Amendment 22

National Security and Investment Bill - Report – in the House of Lords at 4:45 pm on 15th April 2021.

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Lord Callanan:

Moved by Lord Callanan

22: Clause 53, page 33, line 15, after “if” insert “a sender or”Member’s explanatory statementThis amendment clarifies that regulations under Clause 53 may make provision in respect of non-individuals required to give notices and any other documents under the Bill, as well as those in receipt of such documents.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, I rise to move Amendment 22 in my name, but with the permission of the House I will also speak to Amendments 23, 25, 27 and 32. I shall begin with Amendments 25, 27 and 32.

A strong theme of debate in Grand Committee, and in the other place, has been whether there is sufficient accountability in the regime—in particular, through the reporting requirements in the annual report. In general, as the House will be aware, the Government’s position has been that, as the Secretary of State may add anything judged appropriate to the annual report, there is no need to amend the Bill to include additional reporting requirements. The Government have, however, listened to proposals, including those made through amendments tabled in Grand Committee, and seek to add additional reporting requirements where it is judged that they would provide significant additional value for parliamentarians and the general public.

Amendment 32, in my name, will therefore increase the level of detail provided on final orders in the annual report, so that in addition to their total number being published, the number of orders varied and revoked will also be published. We recognise that final orders will be significant and reflective of government intervention following the call-in of an acquisition. There will already be a duty on the Secretary of State, in Clause 29, to publish notice of the fact that a final order has been made, varied or revoked. It is therefore appropriate that we provide information on the total number of orders varied and the total number of orders revoked. I thank, in particular, my noble friend Lord Lansley for this proposal, and for our discussions on how to improve this Bill prior to, during, and following Grand Committee. His counsel has been much appreciated.

Amendments 25 and 27 address the concern that the requirements on the Secretary of State to decide whether to accept or reject a mandatory notice or voluntary notice are insufficiently specific. As it stands, the Secretary of State must decide

“As soon as reasonably practicable” after receiving a notification, and thereafter notify parties of his decision as soon as practicable. I set out during Grand Committee that the Secretary of State would strive to ensure that decisions to accept or reject notifications were made quickly. In many cases “as soon as reasonably practicable” is expected to be a very short period indeed, but we do not consider it appropriate to limit the period to a specific number of days, so as to provide scope for flexibility where required. In place of that, the Government propose reporting on the average number of days taken to respond to voluntary notices and mandatory notices. This additional detail will, we believe, ensure that parliamentarians and the wider public will be able to judge whether the Government’s expectation that this will be a matter of hours or days is proving correct year on year. Of course, these changes do not preclude the Secretary of State from going further by providing more information than required, where the information provides value to Parliament, and where, in particular, it provides reassurance where there is no time limit expressed in terms of a number of days.

Amendments 22 and 23 are minor amendments. Noble Lords will be aware that Clause 53 provides for regulations to be made setting out the procedure for service of documents under the Bill. These changes are intended to put the scope of the power beyond doubt. A change is proposed in subsection (2)(g), so that it is clear that the regulations may specify what must, or may, be done in relation to service of documents by senders outside the United Kingdom. A corresponding change is then made to paragraph (e), to avoid any doubt that the regulations will be able to set out what must, or may, be done where a sender is not an individual.

I hope that I have made clear the principles on which the Government are approaching the amendments in this group. I beg to move.

Photo of Baroness Noakes Baroness Noakes Conservative

My Lords, I have a number of amendments in this group, all of which would amend the annual reporting requirements. Some of them overlap with amendments that my noble friend has just spoken to. In particular, my Amendments 26 and 28 are similar to his Amendments 25 and 27. The difference is that my noble friend’s amendments ask for the average time to be given, whereas I ask for both the average and the maximum, because averages can be very misleading. However, we shall have some data, and I am sure that those can be used as a springboard for further examination of BEIS Ministers and officials, if either House wished to do that, so I shall not pursue those amendments.

Of my other amendments, Amendment 29 asks for differentiation between call-in notices issued for mandatory and for voluntary notifications. That is not given, and it is quite an important bit of information, which would be useful to enable us to see how important that mandatory notification route turns out to be. The other thing I have asked for is a focus on timing—the time between issuing the call-in notice and getting to the end of the process and giving the final notifications and the final orders. I continue to believe that those areas would be important for keeping an eye on how well the process is operating, especially as there are very long times available once the call-in notice is issued. Again, I am sure that questions can be tabled and Ministers can be interrogated in the usual way, so I am not worried about that. I am glad that my noble friend has moved towards more transparency, although he has perhaps not gone quite as far as I would have preferred.

Although I have not added my name to the amendment in the name of the noble Lord, Lord Grantchester, I think it is important for annual reporting to keep a focus on the resources dedicated to this, because the timing performance will be in part a reflection of whether adequate resources have been dedicated. Of course, giving numbers never gives an idea of the quality of resources, so that can only ever be an imperfect picture, but it is important for Parliament to have an opportunity to review and keep in focus the resources dedicated to the ISU processes. That is where the biggest impact is likely to be felt by businesses as they come up against the system. Well done for bringing in some transparency; a bit more would have been better.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe Chair, Built Environment Committee, Chair, Built Environment Committee

My Lords, as I noted earlier, the administrative arrangements for consideration of deals referred to BEIS are incredibly important. This is a good Bill, but it must not be undermined by poor implementation, or UK plc will be cast in a bad light. As others have said in Committee, delays create cost and uncertainty, which can jeopardise beneficial takeovers or combinations. Deals in the 17 categories must be reviewed, but this must be done professionally and quickly.

I therefore welcome the Government’s amendments, and thank my noble friend the Minister, but I do not think they go far enough. At the least, I feel that he should also accept some or all of Amendments 28 to 31, tabled by my noble friend Lady Noakes—either in the Bill at Third Reading or through a commitment to add to guidance.

I have years of experience of being regulated, by the CMA and other anti-trust and investment authorities round the world, mainly in my former retail role. Good people, and good regulators, are both thorough—I know that has been a cause for concern right across the House—and timely. I can tell noble Lords that authorities use the set timeframes as a defence, and almost never, in my experience, report or publish ahead of the deadlines. So the timelines need to be clear, and, as argued by my noble friends Lady Noakes and Lord Lansley, and the noble Lord, Lord Fox, in the debate on Amendment 11, they need to be tight. They could perhaps also be shorter for smaller or struggling companies, which have more to lose. It would be helpful if my noble friend could have a look at that, if it is not already envisaged that we will take special care with those categories.

It is a worry that we are running out of time for the Bill in this legislative Session. As I have said, I supported the Bill at the start, and I am keen to get it on to the statute book, as I know the Government are as well.

In the light of discussion, I have four questions that probably go slightly wider than the annual report. Perhaps I could ask the Minister to respond either today or before Third Reading. My first question is whether in principle the Minister has the ability to consult on sensible arrangements on timeliness and timelines and put them into statutory guidance or whether a new power is needed, which is rather suggested by my noble friend Lord Leigh’s Amendment 36, which we will come on to.

I would also like to be crystal clear on the maximum timescales normally envisaged for clearance, both for the mandatory notifications, which is my second question, and for the voluntary notifications, which is my third question, which my noble friend Lady Noakes has said we need to put into the report as well. Operators will seek clarity even if they are not required to submit proposals for clearance ex ante.

I would very much appreciate an assurance that material on timelines could in fact be added as a guidance product—that is an unfortunate designation; in my day we used to call it guidance. In his very helpful letter yesterday, the Minister set out his plans for a number of guidance products that would be added. It struck me that this is possibly a way forward, and that it would be possible to give a little more of the assurance that business is seeking in the guidance that is now envisaged by the department. So my fourth question is: is that right?

Photo of Lord Lansley Lord Lansley Conservative 5:00 pm, 15th April 2021

I can be brief. I acknowledge with thanks that the Minister has brought forward government amendments that respond both to my Amendment 81 in Committee, about the number of orders varied or revoked and, in part, to what the noble Lord, Lord Grantchester, had to say on Amendment 80 in Committee, including on the time taken to decide whether to accept or reject mandatory and voluntary notifications. I will not rehearse what my noble friend Lady Noakes had to say. Knowing more about the time taken, in addition to what is already intended to be in the annual report, will certainly give us reassurance about these administrative processes, which I think will be very important—especially at the outset, bearing in mind that we start with already potentially five months’ worth of relevant transactions that are within the scope of the regime but the legislation has not yet entered into force. Operating rapidly in relation to all those potential notifiable transactions will be really important, even in the first annual report.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Digital)

My Lords, I shall speak to the amendments tabled by the Minister, and I thank him for doing so. I shall also speak to those tabled by the noble Baroness, Lady Noakes, and Amendment 34, tabled by the noble Lord, Lord Grantchester, which I have signed and strongly support. The noble Lord, Lord Lansley, has highlighted the extra importance of transparency in the annual report in these circumstances where we already no doubt have a backlog of potential action.

I thank the Minister for responding to concerns in Committee and in the meantime and for taking us towards greater transparency. While the noble Baroness did not use the expression “half a loaf”, since it is perhaps three-quarters of a loaf, it goes some way towards giving us a greater understanding of how effective the regime is, particularly given the Government’s desire to keep these rather uncertain timescales that we were talking about in Committee.

In Committee, I hoped to persuade the Government to undertake a regular review of whether the Act was achieving its aims. It seems good practice to make sure that we have the right balance between the investment climate and national security concerns. The Government were unpersuaded by that, but I hope they will take on board the contents of the amendment by the noble Lord, Lord Grantchester, particularly new paragraph (p),

“the impact on levels of foreign investment in the United Kingdom brought about under this Act”, which would be inserted as a requirement in the annual report. Currently, the annual report does not go far enough. Surely, seen in the round, one of the most important factors is the impact of the Bill on foreign investment. Is this not a key indicator that should be included in any annual report? How can we judge how the balance of the Bill’s requirements are working? Is foreign direct investment not sufficiently important to be included in the annual report? I hope that the Minister can perhaps explain, if there is no explicit reference to it, why not, and if not, whether there will be a description of how the regime is operating.

Other aspects of the amendment from the noble Lord, Lord Grantchester, are extremely important. The noble Baroness, Lady Noakes, mentioned the average staff resource allocated to the operation of reviews and so on. That resource aspect is going to be very important so that we can see transparently what resource is being devoted. Then there is the whole aspect of SMEs, which potentially could be impacted very heavily. The noble Baroness, Lady Neville-Rolfe, talked about this. I think that is a very important aspect too.

The way that the regime in the Bill impacts is extremely important. The Minister has given us some transparency, but I very much hope that he will accede to further requirements that could be included in the annual report really without very much difficulty.

Photo of Lord Grantchester Lord Grantchester Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change), Shadow Minister (Environment, Food and Rural Affairs), Shadow Spokesperson (Business, Energy and Industrial Strategy)

I welcome the lead amendment in this group from the Government, providing greater clarity to the Clause 53 procedure for service. However, the bulk of the amendments in this group concern Clause 61, on the annual report. I thank all noble Lords who have contributed to this debate.

In commerce, I have always championed annual reports as a strategic publicity document for an organisation, displaying how it is performing, how effective it has been, what results and achievements it has attained and what wider societal responsibilities it has performed. It can be far more than a dry, lumpy statutory document that has to be produced and is a chore to be complied with. I am sure it should be the same for government departments and public agencies.

I am grateful, therefore, for the dialogue since Committee with the Minister and his team regarding this issue. I am very glad that the Government have looked again at Clause 61 and at the material that could be provided in the annual report of this new unit and its operation. I am grateful to the noble Baroness, Lady Noakes, for looking at this and extending the information to be provided to cover both mandatory notifications as well as voluntary notices.

The noble Baroness has also added many more aspects that would provide greater visibility for the activities of the ISU. It is important that the Government are transparent about these areas so businesses can see the impact on their activities and compare experiences. Parliament and the public can monitor the work of the unit and determine the value to national security activities and how far legitimate businesses are being affected. These amendments were all supported by the UK BioIndustry Association. I thank it for the briefings it has sent throughout the Bill.

However, we still believe that there is more that the Government could do to assist the understanding of this new regime. I thank the noble Lord, Lord Clement-Jones, for adding his name to my Amendment 34. Greater transparency could still be given on the resources allocated to the new unit, the extent to which small and medium-sized enterprises are called in under the regime and the Bill’s impact on foreign investment. This is about requiring greater accountability from the department on the unit’s service standards.

The business community still remains somewhat nervous concerning the impacts on it as a result of the Bill. Throughout its passage, we have sought to champion clarity and support for SMEs and innovative start-ups, which are the engine of growth in the economy, create many new jobs and enhance prosperity. We are keen to foster a business environment in which SMEs can thrive.

It would be beneficial for the Government to report on the unit’s work with SMEs in the annual report. This can only be helpful in providing detail and reassurances to SMEs on the operation of the unit and its impacts on them. I would be very grateful if the Minister could provide reassurances that his department will embrace the annual report in a positive manner and provide as wide a range of information as possible.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, first, I thank all noble Lords who spoke in this debate, particularly my noble friend Lady Noakes—for her Amendments 26, 28, 29, 30 and 31—and the noble Lords, Lord Grantchester and Lord Clement-Jones, for Amendment 34.

I also thank my noble friend Lady Neville-Rolfe, to whom I will reply first. The Government have written on plans for a range of guidance, as my noble friend said. This is intended to aid parties in understanding and complying with the Bill. Timings and matters of requirements are set out in the legislation; they were consulted on, and of course they cannot be added to in guidance. As in the past, the Constitution Committee advised us quite strongly against legislating through guidance. Of course, we remain open to further proposals for guidance that assists in understanding and complying with the basic provisions in the Bill.

I move on to Amendments 26 and 28, which seek to require the Secretary of State to report on the “maximum and average time” taken to process mandatory and voluntary notices. These amendments would also require the Secretary of State to report on the “maximum and average time” taken between a notice being accepted and a call-in notice or notification of no further action being given or issued. Clauses 14 and 18 already set out that, if a notification is accepted, the Secretary of State has up to 30 working days to either give a call-in notice or notify each relevant person that no further action will be taken under the Bill.

I outlined in Grand Committee that these timings are a maximum, not a target. I have also set out the principles by which the Government consider it appropriate to specifically amend the Bill to require additional reporting, rather than to judge over time whether it would be beneficial to publish the information. It is already clear in the Bill that the maximum time that can be taken to make a call-in decision is 30 working days.

On the point of including average times, as I hope noble Lords will appreciate, each case will turn on its own facts. Therefore, reporting an average time without explaining the complexities of every individual case would be meaningless, in my view. For example, there may be a low average for some response times where particularly straightforward cases were prevalent—this may be held up as an efficient case review. There may be another period where particularly complex cases are dealt with exceptionally efficiently but none the less slightly more slowly. What would a comparison of the averages without further details on the cases provide? To my mind, it would provide nothing but a misunderstanding.

Amendment 29 seeks to require the Secretary of State to separately report on the number of call-in notices given in response to mandatory and voluntary notifications. I reassure the noble Baroness that the Bill already allows for the Secretary of State to do this in the future if deemed useful. Clause 61 sets out minimum reporting requirements that the Secretary of State must meet in the annual report.

Amendments 30 and 31 seek to require the Secretary of State to report on the “maximum and average time” taken between a call-in notice being issued and the making of a final order as well as the “maximum and average time” taken between a call-in notice being issued and a final notification that no further action will be taken under the Bill. In my view, the same argument applies in response to these amendments.

Finally, Amendment 34 seeks to require the Secretary of State to report the resource allocated to the investment security unit and the extent to which small and medium-sized enterprises are being called in under the new regime, and to review the impact of the NSI regime on foreign investment. It goes without saying that the Government remain the strongest supporter of SMEs and have sought to provide an easily navigable regime for businesses of all sizes to interact with. In fact, one of the tests of our guidance—I set out the details of it in my letter to noble Lords—continues to be whether unadvised owners of small businesses can understand the regime and navigate the requirements just using our guidance. I reassure noble Lords that it is hard-wired into how we think about the future delivery of this regime.

On the matter of resourcing, I am afraid that our answer and argument remain the same: resourcing is an internal matter for the BEIS Permanent Secretary, including average staff numbers. The Government are of course committed to ensuring that this regime is well resourced.

Furthermore, I am aware from the Grand Committee that the noble Lord, Lord Clement-Jones, in particular is concerned about the NSI regime “unduly deterring foreign investment”. Our regime is indeed in line with many of our allies’ investment screening regimes, therefore we believe that investors will be well used to navigating this kind of regulation.

I am therefore unable to accept the amendments in this group other than those in my name. I hope that noble Lords will feel able not to move theirs and to support those that the Government have brought forward.

Amendment 22 agreed.

Amendment 23 agreed.

Photo of Baroness Henig Baroness Henig Deputy Chairman of Committees, Deputy Speaker (Lords) 5:15 pm, 15th April 2021

We now come to the group beginning with Amendment 24. Anyone wishing to press this or anything else in this group to a Division must make that clear in debate.

Clause 61: Annual report