National Security regime

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The NSI Act gives the Secretary of State in the Cabinet Office the power to review a transaction and make an order preventing, remedying or mitigating a national security risk. There is a new Investment Security Unit within the Cabinet Office that will review transactions. The NSI Act introduces a mandatory notification regime for trigger events involving acquisitions in 17 specific sectors (the “Mandatory Sectors”) (including advanced robotics, artificial intelligence, communications, computing hardware, data infrastructure and energy – to name but a few).

The BVCA has engaged with BEIS (now DBT) on this Bill since its early inception – having responded to the consultations in the 2017 Green Paper, the 2018 White Paper, the consultation on the sectors in scope of the mandatory regime and more recently the Section 3 Statement, as well as engaging in other correspondence and meetings with BEIS and engaging with members of the House of Lords.

The BVCA joined the NSI Act expert panel in April 2021 to provide feedback on a number of areas of the new regime including on operation and market guidance. We have provided feedback, submitted by members, and will meet with ISU officials and give evidence to the BEIS Select Committee in due course. This work will continue into 2023 and as the regime takes shape and we would welcome feedback from members.

BEIS has published the two sets of Market Guidance Notes in line with the commitment made by Government during the parliamentary stages of the Act in 2021. The BVCA provided feedback on both sets of draft guidance to the BEIS Expert Panel, along with other stakeholders. Our response stated that clarification should be given to the ‘better answer’ examples in the guidance, as it does not outline the level of detail needed for respondents to adequately complete the form. We also stated that further clarification of key terms such as ‘dominant influence’ and share security, specifically the distinction between legal and equitable, would be beneficial.

Over 2022 and 2023 the BVCA has engaged with a Business Sub-Committee on the functioning of the ISU. We have submitted evidence and given evidence at two Select Committee hearings.
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