National Security and Investment Bill (First sitting)

Stephen Kinnock Excerpts

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 24th November 2020 Public Bill Committees

[Nadhim Zahawi]

I am grateful to you, Mr Parton. I do not want to hog the floor, as I am sure many colleagues want to ask questions. Thank you very much.

[Stephen Kinnock (Aberavon) (Lab)]

Q It is a pleasure to serve under your chairmanship, Mr Twigg. I do not know whether you can see me, Charlie, but I am here. I am sitting at the back due to social distancing, but it is good to see you.

Going back to your point about resourcing the investment security unit, can you give a bit more detail about what would be an ideal outcome from your point of view? Would it be that we need specificity in the Bill that key representatives and experts of the intelligence services, of the Ministry of Defence, of the diplomatic corps and of other agencies be formally named in the legislation, so we would have that reassurance that the body doing the screening had all the necessary breadth across the spectrum of both the economy and national security?

Charles Parton: That is a good question; it is not necessarily for me and I do not necessarily have the experience to lay down precisely how it works. For me, I think, first, that all those organisations you have mentioned—although others also on the economic side, such as the Treasury and BEIS—perhaps should be there to set the parameters of what needs to be referred. I think that, as a sort of preliminary filter, one would hope that there was an ability for most companies, and most universities as well, very quickly to put forward the deals or the pieces of work that they felt might be coming up against the parameters set by such a Government body.

For a quick decision, is the topic one that is suitable, or does it need a little more investigation? Should we be working with this organisation, or in some cases this particular Chinese academic or company, which may have links to the military or to the repressive regime? The experts, as it were, which means the SAGE-type committee, surely should be very quickly—companies and academics need to move quite quickly—making a preliminary estimation of whether this needs to be referred upwards to a Government Committee that wants to look at it in more detail.

I do agree with you that the range of interests needs to be representative if the decision is to be perceived by all sides as acceptable when it is eventually made.

[Stephen Kinnock]

Q Thanks very much; that is very helpful. On this point about making sure that we have the most effective and streamlined system in place, one of the areas where the Bill diverges from legislation in similar jurisdictions, such as Germany and Japan, is that it does not contain a definition of national security as such.

In the Japanese and German cases, they refer to national security including concepts of public order. I refer in particular to your comments about organisations out there in the marketplace, whether they are universities or businesses, needing to have clarity to know what needs to be referred and what does not. They need to know where the amber or red light is flashing, and where it is clearly a green light and not an issue. Would that be aided and facilitated if the Bill contained a definition of national security?

Charles Parton: It is a bit like defining terrorism. It is really quite difficult to be all encompassing. Sometimes, I am in sympathy with the Chinese legislation that adds at the bottom “and other offences” or “and other things”. I think it is quite difficult, even if people are convinced that they can effectively define that. It is not only national security; there is a question whether you are aiding crimes against humanity or the genocide that is going on in Xinjiang. I am using loaded terms there, but I think they are justified. There must be some mechanism for ensuring that those, too, are brought to bear, but I am not expert enough in legislation to be able to say, “Yes, we need a watertight definition of ‘national security’.”

Certainly, the Bill must convey to companies and academics the need to clear a range of topics. That will not be specific, but, at best, they must be encouraged to consult almost as a default, so that they are not caught out. The other question is, what happens if they don’t? What sort of sanctions are they under if they do not consult, when it is clearly something they should consult on, for reasons either of security or of repression and crimes against humanity?

[The Chair]

Thank you very much. I now call Andrew Griffith.

--- Later in debate ---

[The Chair]

This will probably be the last question, from Stephen Kinnock.

[Stephen Kinnock]

Q Thank you very much, Chair, for giving me another bite at the cherry. Mr Parton, as a final point, I thought it might be useful to remind the Committee of the symbiotic nature of the relationship between the Chinese Communist party and the Chinese business community. Based on your extensive experience in China, could you briefly outline how the Chinese Communist party in essence runs the business community; the role that it plays in ensuring executives are appointed who are sympathetic to the party; and the whole way in which the nomenklatura works? That will help us to understand the extent to which Chinese business interests in this country are, in essence, the same as the interests of the Chinese Communist party.

Charles Parton: That is a very good question.

[Chi Onwurah]

Could I just add to that? That is an excellent point, but could you also say a little bit on how China responds to proposed takeovers that might implicate its national security, if those takeovers are allowed? How does it respond to that investment into its companies?

Charles Parton: Those are both good points. First of all, divide it into the state-owned sector and the private sector. In terms of the state-owned sector, the top executives of the big state-owned companies are appointed by the central organisation department of the party. That is the organisation that is, as Mr Kinnock has said, in charge of the nomenklatura: the top 3,000 to 4,000 party officials. Of course, a lot of state-owned companies are also owned at the provincial and lower levels, and there, too, the top executives are party members and beholden to the party. Let us not forget that most foreign investment by the Chinese is state owned, so it is not just a fair bet but a fair certainty that any state-owned enterprise investing is fully politically controlled.

When it comes to the private sector, Huawei has spent a large amount of its time insisting that it is a private company—I really do not care. And I do not really care that the national security law says that any individual or organisation must help the party or security organs when called upon. The brute fact is that, in the way the system is run in China, if the party tells you to do something, the only response from private business to an order is to say, “Certainly, Sir. How high do you want me to jump?” so this debate is entirely irrelevant. The party is now pushing committees into all private enterprises—foreign and local—and it would be a very unwise head of a private company who said, “No, Mr Xi Jinping. I don’t think so.” If nothing else has been shown by what has happened with Jack Ma, China’s second-richest person, and the Ant Group finance company in the last few weeks—there are, of course, financial risk reasons they might want to control Jack Ma’s Ant Group—it is, “Sorry, you are beholden to the Communist party.” That was a very fierce reminder of it.

In terms of this debate, I do not think we should be under any illusion that if a party says to a company about its technology or whatever, “Well okay, it’s all very well that you’ve got that, but we want it fed into our People’s Liberation Army organisations and science and technology system,” no company is going to say, “Oh no, that’s not right. We won’t do that.” For instance, when Huawei says, “If we were asked to do something against our commitments, in terms of what we do abroad, that would threaten security, we would not do that,” it is rubbish. They know that.

--- Later in debate ---

[James Wild]

Q In the Bill, there are 17 sectors listed where mandatory notifications are required. They include transport and communications, as in some of the points that Mr Western was raising. Should others be added to that?

Also, do you think that although we need to look at the Bill as to what it does, we should also recognise that it does not solve all the problems and threats from hostile states—that the intelligence activity and other things we do to raise the cost of theft of IP need to be seen holistically across the piece, and that the Bill cannot solve all the problems?

Sir Richard Dearlove: The Bill is a step in the right direction. What is important about the Bill is that it raises parliamentary and public awareness of the issue. Everybody takes a big step forward in being sensitised to the problems in the future.

To be honest, I do not have any suggestions right now to add to the list, but I might look at that and see whether there are certain areas. For me, the Bill is almost a symbolic move—one that is long overdue and signals a change in attitude at Westminster and on the part of this and future Governments. It is a very healthy, pleasing and important development.

[Stephen Kinnock]

Q Thank you very much, Sir Richard, for the evidence that you have given us today. The Intelligence and Security Committee defines critical national infrastructure as

“certain ‘critical’ elements of infrastructure, the loss or compromise of which would have a major, detrimental impact on the availability or integrity of essential services, leading to severe economic or social consequences or to loss of life.”

Would the Bill benefit from having that definition of critical national infrastructure embedded in the middle? Linked to that definition, should special measures be taken to raise our guard even higher when it comes to any kind of investment in our critical national infrastructure?

Sir Richard Dearlove: I would certainly see that as advantageous, because it defines a clear area where you start and from which you can make judgments about the involvement of foreign firms being given space or activity in those areas. That is not a bad idea at all, actually.

[Stephen Kinnock]

I know time is short, so thank you.

[Simon Baynes]

Q Thank you, Chair. Thank you, Sir Richard. When and why did we let down our guard to China and where would you restrict its access? You made that comment in your statement, and you have commented already on areas such as nuclear power. Can you add to that to give us a bit more of an idea of other strategic areas where you think we should restrict its access?

Sir Richard Dearlove: I think we were over-enthusiastic about becoming a favoured trading partner with China. I am not going to name names, although I think I have done in one or two instances where, let us say, certain Ministers were incredibly enthusiastic and uncritical about building a commercial relationship with China. Part of that was driven politically, in that if we are going to not be a member of the EU, we need alternative relationships. I am not sure I would see it quite like that.

There has been a big emphasis on building a privileged position with China, which has led to people such as myself shouting from the sidelines and being pretty unpopular. For example, the 48 Group Club that the Chinese set up in the UK is extraordinary. They recruited a whole group of leading British business and political figures into that group who were designated cheerleaders for a burgeoning relationship with China. Huawei was an important part of that. The composition—the British membership of the Huawei board—was a very impressive line-up of people who were there to persuade us to drop our guard.

Anyway, I am glad that that is now largely history. A lot of the people who were involved are very keen to jump ship and be disentangled from those involvements. I am sure that, in time, the economic rewards that they were offered to go on to those boards and things were pretty significant. So the Chinese knew how to play us and that is why we got ourselves into this very difficult position on 5G.

Sorry, what was the second part of your question?