National Security and Investment Bill (Fifth sitting)

Stephen Kinnock Excerpts

Committee stage & Committee Debate: 5th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[Chi Onwurah]

The hon. Member makes an important point that goes to the heart of our concerns. I do not wish to detain the Committee for too long on this, but it is important to discuss the way in which the skills and resources of our national security services, who do so much to keep us safe and secure, will be used to work with the Department to identify potential triggers for a call-in. Some guidance will be given in the statement issued by the Secretary of State, and we will debate that shortly, but what was mentioned many times yesterday during the debate on the Telecommunications (Security) Bill was the capacity and the need for institutions such as our Intelligence and Security Committee to have a more concrete role. Not all of their expertise and knowledge can be in the public domain. As we heard yesterday, the Committee first issued concerns about Huawei back in 2013. If, back in 2013, the business Department had been able to benefit from that expertise, knowledge and insight the Department for Digital, Culture, Media and Sport would be in a different position today.

[Stephen Kinnock (Aberavon) (Lab)]

As my hon. Friend rightly says, the fundamental purpose of our amendment is to ensure that the screening process takes place upstream so that the multi-agency and highly technical capability of intelligence agencies and the Ministry of Defence can be deployed in advance of the Secretary of State—who otherwise may be in a state of isolation—making an initial decision about whether there is a trigger event or whether action is required. The amendment would ensure that the screening process is done by multiple agencies that can then give the Secretary of State advice that is well informed and rooted in an understanding of the risk that we face.

[Chi Onwurah]

I thank my hon. Friend for putting it so clearly, and I hope that addresses the concerns of the hon. Member for West Aberdeenshire and Kincardine. We want the screening process to benefit from the knowledge of our intelligence agencies and others before the Secretary of State calls it in. Our national security depends on having those robust contributions from across Government and the agencies in guiding decisions. In some cases, this may rely on the established sensitive channels of information and access and communications that have marked the work of the Intelligence and Security Committee. That is the best way to guard our national security, relying on our world-leading intelligence agencies, diplomatic service and our civil service expertise across Departments and not just on a single Secretary of State.

During the evidence sessions last week, we heard from an academic expert witness that institutional capacity in this area usually involves a multi-agency review body. We heard from the former head of MI6 that

“the co-ordination of Government Departments is one of the really big challenges”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 23, Q25.]

I am sure everyone who heard Sir Richard Dearlove’s evidence was struck that his years at MI6 had clearly taught him that this is a big challenge and that it is important to have co-ordinated and organised multi-agency input. We heard from the recent head of the UK’s National Cyber Security Centre that the new body

“needs to be broadly based and multidisciplinary.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 85, Q103.]

The consensus of academic and intelligence service experience is that we need an approach that includes different agencies upstream of the calling decision.

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[Chi Onwurah]

I welcome this debate. If by that the hon. Member is asking whether I think human rights have a relationship to national security, that was very well debated yesterday in relation to the Telecommunications (Security) Bill. A number of his colleagues strongly made the point that there is a relationship between modern-day slavery and our national interest and national security. I do not have the expertise to identify what the agency should be. The Low Pay Commission is not an organisation that I had considered, but I am happy to take his advocacy for its being part of this multidisciplinary approach.

[Stephen Kinnock]

My hon. Friend is being incredibly generous. Not wishing to second-guess some of the scepticism that we may be picking up from the Government Benches—[Interruption.]

[The Chair]

Order. Can we have just one meeting?

[Stephen Kinnock]

Thank you, Mr Twigg. As I was saying, not wishing to second-guess the scepticism that I may be picking up from Government Members, one reason I support the amendment is that I think it brings additional focus to the process. Without a clear definition of what national security is in the Bill, and a clear institutional capacity for the Secretary of State, the Secretary of State will be left with an open-ended process. By having a multi-agency, strong institutional capacity we will streamline the process. Our amendment is about cutting bureaucracy out of the process, and streamlining and focusing it. I hope that hon. Members will consider that when they take their sceptical approach.

[Chi Onwurah]

As always, I am immensely grateful to my hon. Friend, who does well to remind us that part of the underlying issue, which we will debate later, is the lack of any definition of national security. Rather than just considering the scepticism, let me focus on what we are trying to do. Given the lack of any definition of national security, is it not right that it should not be left to the Department for Business, Energy and Industrial Strategy to decide what the key issues are on national security? Fundamentally, I think that is the question that Committee members must consider.

The amendment seeks to fill the gap that expert advice and international precedence highlight. It enshrines credible decision making in law and, in doing so, protects our security and gives businesses confidence that the decision to call in has been grounded in evidence and expertise, particularly small and medium-sized enterprises, who will find certain provisions of the legislation most burdensome and who may have the most to lose from lengthy processes once the call-in procedure happens—the hon. Member for West Aberdeenshire and Kincardine referred to those processes. It grounds a mechanism for effective accountability for the call-in decisions of the Secretary of State.

Amendment 4, which would amend clause 4, has a similar aim. It would require the Secretary of State to consult with the Intelligence and Security Committee before publishing a statement under section 3, which sets out the scope and nature of how the Secretary of State would exercise the call-in powers. That statement would include details of sectors that might especially pose risks, details of trigger events and details of factors that the Secretary of State would consider in deciding whether to act. It would also include details of the BEIS unit’s resourcing, if amendment 9 were agreed to.

The measures are a seismic shift in terms of the UK’s approach to mergers and acquisitions and it gives significant powers and discretion to the Secretary of State. It suggests that the Government may publish a statement setting out the scope of the call-in powers. As part of our discussion this morning, we have talked about the way in which security threats evolve over time in the light of technological change—for example, security threats that we did not recognise in the past led to the Huawei debacle—and also, importantly, in the light of political changes, so it is understandable that our understanding of some of those changes will be imperfect and will rely on sensitive information. However, the critical point is that the fact that there will be change and its sensitivity should not preclude the need for accountability.

In other areas of national security, the Intelligence and Security Committee holds Government to account through proper scrutiny and with access to sensitive information. I refer again to the debates on the Telecommunications (Security) Bill and the Second Reading of this Bill, where members of the Intelligence and Security Committee demonstrated their understanding of the key issues around national security and their ability to make a contribution—I think it is fair to say that they are very willing to make a contribution. It is only right that we bring the same level of scrutiny to measures in this Bill, on matters of critical national security. The amendment would bring the scrutiny of the Intelligence and Security Committee to changes in the Secretary of State’s call-in powers, ensuring that these major powers consistently act to protect our national security.

Scrutiny is especially needed in this area. We have had the Enterprise Act since 2002, but there have been only 12 national security cases under it. That speaks very clearly to the lack of experience and an acute need for scrutiny as we now move up to almost 2,000 annual cases. Several witnesses in our evidence sessions emphasised that we were going from effectively zero—a standing start—to Formula 1 performance levels, and that as such, we needed to ensure that we put in place the resources, the expertise and the support to enable that to be effective and not unnecessarily impede our business, our economy and our foreign investment.

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[Chi Onwurah]

I welcome the hon. Lady’s intervention. It is great to have scientific knowledge in Committee and in the House. I welcome the contributions and scrutiny that a scientific background can bring. She is right that there is a tension. The technological environment is fantastic and innovative, with its start-up and enterprise culture. We have great centres of development and innovation, from Cambridge to Newcastle. I am sure hon. Members can mention other centres of great technological development that lead to lots of local start-ups in different areas. All or many of them may be caught by the provisions of the Bill, and that is a concern, but our amendments have been tabled to put in place parliamentary scrutiny.

Parliamentary scrutiny of the call-in process should be, as my hon. Friend the Member for Aberavon said, upstream of the actual call-in notification. This is about the definitions of the sectors to ensure upstream scrutiny. Small businesses, particularly start-ups, seek finance, often foreign investment. There are enough barriers in their way and we do not want to create more unnecessarily, but our amendments are about clarifying and ensuring the robustness of the definitions before they hit the coalface of our small businesses and start-ups, whose interests I want to protect. The Opposition are champions of small businesses, are we not?

[Stephen Kinnock]

Indeed we are. My hon. Friend is absolutely right. I reiterate that what we propose is, through consultation, removing bottlenecks—the key word in the intervention from hon. Member for South Ribble. By improving consultation and ensuring that we have the best possible expertise, we will make the Secretary of State’s life easier, not more difficult. It is about removing bottlenecks, not adding them.

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[Chi Onwurah]

I am struggling to see how that would happen. How would Parliament, after the Bill becomes law, decide that the Intelligence and Security Committee, as opposed to or in addition to the Business, Energy and Industrial Strategy Committee, should have a role. How would that happen in practice?

[Stephen Kinnock]

There are plenty of examples of Select Committees getting involved in the upstream work of Government—for example, giving feedback on White Papers. Parliament and its Select Committees consistently get involved in the work of Government in that context.

[Mark Garnier]

rose—

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[Dr Whitehead]

Yes, indeed. The hon. Member is quite correct to draw attention to clause 22, which concerns false or misleading information. It relates to where someone has, at the time of the trigger event, concealed or misled or sought to deceive those concerned with the trigger event about the nature of the event. I would suggest that that is a different case from what we are trying to establish today. It is not that anyone has tried to deceive anybody or maliciously mislead anybody at the time of the trigger event, but new material may come to light or become available within five years of the initial trigger event that might cause a further call-in notice to be introduced. According to the definition set out in the Bill, that looks like it might not be possible.

[Stephen Kinnock]

I thank my hon. Friend for giving way, and he is being very generous in doing so. He rightly talks about new material or information, but what about the evolving nature of geopolitical threats? There may well be countries that are not considered to be hostile actors now, but political changes one, two or three years down the line could have a massive impact on whether we see that country as a threat to national security. It could become a hostile actor.

[Dr Whitehead]

My hon. Friend makes an important point, which was reflected in the evidence sessions on this Bill. I want to dwell on that briefly, because he makes a really important point. These matters are evolving. Not only that, but the nature of databases evolves. The nature of what we do and do not find out evolves. There are circumstances—my hon. Friend mentioned a particularly important one—where the Secretary of State could be excessively curtailed in the diligent pursuit of his role in terms of call-ins and trigger events if no amendment is made to this clause.

The expert evidence we received from Dr Ashley Lenihan of the Centre for International Studies at the London School of Economics gave rise to a couple of important considerations in terms of how evolving circumstances or new information might be important. Dr Lenihan made a very important point, similar to that made by my hon. Friend, when she stated:

“Dealing with the kind of evolving and emerging threats we see in terms of novel investments from countries such as China, Russia and Venezuela needs the flexibility to look at retroactively and potentially unwind transactions that the Secretary of State and the investment security unit were not even aware of.” ––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November; c. 34, Q36.]

Speaking of existing databases, Dr Lenihan also stated:

“They do not cover asset transactions; they do not cover real estate transactions, which are of increasing concern, especially for espionage purposes.”––[Official Report, National Security and Investment Public Bill Committee, Tuesday 24 November; c. 35, Q36.]

I note that there has been a lot of concern in the United States more recently about real estate purchases in strategic locations, which may give rise to espionage or other national security concerns. As Dr Lenihan emphasises, existing databases do not cover such arrangements but might do in the future and might find it necessary to do so in the future. Under those circumstances, new information could well come to light.

Dr Lenihan also gave an interesting example—this is not strictly in line with our considerations today—of how information might come to light in a way not easily anticipated by those doing the initial call-in notice and trigger event. She referred to the purchase in the United States of a US cloud computing company, 3Leaf, which had gone bankrupt. Huawei—as it happened—quietly bought up the assets, employees and patents of that bankrupt company. That was not noticed at the time by the Committee on Foreign Investment in the United States regulators, because they did not pay attention to bankrupt companies, as opposed companies that continued to operate. That went quietly unnoticed, uncommented and unactioned until, Dr Lenihan informed us, a Government staffer happened to notice on his LinkedIn account that someone he thought had been partially running 3Leaf was listed as a consultant for 3Leaf for Huawei. He thought to himself, “How can this be?” Only through his attention and reporting back was that acquisition unravelled in the United States. No one was providing malicious information or seeking to mislead at the time. It was just that new information came to light, in that instance through surprising mechanisms. However, an important issue came before regulators and the security services. That emphasises that clause 22, important though it is, does not cover those sorts of circumstances and eventualities.

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[Stephen Kinnock]

Could the Minister say a little more about what the problem is with not having the Minister’s or the Secretary of State’s hands tied? Our amendment simply says that if information comes to light that creates cause for concern, the Secretary of State may, if he or she so wishes, look into it again. It is not an obligation; it simply makes sure that the option is there.

[Nadhim Zahawi]

I was going to address that at the end of my remarks, but I will touch on it briefly and hopefully reiterate it at the end. It is about certainty and proportionality. Everything we are doing by legislating in this way has an impact on businesses and the certainty of attracting investment and growing, as the shadow Minister, the hon. Member for Newcastle upon Tyne Central, reminded us in her opening speech.

As I was saying, a draft of the statement was published alongside the Bill. Following commencement, if parties involved in trigger events are concerned about them being called in, they will be able to remove any doubt about this by notifying the Secretary of State of their event. They will then be entitled to receive a quick and binding decision on whether the Secretary of State will call in the event.

I will turn briefly to amendment 10, which seeks to extend the Secretary of State’s power to issue a call-in notice in respect of a trigger event that has previously been called in when no new material information becomes available within five years of the trigger event. After a trigger event is called in, the Secretary of State has—