National Security Act 2023 (Foreign Activities and Foreign Influence Registration Scheme: Exemptions for Certain Foreign Power Investment Funds, Education, Government Administration and Public Bodies) Regulations 2025

Lord Davies of Gower Excerpts

Thursday 5th June 2025 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord, Lord Cryer. I have a high level of sympathy with the points that he raised. Indeed, when we discussed the Iran sanctions regime in Grand Committee, many of those arguments were made and made powerfully. I hope that the Minister will respond to that specific point. I also associate myself with the questions asked by the noble Viscount, Lord Stansgate. I want to expand on a couple of them and ask some further supplementary questions.

First, I thank the Minister for outlining in clear terms the instruments. There are areas where I agree with him very strongly. The FIR scheme, which was passed as a result of considerable cross-party work, is one that I and my party support. As a veteran of each stage of that Bill, now Act, and all of the discussions there, I am very pleased that the Government are now in a position to bring this scheme into effect. It is an important measure. I thank the officials for their work in putting it together because its importance will rely on the fact that it is both reliable and enforceable; it therefore has to be right. I know that there has previously been some debate around the speed at which the Government are doing it but, from my point of view, it was always about getting it right.

On implementation, it is interesting to see these measures. I will ask a couple of questions relating to them. As the Minister indicated, we previously discussed in the Chamber the announcement that Iran and Russia and their state entities are to be on the first enhanced tier list. I will come to China in a moment. I am content on the publication of information under Sections 65, 68 and 70, as these regulations state, but can the Minister say a bit more about how searchable they will be and how easily accessible they will be on GOV.UK? I know that there will be an online portal. Can the Minister say a little more about that? The value of them will be in how transparent and accessible they are, rather than just being available online, but that is a minor consideration.

I now want to ask a couple of questions with regards to publication. The regulations state that, in terms of one of the exemptions from publication, the Secretary of State will be able to make a decision if a person will have information published about them that is likely to be seriously prejudicial to commercial interests. I would suspect that anybody who does not wish their information to be published, even if they have to do so under threat of prosecution, will state that that information is prejudicial to their commercial interests.

I hope that the Minister is able to say that that is an extremely high bar and it will be very hard to litigate, because what I want to see avoided is anybody who is in a position of seeking to hide the information, having been forced to register it, then having a whole phalanx of lawyers to state what the commercial interests may well be. That will drive a coach and horses through the principle of the transparency of this. I hope the Minister can reassure me on that point.

I will come back to some of the aspects of the exemptions in a moment, but first, on Iran, I am satisfied, as I said in the Chamber in response to the Statement. I hope that the Minister will take very seriously the points raised in the Chamber. It was referenced in the impact assessment of the regulations:

“Iran may introduce reciprocal measures to monitor the overseas activities of the UK government. Persons could be prosecuted if engaged in unregistered arrangements or activity, even if the activity itself is legitimate. There is a potential risk of discrimination and exclusion against the diaspora of Iranians living in the UK”.


What proactive work is being done, given that the Home Office has recognised that there may well be a threat to the diaspora within the UK? How has that community been contacted in advance of the scheme being put into operation, given the fact that the risk has already been identified? I hope that the Government are doing this, because we have already seen—as the Minister is well aware, and as we debated in the Chamber—the reach of the Iranian regime within the UK and the threat to those who have sought asylum from it.

The same will apply to Russia: the same risk assessment was provided for Russia, of course. I should state that I have a slight interest when discussing Russia and Russian sanctions, given that I have been sanctioned. I appreciate that the guidance is being issued, but can the Minister confirm that, for the bodies listed in the regulations, any commercial or legal entities in the UK that are providing services for these entities will equally come under the remit of the Part 1 and 2 bodies in the legislation? There should be no loopholes for UK-based entities providing services for those entities because, as we know, Russia and Iran are expert at seeking to circumvent arrangements that the UK puts in place.

I noticed that the impact assessment, under “Rationale for intervention”, mentions

“certain academic and research activities which are directed by the government of Iran”,

and it is similar for Russia. That leads me on to the exemptions. The Government have identified that “academic and research activities” are a tool that is being used, and they are now bringing forward an exemption for them. I do not understand this, and I hope the Minister can say in very clear terms the rationale behind exempting exactly those areas of activity which the rationale in the regulations cites as reasons for their being brought in. I hope that we will be able to have a bit more clarity when it comes to the exemptions. It is important because we know that these very areas, which include academia, research and the use of sovereign funds, and those that are facilitating the investment and advice of those sovereign funds, are exactly the instruments by which we have seen attempted foreign interference. The area where we have seen that on “an epic scale” is from China.

That leads me to the point that the noble Viscount, Lord Stansgate, indicated with regard to China. This week, we have been debating the Government’s strategic defence review. It starts with reference to China supporting the Russian war of aggression on Ukraine. We know that the director-general and the former director-general of MI5 have referred on the record to the enormous efforts that the CCP and the Chinese Government have deployed with regard to espionage and attempted espionage in the UK. In October 2023, the director-general went public and said that more than 20,000 people in the UK had been approached covertly by Chinese spies. We know that that pace has accelerated since then, but the Government do not believe it is warranted for China state enterprises or state entities to register their activities under the enhanced tier.

The noble Viscount quite rightly quoted the Secondary Legislation Committee of this House, which drew to our attention the threat posed by China, and the Home Office’s response as to why China is not on the enhanced tier list. The Secondary Legislation Scrutiny Committee quoted the Home Office saying, and this may be in the Minister’s notes:

“Countries are considered separately for specification on the enhanced tier and decisions are made based on a robust evidence base”.


I have not seen any evidence base published by the Government as to why China would not be on an enhanced tier, given the “epic scale” of its attempts not only to subvert our institutions but to co-opt them to act in espionage. The director-general of MI5 gave examples of more than 20 instances where China was actively seeking to use UK companies and universities, through investments and learning agreements, to access sensitive information and technology. The Government are proposing to exempt those exact areas from these measures, and I do not know why.

The Minister also referenced the exemption of sovereign wealth funds. This piqued my interest, because I raised this during the passage of Bill. I raised it in January 2023 when I specifically cited the

“sovereign wealth fund of a state, which might or might not be listed on a stock exchange and which may or may not, in effect, be a private sector arm of the interests of a foreign power”.—[Official Report, 11/1/23; col. 1476.]

I sought clarification from the Minister in the previous Government with regard to that, and I was told that sovereign wealth funds would be within the scope of this legislation. I just cannot understand why this Government have changed the assurance that I received from the previous Government, so that sovereign wealth funds will no longer be part of this. The deployment and the investment of sovereign wealth funds and pension funds in key UK infrastructure is of course something that we should focus on, whether or not it is part of the information to be published. I hope very much that Chinese investment, sovereign wealth funds and pension funds, and also the lack of published information for those who will claim some form of commercial sensitivity, will not be used to circumvent what we worked very hard to achieve, which is to prevent the kind of interference that the Government have said they are concerned about. I hope that before we are asked to support these regulations in the Chamber, we are given very clear reassurances, so that my concerns can be assuaged.

[Lord Davies of Gower (Con)]

My Lords, these four draft regulations represent the next step in operationalising the foreign influence registration scheme established under Part 4 of the National Security Act 2023, a piece of legislation introduced by the previous Conservative Government. I am sure that the Minister will be pleased to hear that we support these instruments. They provide essential tools better to protect our national security from covert foreign influence, a matter of the utmost importance.

As the Minister explained, the regulations are designed to enhance transparency, deter malign activity and enable earlier disruption of potentially harmful arrangements directed by hostile states. In an increasingly complex and contested geopolitical environment, this is both necessary and timely.

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[Lord Purvis of Tweed (LD)]

The noble Lord has obviously made a decision that, even though China is not on the enhanced tier, Confucius institutions, Chinese pension funds and Chinese state funds will now be exempted. I assume that the Conservatives support that.

[Lord Davies of Gower (Con)]

Indeed—I think I will cover that point as I go along.

Although we support the intent and scope of these measures, scrutiny must not end there. These regulations are not purely technical instruments; they go to the heart of how the UK responds to evolving and increasingly sophisticated state threats. It is in that spirit that I raise three points.

First, the omission of China from the enhanced tier is quite simply a glaring absence. There is now consistent cross-party consensus, reflected in previous debates in both Houses and across the intelligence community, that China poses a systemic and strategic challenge to the United Kingdom. China has targeted Members of this Parliament, launched cyberattacks on UK institutions and engaged in covert activity on British soil. In 2021, it sanctioned two Members of this House and, in 2024, the Government publicly attributed malicious cyber campaigns against MPs and the Electoral Commission to the Chinese state. These are not isolated incidents; they are part of a wider sustained pattern. Given this record, it is difficult to understand why China has not yet been put under the enhanced tier of this scheme.

The Government have stated that they do not comment on individual countries, and that designations are made on a case-by-case basis. However, this is not about speculation but about providing clarity and strategic coherence in our approach to national security. The public and Parliament are entitled to understand the rationale behind such decisions, particularly when the state in question has been repeatedly named by the intelligence community as a principal source of hostile activity. Indeed, the Home Office’s own professional guidance lists Russia, Iran and China as the foremost state-based threats. The director-general of MI5 has echoed this view, as has already been said this afternoon. So why the inconsistency? What message does it send, either to those carrying out covert activities or to our international partners, when a state widely recognised as a threat is excluded from a scheme specifically designed to counter exactly this kind of behaviour? I therefore urge the Government to reconsider this decision, or at the very least to provide a clearer public explanation of their current position.

On enforcement and oversight, effective implementation is vital and registration requirements must be communicated clearly. Guidance must be accessible, and enforcement must be proportionate and consistent across sectors and regions. Can the Minister confirm that the necessary resources are in place to support enforcement, and that compliance will be monitored in a structured and transparent manner? We note that Section 82 of the National Security Act 2023 requires the Secretary of State to publish an annual report on the scheme’s operation, which is welcome, but can the Minister confirm whether that report will include an assessment of the effectiveness of the current exemptions, and whether further exemptions or additional country designations are under active consideration?

Finally, although this scheme is a welcome development, we must acknowledge that it is only one part of a much broader challenge. Hostile states are adapting constantly. Disinformation, cyber interference, economic coercion and influence operations now span multiple domains. Responding effectively demands not just new legal frameworks but a whole of government approach, with sustained investment in resilience, cross-sectoral co-ordination and continued international alignment.

In conclusion, we support these measures, which are necessary, appropriate and overdue, but they must be implemented in a manner that is robust, proportionate and responsive to the evolving nature of state threats—not just today but in the years ahead. We remain concerned about the exclusion of China from the enhanced tier. We urge the Government to keep this matter under close and continuous review, and to act with greater transparency about the strategic direction of our national security posture.

[Lord Hanson of Flint (Lab)]

My Lords, I am grateful both to the contributors to this short debate and for the broad support that has been given for the regulations before the Committee. I will try to answer each noble Lord in turn. There might be a bit of overlap, because some of the issues that have been raised do overlap, but I will try to cover the points raised by each noble Lord in turn.

I shall start with my noble friend Lord Stansgate, who mentioned cyber and cyberattacks. I assure him that the security services, the agencies, the Home Office and the UK Government are acutely aware of hostile states potentially undertaking attacks, and of criminal gangs doing the same. Significant work, which my noble friend would not expect me to talk about in public, is ongoing to ensure the safety and security of our citizens. I give him that assurance as a whole.

My noble friend asked in particular about the exemptions for students and the impact on small businesses or small organisations. I will take the latter first. The registration process is designed to be as simple as possible—this touches on a point mentioned by the noble Lord, Lord Davies. The Home Office anticipates that the process should take a maximum of 30 minutes. We are not expecting small businesses or micro-businesses to register in large numbers if they are in direct relationships with foreign powers, but—again, this goes to a point made by a number of noble Lords—there is comprehensive guidance online to support the registrant and their process, and to support individuals and larger organisations. The proof of the pudding will be in the eating, self-evidently, but we are confident that that will be a relatively simple process from 1 July onwards. Again, I put out the hand of friendship to all noble Lords: if there is feedback downstream on how the scheme operates, from any perspective that is brought to their attention, we would welcome it.

My noble friend Lord Stansgate also asked for clarification on the education exemption. Where someone is in an arrangement with a foreign power and is completing a course in further study, they do not necessarily need to register activities, but it is reasonable to complete the course of education; to uphold the reputation of the provider; to meet the standards of conduct expected by the providers of financial assistance; and to notify any person of personal information. Again, I hope that that is helpful.

My noble friend Lord Stansgate and the noble Lords, Lord Purvis of Tweed and Lord Davies of Gower, mentioned China. I may as well hit that point and discuss it at this time. I think that they all know the answer to the question they asked, but I will give it in the phraseology I have to use. Each country is considered on its merits and no decisions have been made. Countries are considered separately for specification and decisions are made on evidence.

On China more broadly, we have been clear as a Government that we are going to take a consistent, long-term, strategic approach to managing the UK’s relations with China. This means co-operating where we can, competing where we need to and challenging robustly where we must, including on areas of national security. However, each country is considered on its merits and no decisions have been made. The regulations before the Committee highlight two specific nations where we believe there is a significant threat—Russia and Iran—which is why we have brought them forward. I hope that helps my noble friend Lord Stansgate on his points.

I am pleased to see my noble friend Lord Cryer continuing his long interest in issues related to Iran. I know that he has raised this in the Chamber on a number of occasions. He asked what happens if there is a failure to register. That will be a criminal offence in the event of an individual’s activities coming to light linked to a registered nation under the regulations before us today and will carry a potential penalty of five years’ imprisonment. That is not for me to judge. That is for the courts to judge and the police to prosecute, but that is certainly part of this issue today.

My noble friend mentioned in particular the impact on parliamentarians. There is no requirement for parliamentarians who are being lobbied to register with the scheme, and that allows the democratic process to continue. He commented on proscription and mentioned Hamas. Hamas is not specified. The regulations would cover anyone in a relationship with the IRGC in Iran but, as ever, for any organisation, at any time, the Government keep under review the question of proscription. At the moment, this is where we are, but we keep everything under review at all times accordingly. As my noble friend will know, the arrests on 17 May of three Iranian nationals who have been charged with offences under the National Security Act show that the Government are consistent. That matter will go before the courts and be determined by the judiciary in due course.

My noble friend also mentioned proxies. Although I have touched on this, I think it is important that I say that it is the person who is in a relationship with the foreign power who has to register. Therefore, those who are proxies are within the scheme, for example, companies acting under the direction of the Russians or the Iranians. If the proxy is not registered, then the person in the UK acting on their behalf could well be committing an offence. Again, it is our intention to ensure that we act in the interests of national security and of the United Kingdom as a whole.

The noble Lord, Lord Purvis, raised a number of points. Again, I am grateful for his broad support and thank him for that support to date and in getting the legislation in this House in the past. He mentioned commercial interests and asked whether this is a high bar. Let me, I hope, reassure him that the Government’s intention is that it should be a high bar. UK companies providing services to bodies listed will have to register. The exemptions are carefully crafted to ensure that what is out of scope is as narrow as possible, while still fulfilling the scheme’s aim. We have put in place exemptions on sovereign wealth funds, which he talked about. The exemption for sovereign wealth funds is not about prioritising growth over national security as national security remains the first priority of Government, but about ensuring that the scheme remains proportionate. The link between a sovereign wealth fund and a foreign power is inherently transparent, so requiring them to register with the scheme would bring very limited benefits. I hope that answers his point.