National security rules on UK investments may impact universities

Government outlines scenario where university spinout’s sale to investor with links to ‘hostile state’ could be called in under planned new law

November 11, 2020

Proposed new rules to protect the UK from “malicious investment” that threatens national security could potentially affect universities, the government has suggested.

The National Security and Investment Bill, to be introduced by ministers on 11 November, was touted as strengthening the UK’s “ability to investigate and intervene in mergers, acquisitions and other types of deals that could threaten our national security”.

Investors and businesses will have to tell the government about proposed deals in “sensitive sectors” such as defence and artificial intelligence, and the government’s screening powers will extend to “assets and intellectual property as well as companies”.

In its press release on the bill, the Department for Business, Energy and Industrial Strategy listed example cases of where the legislation could come into play – the first involving a university.

“Business A is a university spinout which is developing a unique advanced material,” the press release says. “The material is at a very early stage of development and the company does not have a turnover or market share yet. If the material is developed to commercial levels, it will have military applications.”

The scenario goes on to refer to an “Investor B” that has “links to a hostile state” and has “offered to invest in the company, taking a 60 per cent share”.

Although this would be a “private deal into an unlisted company and is not made public”, the “market monitoring team in the government notices the transaction and will call it in once the Act is commenced”, BEIS’ hypothetical scenario continues.

Australian universities recently lost their bid to be exempted from a law that would give the foreign affairs minister veto powers over deals they strike with foreign governments, prompting sector warnings of “death by red tape for many international research and student education partnerships”.

Alok Sharma, UK business secretary, said: “The UK remains one of the most attractive investment destinations in the world, and we want to keep it that way.

“But hostile actors should be in no doubt – there is no back door into the UK. This bill will mean that we can continue to welcome job-creating investment to our shores, while shutting out those who could threaten the safety of the British people.”

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