The United Kingdom’s National Security and Investment Act 2021 (NSI Act) is effectively blocking and controlling some foreign direct investments that could adversely impact national security, and it should continue to be implemented robustly despite recent criticism from the Chinese government, McGuireWoods London partner Matthew Hall wrote in an Aug. 4, 2023, commentary in Investment Monitor.
The NSI Act enhanced scrutiny of acquisitions of companies, assets and intellectual property that could adversely impact UK national security. While not expressly aimed at any country, it’s broadly accepted that concerns about uncontrolled investment from some particular countries were a key driver behind its implementation, Hall wrote.
In July, the UK Cabinet Office released its 2022-2023 annual report on the NSI Act, which showed a focus on reviewing investments originating from China. Thereafter, the Chinese embassy in London took the unusual step of issuing a statement criticizing the UK’s approach and alleging the UK was discriminating against China.
But Hall, a member of McGuireWoods’ Antitrust, Trade & Commercial Litigation Department, wrote that even if there is “discrimination” against Chinese investment, it is justified and should continue. Hall cited a July 2023 report by the Intelligence and Security Committee (ISC) of the UK Parliament, which found that Chinese acquisitions posed a “significant threat” to the UK.
“The overt acquisition of assets is just one element of the Chinese threat to the UK but an important one,” Hall wrote. “The government now has the legal tools in the NSI Act to deal with this and it should take heed of the ISC’s ultimate concern — that China’s ambition is to make other countries ‘reliant’ on it — by using those powers.”