Foreign entities planning to acquire or control a UK company active in infrastructure, technology and emergency services will need to consider UK national security before entering into a transaction. The proposed changes come as part of a tightening of the rules governing foreign takeovers across a number of countries. They follow recent changes to the UK merger control thresholds to broaden the scope for the Secretary of State to intervene in acquisitions of companies active in particular types of military technology, computer hardware and quantum technology. The detailed proposals are published in the UK Government's 122-page White Paper and draft Statutory Statement of Policy Intent (SSPI) (see link below).

The deadline for responses to the White Paper is 16 October 2018, which is exactly a year after the Government published its Green Paper on the subject. Although no definite timetable is given for implementing the proposals, this latest publication by the Government would suggest that the reforms may not be so far away.

The UK Government is not alone in seeking to reform its powers of scrutiny – the USA, Australia, Japan, Germany and France are also taking similar steps.

The proposed new regime

Under the new regime proposed by the White Paper and the SSPI, the Senior Minister (defined as covering Secretaries of State, the Chancellor and the Prime Minister) will have a statutory power to "call in" a transaction in certain circumstances. The use of this power will permit the Senior Minister to assess any national security risks posed by events (such as investments or acquisitions) that grant a party significant influence or control over entities or assets. Such events are defined as "trigger events". 

What are trigger events?

The trigger events set out in the proposed legislation are:

  • the acquisition of more than 25 per cent of shares or votes in an entity;
  • the acquisition of significant influence or control (defined in the draft legislation) over an entity;
  • the acquisition of further significant influence or control over an entity beyond the above thresholds;
  • the acquisition of more than 50 per cent of an asset; and
  • the acquisition of significant influence or control over an asset.

The statutory test to call in a trigger event

The parties to a transaction may make a voluntary notification to the Government where they consider the transaction may raise national security concerns, based on the guidance set out in the SSPI. If they do not notify, the parties run the risk of Government intervention (as well as delay and the imposition of possible remedies – see below).

The Minister can call in a trigger event if he/she has reasonable grounds for suspecting that:

(a) a trigger event has occurred or is in progress or contemplation; and

(b) the trigger event may pose a risk to national security.

In assessing whether there is a national security risk, the Minister must consider three relevant factors, as follows:

(i) The target risk – could the entity or asset in question be used to undermine the UK's national security?

The acquisition of control over entities and assets within the following "core areas" is more likely to pose a national security risk:

  • some parts of national infrastructure sectors (civil nuclear; communications; defence; energy; and transport);
  • some advanced technologies (artificial intelligence and machine learning; autonomous robotic systems; computing hardware; cryptographic technology; materials and manufacturing science; nanotechnologies; networking/data communication; quantum technology; and synthetic biology);
  • critical direct suppliers to the Government and emergency services sectors; and
  • military and dual-use technologies.

(ii) The trigger event risk – does the trigger event give a person the means to use the entity or asset in this manner?

Such means would include, for example, disruption, espionage, or inappropriate leverage over services or investment decisions, or in other geopolitical or commercial negotiations.

(iii) The acquirer risk – might the person acquiring control over the target use this to undermine national security?

Screening process and remedies

The Government is proposing that it has a period of six months in which it can act in relation to a transaction that may pose a national security risk (this is in contrast to the three-month period it currently has to intervene in relation to mergers on public interest grounds, which includes – for the moment – national security). It expects to become aware of relevant trigger events through increased market monitoring resources and the use of its information gathering powers.

Once the Government has called in a trigger event, it will have a period of up to 30 working days to carry out its national security assessment. This period may be extended by a further 45 working days (or longer if the parties agree). The Government expects there to be 200 notifications each year, although it believes that around half of these will not give rise to concerns and will not require a full national security assessment. The Government expects that about half of the trigger events called in for a full assessment will require remedies.

Proposed remedies for breach of notices or conditions (for example, the call in notice, or conditions imposed on a transaction to remedy any national security risk) are far-reaching and will include civil financial penalties of up to 10% of worldwide turnover for businesses, or 10% of total income, or £500,000 (whichever is higher), for individuals. Criminal sanctions for individuals include imprisonment of up to five years and fines. Individuals may also be disqualified from being a director for up to 15 years. Ultimately, the Government can block or unwind a transaction if it is not possible to agree conditions to remedy any identified risk to national security.


It is clear from the current proposals that the new regime is designed to have teeth and allow Government the right not only to intervene in transactions that it considers to be undesirable from a national security perspective, but also to impose stringent remedies. It remains to be seen how the proposed national security regime will interact with the existing merger control regime operated by the CMA in the UK and the other statutory regimes in the infrastructure sectors, such as communications, water, nuclear and aviation, which are governed by sectoral regulators. As long as the UK remains bound by EU law, the new regime will also need to work effectively with EU merger control and the proposed EU foreign direct investment screening regulation.

Please see the White Paper and draft Statutory Statement of Policy Intent

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