The National Security and Investment (NSI) Act, a new legal regime that gives enormous power to Ministers in United Kingdom to block foreign acquisition of domestic firms, came in to effect on Tuesday (Jan 4).
Termed by the government as the “biggest shake-up of the UK’s national security regime for 20 years”, the rules under the act gives the government ability to scrutinise and intervene in acquisitions made by anyone, including businesses and investors, that is viewed as harming the national security of UK.
UK Ministers are already empowered legally to intervene in deals where a foreign-led takeover could affect economic stability, media plurality, the UK’s pandemic response, or national security. However, the act builds on the government’s ability to deploy the national security rationale for “calling in” a takeover.
Dismissing charges that law is protectionist and hamper ease of doing business, the UK government said that a vast majority of acquisitions will require no intervention and will be able to proceed quickly. The government clarified that it will not revisit a transaction once cleared unless false or misleading information was provided.
Under the rules framed under the new law, 17 areas of the economy have been identified as warranting greater scrutiny when overseas investors seek to make an acquisition. In addition to defence and military technology, ministers will be able to examine deals in a wide range of sectors such as advanced robotics, artificial intelligence, the civil nuclear sector, transport and quantum technology.
UK's Business Secretary Kwasi Kwarteng said "The UK is world-renowned as an attractive place to invest but we have always been clear that we will not hesitate to step in where necessary to protect our national security."
"The new investment screening process in place from today is simple and quick, giving investors and firms the certainty they need to do business, and giving everyone in the UK the peace of mind that their security remains our number one priority." he added.
Observers view the new law as an attempt by Boris Johnson government to prevent Chinese takeovers of strategically important technology businesses.
The regulators in UK also recently prevented the $75bn (£56bn) takeover of the world-leading chipmaker Arm (seen as crown-jewel of UK tech sector) by its rival Nvidia.
In July 2021, the UK government launched an investigation of Chinese-owned Nexperia's acquisition of UK's largest semiconductor plant Newport Wafer Fab.
The Competition and Markets Authority (CMA) in its report observed that the merged business entity would have the ability and incentive to harm the competitiveness of Nvidia’s rivals by restricting access to ARM’s IP which is used by companies that produce semiconductor chips and related products, in competition with Nvidia.
Newport Wafer Fab, which makes wafers of semiconductors at its plant in Duffryn, Newport, employs 450 people and is the UK's largest chip plant. It makes the wafers that electronic circuits are printed onto
Though headquartered in Netherlands, Nexperia is a owned by Chinese company Wingtech Technologies. It already has a site in Manchester.
Several MP's across party lines had urged the government to use the newly-enacted National Security and Investment Bill to block the Newport Wafer Fab acquisition.
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