Making social science accessible

11 Dec 2023


National Security and Investment Act 2021: an Act freed from the ‘chains’ of the EU?

This working paper tests the Foreign Direct Investment (FDI) screening regime established by the UK National Security and Investment Act 2021 against the corresponding framework in the EU to examine the way the UK used its flexibility with regard to foreign investment control on national security grounds in the post-Brexit era.

The UK has enacted the National Security and Investment (NSI) Act 2021 and established a new foreign investment screening regime on national security grounds, separate from competition regulation as under the Enterprise Act 2002, conferring significantly broader screening powers, and having a wider scope than its predecessor.

The paper examines the new regime both ‘internally’, analysing the new investment screening regime established by the NSI Act 2021, and ‘externally’, examining its compatibility with the EU legal framework.

The paper finds that the new regime follows in the EU’s footsteps. The two approaches are almost identical regarding the ‘sensitive’ sectors and the screening thresholds. Specific aspects of the new regime diverge significantly and would be problematic under EU law, especially with regard to the screening of EU-based acquirers of UK targets. If it had remained an EU member state, the UK would have to adhere to the strict limitations of EU law to screen EU-based acquirers. This is the only irreconcilable difference. However, the new UK regime would not be found incompatible in relation to investment screening in the main third-country scenario, as both approaches are like-minded in this regard. The paper concludes that the new regime established by the NSI Act 2021 cannot be characterized as a testament to a legislation freed from its ‘chains’.



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