Clause 11 - Exceptions relating to control of assets

National Security and Investment Bill – in a Public Bill Committee at 11:30 am on 3rd 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 11 is intended to provide an exemption for certain asset acquisitions, which would otherwise be trigger events. The power to call in acquisitions of control over qualifying assets, as defined in clauses 7 and 9, will significantly expand the Government’s ability to protect our national security.

The clause ensures that these new powers will not extend to certain acquisitions made by individuals for purposes that are wholly or mainly outside the individual’s trade, business or craft. The Government do not believe, for example, that it would be right for the Secretary of State to be able to intervene in consumer purchases. Given their nature, such acquisitions cannot reasonably be expected to give rise to national security risks.

Moreover, a regime which could apply to such circumstances would quickly become impractical and could result in significant numbers of additional notifications for no national security gain whatsoever. As such, this clause explicitly limits the types of assets that the Secretary of State may scrutinise in line with the Government’s intention that the regime will primarily concern control of entities and only extend to assets as a precautionary backstop.

It would mean, for example, that sales of software products to consumers by a software company would not be caught by the regime, but—this is important—it would not prevent a transaction involving the software company selling the underlying code base supporting that software to a buyer acting in a professional capacity from the possibility of call-in under the regime, where that might give rise to a national security risk.

The Government have also carefully considered whether certain types of assets should remain outside this exemption clause. We have concluded that all assets that are either land or subject to export controls, as my hon. Friend the Member for Wyre Forest regularly reminds us, should not fall within the exemption. This approach, I believe, reflected in the clause, recognises the unique nature of the risks posed by land acquisitions and proximity risk to certain UK sites, as well as the particularly sensitive nature of items on the export control lists. The Government consider that this approach is proportionate and appropriately exempts acquisitions that do not give rise to national security risks, while ensuring flexibility exists to scrutinise hostile actors directly targeting the acquisition of sensitive assets.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

I note that subsection (2) lists some exceptions, many of which are framed in terms of regulations of the European Parliament and the European Council. Let me ask the Minister two things. First, why is that the case, given that we will be completely out of the European Union in a matter of days? Secondly, and perhaps more importantly, if the European Parliament and the European Council were to amend those regulations, do the Government intend to amend this legislation to keep in step with what is happening in the rest of the European Union?

Question put and agree to.

Clause 11 accordingly ordered to stand part of the Bill.