UK Plans New Law to Block Investment From Hostile Foreign Actors

November 11, 2020 Updated: November 11, 2020

Foreign takeovers of British businesses that may threaten national security will be banned, as the UK plans new powers to vet foreign investment.

A new bill will be introduced on Wednesday to update the UK’s current 20-year-old law on foreign investment, so that it will reflect contemporary threats and be in line with the country’s closest allies, the UK government said in a statement.

Business Secretary Alok Sharma said this means there will be no back door for hostile actors to enter the UK.

The new bill, if it becomes law, will require investors and businesses to notify the government about “certain types of transactions in designated sensitive sectors,” such as defence, energy, and transport sectors, “to ensure it can investigate and take action to address any national security risks.”

The bill also gives the government more screening powers so it can “interrogate the acquisition of sensitive assets and intellectual property, as well as the acquisition of companies.”

A new dedicated Investment Security Unit will be set up under the Department for Business, Energy, and Industrial Strategy as a single point contact for businesses to seek clarification of the rules and to report their transactions.

The government said the new system will also be more time efficient as well as being “targeted and proportionate” to make sure the UK remains attractive to investors.

“The UK remains one of the most attractive investment destinations in the world and we want to keep it that way,” Sharma said.

“But hostile actors should be in no doubt—there is no back door into the UK.”

Countries Tightened Foreign Investment Control

The UK is not the only country reinforcing its defence against hostile foreign investment. The U.S. Treasury Department on Jan. 13. released two new regulations governing how the federal government reviews foreign investment.

These new regulations enable the Committee on Foreign Investment in the United States (CFIUS) to better address national security concerns arising from certain types of investments and transactions, including real estate transactions, with an emphasis on airports, maritime ports, and military installations, that were previously outside of its jurisdiction.

It also broadens CFIUS’ jurisdiction over non-controlling investments into certain U.S. businesses involved in critical technology, critical infrastructure such as telecommunications and energy, or sensitive personal data such as health records and financial information.

Australia has also updated it’s foreign investment law, giving the treasurer greater authority to scrutinise foreign bids, amidst growing concerns surrounding Chinese investment in Australian assets.

A recent study showed that China’s communist regime has moderate to heavy influence over 40 percent of European businesses acquired by Chinese companies in the past decade.

Katabella Roberts and Daniel Y. Teng contributed to this report.