New Clause 7 - Annual report to the Intelligence and Security Committee

National Security and Investment Bill – in a Public Bill Committee at 4:15 pm on 10th December 2020.

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“(1) The Secretary of State must, in relation to each relevant period –

(a) prepare a report in accordance with this section, and

(b) provide a copy of it to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.

(2) Each report must provide, in respect of mandatory and voluntary notifications, trigger events called-in, and final orders given, details of—

(c) the jurisdiction of the acquirer and its incorporation;

(d) the number of state-owned entities and details of states of such entities;

(e) the nature of national security risks posed in transactions for which there were final orders;

(f) details of particular technological or sectoral expertise that were being targeted; and

(g) any other information the Secretary of State may deem instructive on the nature of national security threats uncovered through reviews undertaken under this Act.”.—

This new clause would provide the Intelligence and Security Committee with information about powers exercised under this Act, allowing closer scrutiny and monitoring.

Brought up, and read the First time.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I beg to move, That the clause be read a Second time.

It is with some regret that I rise to move new clause 7, because it is the last new clause we propose to the Bill. It is a Christmas present to the Minister. Things have certainly been interesting since we began our line-by-line scrutiny. With your leave, Sir Graham, I will take this opportunity to thank all those involved in drafting the Bill, as well as the Clerks, who have worked so hard and played such an important role in helping to draft amendments and provide support to all members of the Committee. I also thank you, Sir Graham, for chairing it so admirably.

We have learned a great deal over the last couple of weeks. I have learned just about everybody’s constituency

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I will not take up the opportunity of a test. We have all learned a lot about air flows—in this room, at any rate—as we seek to maintain some heat. What we have not learned, though, is how the Minister believes the Bill can be improved. All our line-by-line scrutiny has yielded many assurances, compliments on our intention and, indeed, some letters, for which I am grateful, but no acceptance and not even the commitment to go and think about some of our constructive proposals, amendments and new clauses. I urge him to consider this new clause as an opportunity to show that he truly believes, as he said earlier, in the skills, experience and expertise of the Committee by reflecting on the potential for improvement.

The new clause returns to an earlier theme and would require—the Minister will be pleased to note that that is a “must”, not a “may”—an annual report to be prepared by the Secretary of State

“in accordance with this section” and a copy of it to be provided

“to the Intelligence and Security Committee of Parliament as soon as is practicable after the end of that period.”

It sets out what should be in that report, such as the events, the number of entities, the nature of the risks and

“details of particular technological or sectoral expertise” and so on. It would provide the Intelligence and Security Committee with information about the powers exercised under the Bill and allow closer scrutiny and monitoring.

The new clause reflects how we have consistently supported the need for the Bill. Our approach to the security threats we face is to push for change specifically to allow broad powers of intervention, but for those using those broad powers to be held to account by Parliament and through transparency. Our international allies do exactly that. The US requires CFIUS to produce a non-classified annual report for the public, alongside a classified report for certain members of Congress, to provide security detail to them, allowing congressional scrutiny while retaining sensitivity of information.

As I think the Minister acknowledges, the Government have been late in following where international allies and the Opposition have led with calls to better protect our national security, so he must not fall behind in following our calls for accountability and transparency. That is critical not just to ensure our security and wider parliamentary understanding of the nature of the threats we face but for accountability.

The Secretary of State is to be given sweeping powers. For the last time, I should say that we will go from 12 reviews in 18 years—less than one a year—to 1,830 notifications a year, which is more than five every single day. The Secretary of State will be able to intervene in every single such private transaction. It will be hard to bring claims against national security concerns in court, where the judiciary will understandably find it difficult to define national security against the Government’s definition. In that context, it is important to bring expert parliamentary scrutiny to the Government’s decisions. I do hope the Minister will reflect on that. Alongside a public report, the new clause would require the Government to publish an annual security report to the Intelligence and Security Committee so that we have greater accountability without compromising security.

I will say a few words about the evidence base and the reason for tabling the amendment. Professor Ciaran Martin said:

“I think that the powers should be fairly broad. I think there should be accountability and transparency mechanisms, so that there is assurance that they are being fairly and sparingly applied.”––[Official Report, National Security and Investment Public Bill Committee, 26 November 2020; c. 81, Q96.]

My understanding is that the only accountability and transparency mechanism is the public report, which may be published, and the prospect of judicial review, neither of which provide for expert scrutiny on the security issues.

I also ask the Minister to reflect on Second Reading, where member after member of the Intelligence and Security Committee stood up to say that they felt that their expertise would be useful and helpful in the working of the Bill.

Photo of James Wild James Wild Conservative, North West Norfolk

The hon. Lady said that the annual report “may” be published, but in clause 61 it “must” be laid before the House, so there is no question that the annual report will be published.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

The hon. Gentleman makes a good point. It must be published, but the details that it sets out are limited. The reporting on other information, as I think the Minister has said, is something that is intended but is not required. We have requested that several other pieces of information be published, but the Minister has said that they may be.

The hon. Member for North West Norfolk is absolutely right that there will be an annual report, but that is a public report that will provide only the limited information set out in clause 61(2). Obviously, it will not provide anything that might have an impact on national security. With regard to what is published in the final notifications, for example, that can be redacted to take out anything of commercial interest as well as of national security interest. There is no requirement to report on any aspect to do with national security. Given that the only report is a public report, that is understandable. That is why we are proposing that a secure sensitive report should also be published and shared with the Intelligence and Security Committee.

Tom Tugendhat, the Chair of the Foreign Affairs Committee said that

“there is a real role for Committees of this House in such processes and…the ability to subpoena both witnesses and papers would add not only depth to the Government’s investigation but protection to the Business Secretary who was forced to take the decision”.—[Official Report, 17 November 2020; Vol. 684, c. 238.]

A member of the Intelligence and Security Committee also said that

“we need mechanisms in place to ensure that that flexibility does not allow the Government too much scope.”—[Official Report, 17 November 2020; Vol. 684, c. 244.]

As I have already noted, CFIUS has an annual reporting requirement.

The Chair of the Intelligence and Security Committee, Dr Lewis, has written to you, Sir Graham, and the other Chair of this Committee to ask a number of questions that he did not feel had been had been adequately answered by the Bill or its supporting documentation, and to place his Committee at the disposal of this Committee. He writes that the ISC continues to have a very real interest in the Bill and would have liked to have been included in briefings on it, and he asks about the investment security unit.

To summarise, the Minister must welcome the expertise of the Intelligence and Security Committee. He would certainly be obliged to appear before the Intelligence and Security Committee, if requested to do so. Does he agree that placing an annual report before that Committee would aid business and BEIS confidence? I previously mentioned its potential conflicts of interest, and we spoke about its having access to the right kind of resources. Agreeing to this new clause and to the placing of a report with the Intelligence and Security Committee is in the interests of both the Bill and the better working of our national security.

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 4:30 pm, 10th December 2020

I am grateful to the shadow Minister for her contribution on new clause 7, which seeks to require the Secretary of State to provide an annual report to the Intelligence and Security Committee, including detailed information relating to mandatory and voluntary notifications, trigger events that were called in and final orders made. In particular, it seeks to require the Secretary of State to provide details of factors relevant to the assessment made by the regime, including the jurisdiction of the acquirer; the nature of national security risks posed in transactions where there were final orders; details of particular technological or sectoral expertise that were targeted; and other national security threats uncovered through reviews undertaken under the Bill.

I am pleased that esteemed members of the ISC are taking a continued and consistent interest, including in relation to their role in scrutinising the regime provided for by the Bill. The Committee will be aware that clause 61 requires the Secretary of State to prepare an annual report and to lay a copy before each House of Parliament. That clause provides for full parliamentary and public scrutiny of the detail of the regime, which we judge to be appropriate and which does not give rise to national security issues when published at an aggregate level. I reassure hon. Members that that annual report will include information on the sectors of the economy in which voluntary, mandatory and call-in notices were given. It will also give a sense of the areas of the economy where the greatest activity of national security concern is occurring.

We intend to follow the existing, appropriate Government procedures for reporting back to Parliament, including through responding to the Select Committee on Business, Energy and Industrial Strategy. The ISC’s remit is clearly defined by the Justice and Security Act 2013, together with the statutory memorandum of understanding. That remit does not extend to oversight of BEIS work. I am sure that the BEIS Committee will continue to do a sterling job of overseeing and scrutinising the Department’s overall work. I welcome and encourage the ISC’s security-specific expertise, which the hon. Lady referred to, and its review of the annual report when it is laid before Parliament.

For the reasons I have set out, I am not able to accept the new clause. I hope that hon. Lady will agree to withdraw it.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I thank the Minister for his response, but he did not address the issue scrutiny of sensitive aspects of how the Bill will work. I recognise that the ISC’s remit does not cover BEIS—that is the exact point of requiring such a report. As I think was discussed on Second Reading, the BEIS Committee will not scrutinise any sensitive information or information that is directly relevant to our national security. I am afraid that I cannot accept the Minister’s reasoning for his rejection of the new clause—namely, that it is effectively already covered by clause 61—so I will put it to a Division.

Division number 21 National Security and Investment Bill — New Clause 7 - Annual report to the Intelligence and Security Committee

Aye: 5 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 5, Noes 9.

Question accordingly negatived.

Bill to be reported, without amendment.

Committee rose.

Written evidence reported to the House

NSIB04 Law Society of Scotland

NSIB05 Alternative Investment Management Association Ltd (AIMA)

NSIB06 Taylor Wessing LLP