Opinion | One year on, UK investment law shows how West is strengthening economic security

The National Security and Investment Act gives the UK government powers to review, block and even undo investments on national security grounds

It is clear that ministers are likely to increasingly use these new powers given the growing range of geopolitical, economic and technological challenges facing the country

Reading Time:3 minutes

Police officers near the House of Parliament in London on September 12, 2022. Photo: Bloomberg

Published: 12:30am, 4 Jan 2023

The whirlwind of UK politics in 2022 included three prime ministers and four finance ministers, not to mention major foreign policy challenges like the Ukraine war.

However, below the radar, one of the key developments in the machinery of the UK government was the National Security and Investment Act (NSI), introduced a year ago on January 4. While the new UK measures are not targeted on any single country, a number of the earliest decisions have impacted Chinese firms such as Beijing Infinite Vision Technology and Shanghai-listed Wingtech.

The UK legislation is by no means an isolated development internationally. Across much of Europe, and indeed the Western world, policymakers are debating how to update their economic regimes in light of new national security challenges, including technological and geopolitical changes which mean that reforms to public powers to scrutinise investments may well be needed much more regularly in the future. The central policy challenge is how best to maintain a broadly open approach to the international economy, while ensuring appropriate security safeguards.

The United States has long been a pioneer in this agenda through the Committee on Foreign Investment in the United States. CFIUS is an inter-agency committee of the US government that was first established by US president Gerald Ford in 1975 to monitor foreign investment. In the 1980s, Congress passed an amendment which empowered CFIUS to reject investment deals.

CFIUS does not acknowledge which deals are under review, and does not publicly announce its findings. It is chaired by the US Treasury secretary, and includes representatives from 16 US departments and agencies, including defence, state, commerce and homeland security.

All US companies proposing to be involved in acquisitions with a foreign firm are supposed to voluntarily notify CFIUS, but the committee can review transactions that are not voluntarily submitted. The body’s primary concern in most reviews is that technology or funds from an acquired US business might be transferred to a sanctioned country as a result of being acquired by a foreign firm.