National Security and Investment Act

The National Security and Investment Act (NSIA) came into force on 4 January 2022. The Act gives the government the power to scrutinise certain acquisitions, and to intervene where there may be a national security concern. This scrutiny takes place via a system of mandatory notifications and government call-in powers through which acquisitions deemed a threat to national security may be blocked, curtailed or unwound.

For the University sector, the NSIA can be relevant where research or commercialisation activities involve dealings in shares, intellectual property rights, or the creation/transfer of investor rights.

What is a Mandatory Notification?

Mandatory Notification applies where the University is acquiring a ‘qualifying entity’ that carries out certain specified activities within one or more 17 ‘key sectors’. This is likely to apply to aspects of Aston’s commercialisation activities, including dealings in shares in spin-out companies. When acquiring shares in, or influence over, entities undertaking activities in sensitive areas of the economy the University is likely to require national security clearance before completion of the transaction.

Qualifying entities include UK or foreign companies, partnerships (including limited liability partnerships), charitable bodies, trusts, unincorporated associations or any other body corporate.

Key sectors: The 17 designated sensitive sectors of the economy are:

Advanced Robotics	Cryptographic	Satellite and Space
Artificial Intelligence	Authentication	Technology
Civil Nuclear	Data Infrastructure	Suppliers to Emergency
Communications	Defence	Services
Computing Hardware	Energy	Synthetic Biology
Critical Supplies to Government	Military and Dual-use	Transport
	Quantum Technologies

Full details on the scope of each sector is available.

A mandatory notification will need to be made if the University is acquiring a qualifying entity that has a connection to the UK and carries out specified activities in one ore more of the 17 key sectors and any of the following apply:

The University’s shareholding stake or voting rights in the entity will increase from:
25% or less to more than 25%
50% or less to more than 50%
75% or less to more than 75%

The University’s acquisition is of voting rights and this will enable the University to secure or prevent the passage of any class of resolution governing the affairs of the entity.

 

Failure by an acquirer to make a mandatory notification renders the acquisition void and carries the potential for significant civil and criminal penalties. After the Mandatory Notification has been made, acquisitions will be assessed for risk of harm to national security and may be either cleared, made subject to conditions, or blocked.

Mandatory Notifications have to be made online by the acquirer (typically the individual partner, not Aston as an institution) using the Mandatory Notification Form.

While the obligation to complete the mandatory notification form falls on the acquirer, colleagues in the Business Development Team in RKE will support this activity to ensure that mandatory notifications are completed in a timely fashion and in the prescribed format.

 

What is Government Call-in Power?

The Government has the power to ‘call in’ planned or completed acquisitions where there is a perceived risk of harm to national security. This power will apply to some projects and activities which involve the grant to partners of licenses to, and assignations of, rights in IP.

Unlike the Mandatory Notifications that apply to qualifying acquisitions of qualifying entities that meet certain criteria (see above), IP licensing arrangements are not subject to any statutory notification requirement. However, there is a government power to call in projects involving IP licensing arrangements for assessment and other acquisitions where there is a perceived national security concern. The government’s power to call-in acquisitions for assessment persists for five years after the acquisition has taken place. 

In this context, the call-in powers apply to the acquisition of a qualifying entity or qualifying asset (which includes land, tangible moveable property and intellectual property) which has a connection to the UK, where the level of control the University is acquiring meets or passes the following specified thresholds (see directly below).

The acquisition is subject to the government’s call-in powers if the level of control the University will acquire meets any of the following thresholds: 

• The University’s shareholding stake/voting rights in a qualifying entity meets or crosses certain percentage thresholds – increasing from:
  • 25% or less to more than 25%
  • 50% or less to more than 50%
  • 75% or less to more than 75% 
     
• The University acquires voting rights in a qualifying entity that allows it to pass or block resolutions governing the affairs of the entity
   
• The University is able to materially influence the policy of a qualifying entity (e.g. acquiring the right to appoint members of the board of the entity that enables it to influence the strategic direction of the entity)
   
• The University is able to use a qualifying asset, or direct or control its use, or is able to do so more than it could prior to the acquisition

If the government uses their powers of call-in, the acquisition will be assessed for risk of harm to national security. The assessment can result in the acquisition being cleared, made subject to conditions, blocked or unwound (in the event that the acquisition has already taken place or the licencing arrangement has already taken effect).

What is a Voluntary Notification?

A Voluntary Notification is a means of seeking clearance for a completed or planned acquisition and can be made by either party to the acquisition, not just the acquirer. Once a completed Notification has been accepted, the government has 30 working days within which to review the project and to decide either to issue a clearance, or to call the project in for national security assessment.

If the project is called in, the Government has a further 30 working days to complete its national security assessment, although this can be extended by an additional 45 working days if more time is required. The identification of a risk of harm can result in the project being made subject to conditions, blocked, or unwound (if already under way). Complete The Voluntary notification form.

Help and additional resources

We recognise that there is a great deal of detail associated with the National Security and Investment Act and colleagues in key Professional Services Departments (RKE, Office of the General Council, Finance) will be able to provide advice on the implications of NSIA for research collaborations, studentships, consultancy and commercialisation.

If you think the NSIA may be relevant to a research collaboration or studentship bid that is under development, please contact the relevant Strategic Funding Manager as soon as possible:

• College of Business and Social Sciences - SFM
• College of Engineering and Physical Sciences - SFM
• College of Health and Life Sciences - SFM
• Collaborations where the bid will be to Horizon Europe (regardless of College)

If you have a consultancy or commercialisation project at the planning stage, please contact the relevant Business Development Manager:

• College of Business and Social Sciences – BDM
• College of Engineering and Physical Sciences – BDM
• College of Health and Life Sciences – BDM
• Technology Transfer Manager
• KTP Manager

If you have questions regarding NSIA about a project that is already underway, please contact Aston’s Awards and Contracts Specialist.

Key resources:

• National Security and Investment Act: guidance for the higher education and research-intensive sectors
• National Security and Investment Notification Service and guidance

Page last updated on: 29/03/2022