Clause 7 - Qualifying entities and assets

National Security and Investment Bill – in a Public Bill Committee at 4:15 pm on 1st December 2020.

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Question proposed, That the clause stand part of the Bill.

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

Clause 7 provides the definitions of “qualifying entities” and “qualifying assets” within the scope of the Bill, where, if they are subject to an acquisition of control that raises national security risks, the Secretary of State may take action. The Government have deliberately adopted a broad definition of “qualifying entities” to ensure that we can protect national security, regardless of the form of the legal structure of an entity that is being acquired in a trigger event.

Entities can be established or restructured in different forms including, for example, companies, limited liability partnerships and unincorporated associations. The clause includes an indicative, and non-exhaustive, list of the entities in scope. However, “individuals” are explicitly excluded. We expect most trigger events to concern companies, but we must also ensure that hostile actors cannot undermine or bypass the new regime through an entity being structured in such a way as to avoid scrutiny. It is therefore right that the clause provides for a broad definition of an “entity”.

Equally, from time to time, there may be cases that concern the acquisition of control over non-business entities such as trade bodies or industry groups that the Government none the less need to be able to scrutinise. The clause also permits the Secretary of State to scrutinise acquisitions relating to non-UK entities, if the entity carries on activities in the UK or provides goods or services to persons in the UK. As I am sure hon. Members will acknowledge, the cross-border nature of trade and supply chains in today’s world means that conduct abroad may impact national security here. For instance, goods that are critical to the defence of the realm may be supplied from abroad. If those goods were to be interfered with, that could harm our national security.

Finally, the clause provides a list of the types of assets in scope. This consists of land; tangible—or in Scotland, corporeal—movable property; and ideas, information or techniques that have industrial, commercial or other economic value. Again, qualifying assets include land and movable property situated outside of the UK or the territorial sea, or ideas, information or techniques, but only if the asset is used in connection with activities taking place in the UK or the supply of goods or services to persons in the UK. The Government expect the Secretary of State to intervene in acquisitions of control over assets exceedingly rarely, but it is right for the Secretary of State to be able to scrutinise trigger events involving single sensitive assets, to avoid this becoming an avenue targeted by our adversaries.

Taken together, the definitions provide the Secretary of State with the ability to scrutinise the vast majority of acquisitions related to entities and assets that may raise concern if the acquirer is a hostile party. I hope that hon. Members will agree that this approach is reasonable and proportionate, and one that will support the Government in addressing national security risks facing our country.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.