Clause 2 - Further provision about call-in notices

National Security and Investment Bill – in a Public Bill Committee at 11:00 am on 1st December 2020.

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Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy) 11:00 am, 1st December 2020

I beg to move amendment 10, in clause 2, page 2, line 12, leave out subsection (1) and insert—

“(1) No more than one call-in notice may be given in relation to each trigger event, unless material new information becomes available within five years of the initial trigger event.”.

This amendment would enable the Secretary of State to issue multiple call-in notices if material new information becomes available.

Photo of Derek Twigg Derek Twigg Labour, Halton

With this it will be convenient to discuss clause stand part.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

Rather late in the day, I will say what a pleasure it is to serve under your chairmanship, Mr Twigg. I am sure you are aware that we share an anniversary: we are among the few surviving Members of the 1997 intake—those happy days when Labour used to win elections. We came to this House in 1997 and have been here ever since.

The reason I emphasise that fact, Mr Twigg, is to underline just how many Bills you and I have sat on, led for the Labour party or been involved in over the years. I am unable to tot up the exact number but it is a considerable, and it is a great pleasure to be sitting on this Bill Committee. I have served on a large number of Bill Committees of late, the most recent being the Environment Bill Committee, which has just finished its deliberations. I was unable to be present for this Bill Committee’s witness sessions because I was finishing off the Environment Bill—well, trying to strengthen it rather than finish it off. I am grateful to my colleagues for asking a series of pertinent questions in the evidence sessions. We are all grateful for that and, indeed, to the expert witnesses.

I want to cite the amendment in the context both of the various Bills that have come through the House and of the witness sessions, which I have assiduously read, even though I was not present for them. I hope the Minister will accept that the amendment is entirely in line with the constructive way in which I hope we have gone about our business in this Committee. The amendment, which I shall unpack in a moment, strengthens not only the Bill but the ability of Ministers to do their job properly as far as its provisions are concerned. That is its intention.

The amendment seeks to replace subsection (1), which is a bald sentence:

“No more than one call-in notice may be given in relation to each trigger event.”

My time with Bills has taught me to look carefully through all of the different clauses to find the qualification. In my experience, tucked away somewhere in most Bills is a qualification. Sometimes it is about when a clause is to be implemented, sometimes it is a definition of the wording, and sometimes it is an additional provision that mediates the clause to which our attention was first drawn.

This clause has no such qualification. It is an absolutely straightforward statement. We have discussed trigger events to some extent in our evidence sessions, and they are elucidated and qualified in further clauses, as are call-in notices, but the fact that we get only one call-in notice per trigger event seems to be the central essence of this subsection. Our amendment seeks to put a question mark against whether that bald statement about the fact that we get one go per trigger event is the wisest formulation to have in the Bill.

The amendment makes a modest change to the clause, stating:

“No more than one call-in notice may be given in relation to each trigger event,” and adding,

“unless material new information becomes available within five years of the initial trigger event.”

Photo of James Wild James Wild Conservative, North West Norfolk

From his experience of many Bills, I wonder what the hon. Gentleman made of the provisions in clause 22 on false or misleading information that has been given to the Secretary of State, whereby if he has been given that information he can change a decision he has previously given and can therefore issue another call-in notice.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

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.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

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.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

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.

The amendment would close a loophole. If information comes to light that the Government have honestly sought and that has not been dishonestly concealed, there appears to be little, according to line 12, that the Government can do about it. They cannot pursue a new call-in notice. According to line 12, it is a done deal—the trigger event has been and gone and cannot be revived.

The amendment would not provide an open-ended opportunity for someone many years later to find something out. Companies would not be in the position of forever facing the possibility of prejudicial information coming out. We have included a sunset provision on the new information becoming available. The amendment states that it should be

“within five years of the initial trigger event.”

That marries with arrangements elsewhere in the Bill for five-year limits.

It is important to make the change, particularly because the impact assessment acknowledges that there is a struggle to access appropriate data on the relevant transactions. It is not that anyone is doing their job badly or concealing anything, but it is possible that information is not accessible at the time of a trigger event.

I hope that the Minister will accept the amendment, and certainly the spirit in which it is intended. Although we want to make it clear that it is important that, as often as possible, the trigger event and the associated call-in are clear, resolved and put to bed thereafter, there are circumstances where that is not possible, and the Minister should have the ability to rectify that problem and act in the best interests of national security and of fair play for the companies involved.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care 11:15 am, 1st December 2020

I hope that the hon. Member for Southampton, Test and other hon. Members will permit me, in responding to the hon. Gentleman’s points, to begin by considering stand part and by laying out the Government’s broad rationale before turning to the substance of the amendment.

The clause contains further provisions about the use of the call-in power. It is vital that the Secretary of State is able to call in and scrutinise trigger events that have taken place. However, it is right that clear limits are placed on the call-in power to ensure that it is used in a proportionate manner—the whole point here is proportionality. The clause therefore prohibits a trigger event from being called in more than once. It also provides that the Secretary of State may issue a call-in notice only up to five years after a trigger event has taken place and no longer than six months after becoming aware of the trigger event.

The time limit of five years strikes the right balance between ensuring the Secretary of State has enough time to spot completed trigger events that may pose a risk to national security. The hon. Gentleman cited evidence from Dr Lenihan on 3Leaf, which speaks more to the screening operation than the amendment. Of course, the Secretary of State also has to make sure that the risks to national security are balanced against avoiding undue uncertainty for the parties involved, which we all want to make sure we look after, and we have heard from colleagues about the challenges that small businesses face in building or rebuilding their business

For trigger events that take place before commencement but after the introduction of the Bill, the five-year time limit starts at commencement rather than from when the trigger event takes place. If the Secretary of State becomes aware of that trigger event before commencement, the six-month time limit also starts at commencement. The ability to call in trigger events that take place before the commencement of the call-in power but after the introduction of the Bill will help to safeguard against hostile actors rushing through sensitive acquisitions to avoid the new regime, now that we have set out our main areas of interest.

The five-year time limit does not apply if the Secretary of State has been given false or misleading information, as my hon. Friend James Wild reminded us, or in relation to notifiable acquisitions that have been completed without prior approval.

In all this, we will seek to provide as much transparency and predictability as possible. The Secretary of State may not, therefore, exercise the power until under, clause 3, a statement is published setting out how.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

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.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

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—

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.