National Security and Investment Act 2021

Under the National Security and Investment Act 2021 (‘NSI Act’) assets are within scope of HM Government’s call-in power but are not subject to the mandatory notification requirements. Therefore, there is no legal obligation for a party to submit a notification in respect of a transaction involving a qualifying acquisition of an asset. Parties may make a voluntary notification to the Secretary of State about an acquisition if they wish to be certain whether the acquisition will be called in.

The legislation applies to the following classes of asset (see Section 7 of the NSI Act):

• land
• tangible moveable property (e.g., equipment, components, materials)
• ideas, information, or techniques which have industrial, commercial, or other economic value (i.e., intellectual property)

Such assets must have sufficient connection to the UK, generally including being used in connection with activities carried on in the UK, or the supply of goods and services to persons in the UK. 

For the purposes of core Imperial activities, most qualifying acquisitions are likely to relate to grants of licences or assignments in respect of intellectual property (IP) but could in some cases encompass procurement or disposal of certain specialist items of equipment, materials etc.

HM Government has stated that it expects to call-in acquisitions of control over qualifying assets rarely compared to qualifying entities. However, it is possible that strategically sensitive IP and related technology (including that within any of the 17 sensitive areas of the economy or controlled under other legislation) could receive additional scrutiny, particularly where the Target Risk and Acquirer Risk are deemed to be moderate or high, thereby contributing to potential risks to national security.

Under the voluntary part of the NSI Act, the target of a qualifying acquisition is the qualifying asset that has been or will be acquired. When considering the ‘Target Risk’, HM Government seeks to understand (and therefore the parties to the transaction should have in mind) aspects including:

• The current, intended, or potential use or purpose of the asset – whether the any of the foregoing have given rise to, or may give rise to, a risk to national security, e.g. flight control systems or CFD modelling concerning civilian aircraft, with potential military applications
• The nature of the asset, including whether it is sensitive, hazardous and/or subject to export controls, or if it is proximate to sensitive sites, e.g. certain radioactive sources, viruses, pathogens or restricted locations
• The utility of the asset, including its technology readiness level (TRL) or ease of deployment e.g. low-TRL laboratory ‘proof of concept’, versus higher TRL work to develop existing technology for implementation in the field

See paragraphs 23-24 inclusive of the NSI Act Section 3 Statement for explanation of how HM Government assesses ‘Target Risk’: National Security and Investment Act 2021: Statement for the purposes of section 3 – GOV.UK (www.gov.uk).

Under the voluntary part of the NSI Act, HM Government considers whether the acquirer poses a risk to national security. When considering the ‘Acquirer Risk’, HM Government seeks to understand (and therefore the parties to the transaction should have in mind) aspects including:

• Characteristics of the acquirer including sector of activity
• Technological capabilities of the acquirer
• Links between the acquirer and entities that may seek to undermine or threaten UK security
• Ultimate control of the acquirer
• Threats posed by existing holdings of the acquirer
• Whether the acquirer, or their ultimate controller, has committed or is linked to criminal or illicit activities connected to national security, or that have or may give rise to a risk to national security

Please Note:

• Acquirer links to entities that pose a threat to national security will not automatically mean that a qualifying acquisition will be called in by HM Government
• Acquirer country of origin is not a sole determinant of call-in, but ties or allegiance to states or organisations hostile to the UK will be considered as part of assessing whether a qualifying acquisition has or may give rise to a risk to national security

See paragraphs 25-29 inclusive of the NSI Act Section 3 Statement for explanation of how HM Government assesses ‘Acquirer Risk’: National Security and Investment Act 2021: Statement for the purposes of section 3 – GOV.UK (www.gov.uk).

Under the voluntary part of the NSI Act, HM Government considers the level of control that has or will be gained by the acquirer over the qualifying asset. This includes controlling or directing its use, in addition to using it. Examples in the context of College activity might include the grant of licences to use and commercially exploit intellectual property (IP), or in the case of assignment of such IP, to a third party (including other universities). More control, e.g. by granting full ownership of an asset (including IP), may increase the possibility of a qualifying asset being used to harm national security, including by influencing market behaviour in a manner that may give rise to a risk to national security. 

Control Risk is assessed alongside Target Risk and Acquirer Risk, on the basis that lower risk in the latter categories means the level of control acquired is less likely to give rise to a risk to national security, and the acquisition is therefore less likely to be called in.

See paragraphs 30-32 inclusive of the NSI Act Section 3 Statement for explanation of how HM Government assesses ‘Control Risk’: National Security and Investment Act 2021: Statement for the purposes of section 3 - GOV.UK (www.gov.uk).