It has now been just over six months since the
1. The NSIA Annual Report 2022
The Annual Report summarises the performance of the
-
The Annual Report confirms that the Government is taking around three to four working days to accept filings (whether mandatory or voluntary). These statistics are consistent with our experience that the Government is currently accepting notifications and making decisions quickly.
- The Government received 222 notifications in total, 25 of which were voluntary. Only 17 of these were called in for review, and three of the 17 were cleared (while the remaining 14 were still subject to assessment at the end of the reporting period). The average period for clearance after a call-in was 24 working days.
- The Government reports the highest number of mandatory notifications in relation to Defence, Military, and Dual Use, Critical Suppliers to the Government, Artificial Intelligence and Data Infrastructure, and higher rates of call-in were also seen in these sectors.
- The
UK's National Security and Investment Act to Commence inJanuary 2022 (20 August 2021 ) The National Security and Investment Act 2021 and its Implications for Distressed Investments and Restructuring (8 April 2022 )
The Government also highlights in its report the willingness of the Investment Security Unit (ISU) to engage with parties and their advisers in relation to queries regarding the operation of the regime.
2. Key Takeaways
Some notable absences from the Annual Report include the average time taken to clear a transaction following notification, i.e., the initial 30 working day review period which applies to the vast majority of cases.2 Our experience is that cases are being cleared well within this period, with decisions being received as early as 20 working days following acceptance in the early months of the regime's operation, although more recent experience suggests that the Government is increasingly using the full 30 working day period. The Annual Report also does not disclose the volume of notifications that relate relating to internal restructurings, which are deliberately caught by the regime and which we understand are generating a large proportion of filings in practice. It would be useful to see statistics on these points in future reports.
The relatively short average length of clearance for the three reported cases which were called in suggests that these were reasonably straightforward cases which presented limited national security issues. This short time period also suggests that there have not been many (if any) instances of stopping the clock in order to allow time for responses to information requests, which would be expected to materially extend the 30 working day assessment period in practice in a complex case. Our expectation is that complex cases are more likely to take several months to resolve in practice.
The Annual Report indicates that the overall volume of filings made is somewhat lower than anticipated by the Government (the original impact assessment suggested 1000-1800 notifications a year could be expected). The Government suggests that this may be related to a general decline in M&A activity, noting that three months provides a rather limited dataset. It is likely too early to draw firm conclusions from the Annual Report. However, taking account of the high number of notifications made in
Overall, these early indications of speed and efficiency are of course positive and it is comforting that the Government is actively comparing its performance in operating the regime with that of its international counterparts, such as the Committee for
3. MoU Between the Government and the CMA
The new national security regime runs alongside (i) the
Given the wider powers of intervention held by the Government under the NSIA, the ISU will need to dedicate resources to market monitoring. Due to the voluntary nature of the
4. Watch This Space
These early indications of speed and efficiency are encouraging, but efficiency should be fully expected in relation to cases which raise no material national security concerns (including those involving internal restructurings), and the vast majority of filings are expected to fall within this category. It remains to be seen how some of the more complex cases will be treated, including the 14 cases that were subject to a more detailed assessment following a call-in as of
More generally, while the transparency represented by the Annual Report and the ISU's continued commitment to responding to enquiries and requests for guidance are welcome, it remains the case that the overall process is opaque in practice. Once filings are submitted, there is little engagement with the ISU until a decision is made, which can be somewhat unsettling for merging parties. In addition, the lack of publicised reasoned decisions will mean that it will continue to be difficult to assess risk and identify national security concerns in practice. In that regard, we understand that the Government intends to issue revised market guidance "in due course". We understand that this is anticipated over the summer months.
MoFo's Global National Security practice group has extensive first-hand experience in navigating foreign investment regimes all over the world and in particular
For background on the
- National Security and Investment Act Receives Royal Assent (
Julia Kotamäki,
Footnotes
1. National Security and Investment Act 2021: Annual Report 2022. Note that future reports will cover years from 1 April to 31 March.
2. The Annual Report states that the Government stayed within the 30 working day time limit for each notification received, suggesting the review period has ranged from 11 to 30 working days but does not provide a detailed breakdown or average time periods for clearance following notification. See 2022 Annual Report, page 13.
3. See Annual Report, page 13.
4. MoU between BEIS and the CMA on the operation of
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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