Key Facts

• Chi Onwurah moves a new clause in the National Security and Investment Bill.
• The clause specifies factors such as supply chain risks, economic security impacts, defence capabilities, data transfer concerns, acquirer characteristics, compliance history, international interests, and illicit activities.
• The use of 'may' instead of 'shall' is deliberate to provide guidance without prescription.
• Dr Ashley Lenihan from the London School of Economics testified on clarity in national security regulations.
• The US Foreign Investment Risk Review Modernization Act 2018 considers six factors for national security assessments: countries of specific concern, critical infrastructure, history of compliance with law, control over US industries affecting national security requirements, personally identifiable information, and new cyber-security vulnerabilities.
• Onwurah's proposed clause states that when assessing a risk to national security, the Secretary of State may have regard to factors including those specified in her proposal.
• The new clause aims to balance flexibility for the Secretary of State with clarity for businesses.
• Paragraph (a) protects supply chains and sensitive sites from disruption, espionage, and inappropriate leverage.
• Paragraphs (b) and (c) look strategically at national security in relation to economic security.
• Paragraph (d) focuses on threats posed by modern technology, including artificial intelligence.
• Paragraph (e) recognises that national security risks are more likely when acquirers owe allegiance to hostile states.
• The new clause aims to guide the Secretary of State's considerations for national security without providing a prescriptive definition.
• Sir Richard Dearlove supports having a critical national infrastructure definition in the Bill.
• Canadian guidelines list national infrastructure security as an explicit factor in assessments.
• Chi Onwurah reminds herself to mention either the impact assessment or the consultation response.
• The consultation response gives an example of how the bill could prevent hostile parties from owning a company responsible for critical infrastructure failures like Heathrow terminal 5 shutdowns.
• There is concern about defining national security in such a way that it limits judicial interpretation.
• The new clause seeks to create a non-exhaustive list of factors that the Secretary of State may take into account when considering national security risks.
• The Government believes including such a list could cause confusion rather than clarity.
• A draft statement was published on introduction of the Bill, detailing what the Secretary of State is likely to be interested in regarding national security risks.
• New Clause 2 would require a report on the impact of the Bill on SMEs and early-stage ventures.
• The Secretary of State must lay before Parliament within 18 months after Royal Assent.
• Guidance for SMEs and early-stage ventures to comply with provisions is also required.
• New clause 2 requests reporting back to Parliament on the bill's impact on SMEs and early-stage ventures.
• New clause 3 provides a six-month grace period for small businesses to avoid criminal prosecution if they inadvertently violate the law due to ignorance or lack of experience.
• The clauses aim to protect national security while avoiding unnecessary barriers for small businesses.
• The National Security and Investment Bill is expected to come into force during the period when small businesses are trying to recover.
• New clause 2 aims to support SMEs by allowing them to proceed with certain transactions for a short period.
• The Government argues that creating a grace period could be exploited by hostile actors seeking to undermine national security.
• The Opposition's new clause 5 aims to require the Secretary of State to maintain a list of high- and low-risk acquirers.
• China is highlighted as a significant example of a potential hostile state, with instances of Chinese companies acquiring Swedish firms noted.
• Evidence indicates that origin and state of origin should be important drivers in national security screening processes.
• Chinese investors are particularly interested in emerging biotech, internet of things, artificial intelligence, and agri-tech companies in Cambridge and Oxford.
• A Palo Alto-based venture capital firm backed by the Chinese Government had dozens of US start-ups in its portfolio as of November 2020.
• The number of venture capital investments in US start-ups featuring at least one Chinese investor increased from 20 to 151 between 2010 and 2020.
• The Bill requires the Secretary of State to publish a statement about how call-in powers will be exercised.
• Clause 6 enables the Secretary of State to make regulations to exempt acquirers from mandatory notification on the basis of their characteristics.
• National security is defined as specifically protecting the nation rather than broader national interests.
• In 2019, 90% of large tech investment rounds included US or Asian investors.
• Venture capital funds often do not publish the names of limited partners.
• The amendment seeks to give the Secretary of State additional regulatory power.
• The new clause would enable the Secretary of State to introduce regulations covering circumstances where a person acquires access to, or the right to access, sensitive national security information.
• The Bill already includes provisions that cover acquisitions of control over qualifying assets which include ideas, information, or techniques with industrial, commercial, or other economic value.
• Concerns are raised about potential backlogs and unnecessary intervention in cases not directly related to investment control.
• The new clause would provide annual reports to the Intelligence and Security Committee.
• It covers details such as jurisdictions, number of state-owned entities, risks posed by transactions, and targeted expertise.
• Professor Ciaran Martin supports broad powers with accountability mechanisms.
• The Minister proposes an annual report under clause 61 which provides public and parliamentary scrutiny.
• The Intelligence and Security Committee's remit does not cover BEIS work, limiting its ability to scrutinise sensitive information.
• Chi Onwurah puts her proposal for a new clause to a Division but faces rejection.