Select committee: Foreign Affairs Committee

Sixth Report: Striking the balance: Protecting national security through foreign investment legislation

HC 296 Published 19 January 2021

Foreign Affairs Committee The FCDO’s role in blocking foreign asset stripping in the UK Report on parliament.uk ↗

At a glance2 recommendations and 2 conclusions · Government response published 26 February 2021 (deadline 19 March 2021)

The government's response

Summary written by Accountability Index from the government's response. It is not the government's own words.

The Government explains why it was "unable to accept" the Committee's amendment and does not define 'national security' in the Bill, while saying it shares the aim of the regime achieving the right balance.

On Recommendation 1, the Bill "does not seek to define 'national security'", which the Minister calls "deliberate" so that the government of the day can respond rapidly to changes; risks will be determined "on a case-by-case basis".
The Minister states he "fully agree[s]" that sufficient clarity must be provided to businesses and investors about how the regime will operate, and says the reforms are "solely about national security".
On Recommendation 2, the Government "does not believe that it would be appropriate to define 'national security'"; it points to the Bill's explicit references to 'national security' in its legal tests and to the right to apply for judicial review.
The Government "will formally consult on a further version" of the Statement on the call-in power, which will take into account the Committee's comments and feedback from other Parliamentarians. No date is given.

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What the committee recommended 4

1
If the Government is not more coordinated and able to think long-term in its approach... Conclusion · paragraph 13
2
The Bill in its current form does not provide sufficiently clear guidance on how national... Conclusion · paragraph 20
3
We recommend that the new legislation should be as clear as possible about what may... Recommendation · paragraph 21
4
Businesses, investors and the Secretary of State and the Investment Security Unit need clarity and... Recommendation · paragraph 26

Sources

Sixth Report: Striking the balance: Protecting national security through foreign investment legislation ↗The committee's report, HC 296, parliament.uk
Tenth Special Report: Striking the balance: Protecting national security through foreign investment legislation: Government Response to the Committee’s Sixth Report ↗The government's response, 26 February 2021, parliament.uk

Recommendations and conclusions 4

1
If the Government is not more coordinated and able to think long-term in its approach... Conclusion · paragraph 13 · addressed to Foreign, Commonwealth & Development Office Conclusion (the committee's words)
If the Government is not more coordinated and able to think long-term in its approach to foreign investment, we risk losing our most innovative companies overseas, with harmful consequences for our national security.
2
The Bill in its current form does not provide sufficiently clear guidance on how national... Conclusion · paragraph 20 · addressed to Foreign, Commonwealth & Development Office Conclusion (the committee's words)
The Bill in its current form does not provide sufficiently clear guidance on how national security should be understood. This is likely to hinder targeted application of the new law, with adverse repercussions for the UK’s national security and economy.
3
We recommend that the new legislation should be as clear as possible about what may... Recommendation · paragraph 21 · addressed to Foreign, Commonwealth & Development Office Recommendation (the committee's words)
We recommend that the new legislation should be as clear as possible about what may or may not constitute a national security risk in the context of foreign investment. Failure to provide greater clarity would be likely to have significant consequences for the credibility of the national security regime and for UK inward investment.
4
Businesses, investors and the Secretary of State and the Investment Security Unit need clarity and... Recommendation · paragraph 26 · addressed to Foreign, Commonwealth & Development Office Recommendation (the committee's words)
Businesses, investors and the Secretary of State and the Investment Security Unit need clarity and guidance on the factors that should be considered as part of national security assessments. We recommend that the new legislation and accompanying guidance should clearly distinguish between ‘national security’ and the broader ‘public interest’ or ‘solely economic’ concerns that are not within scope, to prevent undue uncertainty for businesses and avoid any misuse of the term ‘national security’.