Under the “legally void” provision, transactions that took place three to five years ago could now be immediately deemed void. If the first transaction in a chain were deemed void, that would leave the legal rights and entitlements of all subsequent transaction parties in total uncertainty. That is not just a theoretical concern that we are raising to test or probe the Bill, but a truly practical one. A number of investment transactions involve a change of shareholder parties over a three to five-year period. The automatic default of non-compliant transactions becoming void would mean an impossible series of rights, entitlements and changes having to be unwound. It may well be practically unworkable and legally uncertain.

[Katherine Fletcher (South Ribble) (Con)]

I appreciate the point that the hon. Lady is making, in that transactions over a period of three to five years could become complex, but surely if something is called in and deemed void in the overriding interest of national security there will be an extremely good reason for it. Although the complexity of downstream transactions is regrettable, we would be acting in the British interest if we had to trigger these powers.

[Chi Onwurah]

I thank the hon. Lady for her intervention, which by and large I agree with. That is why we are not seeking to remove the power, but to ensure that the Government and the Secretary of State explain how it would work in practice. She is right that if a bad or hostile actor has deliberately gone behind our national security framework, or the legislation as set out in the Bill, to undertake a transaction, the consequences will be on their head. However, there might be a series of other transactions as a consequence that were not made by bad or hostile actors—I will give some examples—and the impact on them should be set out, as far as possible, to give some clarity, because this is a huge area of uncertainty.

As has been stated on a number of occasions, we attract more foreign investment than any European Union country, and one reason why the UK is such an attractive location for foreign investment is that we have a robust legal framework that is trusted globally, but by giving rise to uncertainty the clause might impact that. We are not seeking to remove this power, but to have it properly explained, as far as possible.