The biggest shake up of the UK's national security regime is due to come fully into force on 4 January 2022 with the National Security and Investment Act 2021, which will dramatically alter the scope of the government's existing powers to intervene in business transactions.  

The government promises that the new regime will "advance the UK's gold-star reputation as an attractive place to invest". It also claims that the new regime will offer investors "more efficient clearance processes for relevant acquisitions as well as more transparency about what types of deals the government could examine and the processes for doing so."

Time will tell as to whether the clearance processes run smoothly. However, the regulatory hurdles are significant. Notification of relevant transactions must be made before completion. The rules give the government power to call in for review, and potentially prohibit or declare void, any qualifying transaction which may give rise to national security concerns. Parties to deals must make a mandatory notification to BEIS and obtain clearance where the target carries on activities in the UK or supplies goods and services to persons in the UK and its activities take place in any of 17 sectors that are deemed to be sensitive, and the government has recently issued further welcome guidance on those sectors. Parties can make a voluntary notification if a transaction falls outside the sensitive sectors but where the parties consider it may give rise to national security concerns and want to seek advance comfort in respect of the government's call-in power.  

Clients like certainty and the ability to agree and execute transactions in a short timeframe. This is where the NSI Act may fall down. With no definition of "national security" and no de minimis (in terms of deal size or market share) below which the new regime will not apply, even small transactions may involve advisers poring over the legislation to determine whether a notification should be made. Getting it wrong may involve severe sanctions: the risk of the transaction being declared void, along with significant fines. For now, the government has reassured that it will take a robust but proportionate approach to investment in the UK, and investors may have to get used to a longer deal timeline and more uncertainty from early next year as the NSI Act beds in.