i Legislation, policy and practices

The United Kingdom does not currently have a domestic legal framework that specifically governs inward foreign direct investment (FDI). Neither is there a formal policy distinction between domestic and foreign investment in the United Kingdom. However, there are a number of means by which the government can intervene in transactions, as discussed further in this chapter. While these provisions are of general application and not specific to foreign investors, intervention may be more likely in some circumstances when foreign investors are involved, in particular with regard to the public interest intervention regime that allows for intervention in transactions that may raise issues of national security (including public security).

Many transactions involving the acquisition of UK businesses will be subject to review from a competition law standpoint (i.e., assessing whether the merger will have a significant negative effect on competition). The review will be conducted either under the UK merger control regime, as set out in the Enterprise Act 2002 (the Enterprise Act), or the EU merger control regime, as set out in the EU Merger Regulation (EUMR).2 Some reference will be made to these regimes (e.g., with respect to their jurisdictional thresholds, which are also relevant to the public interest intervention thresholds), but the general merger control regime will not be discussed in detail.

The UK government can also intervene to review transactions from the perspective of protecting the UK's public interests, including with respect to transactions raising concerns regarding national security (including public security), media plurality or financial stability, if certain conditions are met. The government's current powers to intervene in mergers raising public interest concerns are in the Enterprise Act. For so long as the United Kingdom is a member of the European Union (EU), any intervention must be compatible with EU law, as discussed further below.

In addition to the above-mentioned regimes, express controls are also prescribed in some other areas, notably:

  1. under Section 13 of the UK Industry Act 1975, the Secretary of State has the broad power to block an acquisition by a non-UK-based entity of an 'important manufacturing undertaking' when it appears that a change of control would be contrary to the interests of the United Kingdom or any substantial part of it; and
  2. the government holds 'golden shares' in a limited number of UK companies that typically allow it to prevent certain investors holding more than a certain percentage of shares. A number of golden shares also include powers over the disposal of material assets.

Again, EU law imposes some limits on the exercising of these rules.

In some sectors of the economy, the government or independent regulators also operate licensing or authorisation schemes, allowing for the scrutiny of individuals participating in particular activities. Certain investments in regulated sectors – such as water3 and financial services4 – may be subject to different merger control assessment or authorisation requirements, or both. Independent regulators operate in a number of sectors, including communications, water, electricity, gas and energy, nuclear and aviation (regulated by Ofcom, Ofwat, Ofgem, the Office for Nuclear Regulation and the UK Civil Aviation Authority, respectively). The scope of regulators' powers for intervention varies (such as licensing schemes for existing enterprises or approval requirements prior to commencing a new infrastructure project) as do the processes and timescales associated with the different regimes. None of these regulatory processes are specific to foreign investors, although, in some cases, the nationality of an investor will play a part in the authorisation process.5 Mergers concerning the defence sector may also require consent from the Ministry of Defence (MOD) to assign or novate any defence contracts. Details of these sector-specific regulations are outside the scope of this chapter. However, consent requirements and policy direction in particular UK business sectors should be further investigated before undertaking investment activities.

A recent development is that the government has been taking steps to reinforce safeguards and to broaden the range of transactions that can be reviewed based on national security concerns. This is in line with broader international activity aiming to reinforce screening powers in light of growing concern that hostile states may use the ownership or control of entities and assets, particularly those concerning critical infrastructure and key technologies, to undermine national security through espionage, sabotage or exerting inappropriate leverage. The changes formulated also aim to address the changing and developing risks that the United Kingdom is facing to national security, in particular in light of technological developments and the increasing importance of technology in society.

As a short-term (temporary) step, the UK government lowered the legislative thresholds at which it can intervene in transactions to protect public interest for targets involved in activities connected with three areas of the economy – goods and services with military or dual use, computer hardware technologies and quantum technologies – allowing the government to review a greater range of transactions in these areas (including those where the target has much lower UK turnover). These powers have already been used to review the proposed acquisition by Gardner Aerospace (a subsidiary of a Chinese aerospace and mining company) of Northern Aerospace in June 2018. In a second, longer-term step, the government is proposing to introduce a stand-alone (voluntary) notification and review process for investments, acquisitions and other events raising national security concerns. This new regime is expected to expand significantly the range of circumstances in which the government can analyse and address national security concerns (there will, for example, be no jurisdictional safeguards based on the target's UK turnover or share of supply). The government anticipates that this regime may result in around 200 notifications (and around 100 in-depth national security reviews) per year. This represents a marked increase in the number of transactions that will be subject to national security scrutiny going forward, the government having intervened in only two cases on national security grounds in the past two years.

When introducing the above-mentioned policies, the government was keen to emphasise that 'scrutiny does not mean making any part of the UK's economy off-limits to foreign investment' and that the proposals are not 'in any way designed or intended to limit market access for any individual countries'.6 Nevertheless, it is clear that the proposals, as currently formulated, will lead to a far greater number of transactions being reviewed for national security concerns than is currently the case, with corresponding consequences in terms of deal timeline and risk certainty going forward. At the time of writing, the current proposals for this regime, which are discussed further in Section VII, are still in draft form and subject to consultation, and there is no indication as yet as to when the government expects this new regime to come into force.

The Department for International Trade (DIT) is a government department that helps promote the United Kingdom as an investment destination and assists overseas companies to locate and grow in the United Kingdom. The DIT provides foreign companies with information about starting or expanding a business in the United Kingdom and can also provide support for UK inward investors looking to set up companies in the United Kingdom.7

ii Significance of foreign investment in the United Kingdom

The United Kingdom has a reputation for being one of the most open economies to foreign investment, reflecting the values on which its economic approach is based, including the welcoming of overseas investment.8 It is an attractive place for businesses within Europe, with one of the lowest corporation tax rates in the G20 countries, lower labour costs than businesses in Germany, France and Italy and up to 230 per cent tax relief available on research and development costs.9

A UK attractiveness survey conducted by Ernst & Young (EY) reports that, in 2017, the United Kingdom remained the number one destination for foreign direct investment within Europe, achieving its highest number of projects in any year since EY's FDI database was launched in 1997 (with a total of 1,205 projects) and attracting 6 per cent more FDI projects than in 2016.10

However, the UK's share of European FDI projects has fallen slightly in recent years – having been at 21 per cent in 2015, it fell to 18 per cent in 2017. FDI has seemingly been affected by the Brexit vote (discussed further in Section VII). For example, a decline in investments in financial and business services and headquarters in the United Kingdom was observed in 2017, in comparison to the previous year. EY also suggested that an increase in projects within the consumer goods and manufacturing sectors (e.g., food, electronics and transport manufacturing) observed in 2017 reflected moves by businesses selling to UK customers to ensure their ability to continue to operate efficiently in the United Kingdom after Brexit.11 The survey also remarked on a decline in investor sentiment, as compared with prior to the referendum.12 However, the United Kingdom is still very successful at attracting FDI and this remains a crucial driver of the UK economy. The long-term effects of Brexit on FDI performance is likely to depend on the outcome of the Brexit negotiations and the government's ability to capitalise on post-Brexit opportunities.


There is generally no formal policy distinction between domestic and foreign investment in the United Kingdom. However, there follows an overview of the main (generally applicable) legislation regulating government intervention. Further details on the jurisdictional tests and processes under the public interest intervention regime are provided in Section IV.

i Merger control law

Inward investment in the United Kingdom that involves the acquisition of a business, part of the activities of a business or the creation of a joint venture may fall to be reviewed under EU or UK merger control law, if the relevant jurisdictional thresholds are met. As a general proposition, transactions will be reviewed by the European Commission (the Commission) when the EU merger control thresholds are met, and by the UK's Competition and Markets Authority (CMA) when the UK thresholds (and not also the EU thresholds) are met.13 The authorities will investigate whether there are any competition concerns associated with a transaction.14 The nationality of the parties to a transaction is not a relevant consideration for this assessment.

The EU merger control regime is a mandatory, suspensory notification regime, meaning that parties must notify a transaction meeting the relevant thresholds and must await approval prior to implementation (regardless of whether they are based within or outside the EU). Significant penalties can be levied for a failure to file or for implementation prior to clearance, with potential fines reaching up to 10 per cent of the worldwide aggregate turnover of the undertakings concerned.

The UK merger control regime is a voluntary system, meaning that parties are not obliged to notify a transaction that meets the jurisdictional thresholds for review. However, pre-merger notifications are recommended in challenging cases for the sake of legal certainty since the CMA can review (completed and anticipated) mergers on its own initiative, can issue interim orders (preventing integration or completion, or unwinding integration) and can impose conditions (e.g., requiring divestments if, on reviewing a transaction, it believes that the transaction has resulted or may be expected to result in a substantial lessening of competition).

ii Public interest review regimes

Both the UK and EU merger control regimes include provisions allowing a transaction to be reviewed on certain specified grounds other than competition law (so called 'public interest' or 'legitimate interest' grounds) when the nationality of a party to a transaction can have greater relevance.

For transactions subject to the EU merger control regime, the EUMR permits Member States to investigate a transaction to protect its 'legitimate interests' (other than the maintenance of competition). In such cases, the competition review will be conducted by the Commission (unless jurisdiction is transferred in a manner prescribed by the EUMR), and a review of the identified 'legitimate interest' will take place under the relevant domestic legislation, such as the Enterprise Act in the case of the United Kingdom. If the Commission were to clear a transaction on competition grounds, it would still be open to the UK government to intervene on the basis of a legitimate interest and to impose conditions on the transaction (for example, Fox/Sky, 2017). However, if the Commission were to block a transaction based on competition concerns, even if the government considered that it was in the UK's public interest for the transaction to go ahead, the government would not be able to override the block imposed by the Commission.

The question of what constitutes a legitimate interest is a matter for EU law. There are three specific categories of legitimate interests deemed to be compatible with general principles and other provisions of EU law, namely public security, media plurality and prudential rules.15 Any other legitimate interest a Member State wishes to protect must be communicated to the Commission, which then has 25 working days to assess the compatibility of that interest with EU law before a measure to protect the interest can be taken by the Member State.16 To trigger the intervention process, the UK Secretary of State will issue a European intervention notice under Section 67 of the Enterprise Act. Member States may also retain jurisdiction to examine national security aspects of mergers under Article 346 of the Treaty on the Functioning of the European Union (the TFEU).17

The UK government acting via a Secretary of State18 can also intervene in a transaction on defined public interest grounds in circumstances where the relevant EU merger control thresholds are not met, including in respect of:

  1. transactions that are reviewable under UK merger control law (known as public interest cases): a public interest intervention notice is issued in such circumstances, under Section 42 of the Enterprise Act; and
  2. transactions that do not meet the requirements for notification under UK or EU merger control law but raise special public interest considerations (known as special public interest cases): a special public interest intervention notice is issued in such circumstances, under Section 59 of the Enterprise Act.

Special public interest mergers are narrowly defined and limited to certain mergers in the newspaper and broadcasting sectors, and mergers involving certain government contractors or subcontractors who hold or receive confidential information or material relating to defence.19 Such cases are rare, this provision only having been used twice under the Enterprise Act to date, both of which were in the defence sector.20

For both public interest cases and special public interest cases, the public interest considerations on which the Secretary of State may rely to justify intervention are set out in the Enterprise Act, and include:

  1. interests of national security, including public security;
  2. the need for sufficient plurality of persons with control of the media, the need for a wide range of broadcasting (of high quality and appealing to a wide variety of tastes and interests) or the need for persons carrying on media enterprises, or those with control of such enterprises, to have a genuine commitment to broadcasting standards;
  3. the need for the accurate presentation of news and free expression of opinion in newspapers;
  4. the need for sufficient plurality of views in newspapers; and
  5. maintaining the stability of the UK financial system.21

The Secretary of State has the power to modify the above-mentioned list of public interest considerations by specifying a new consideration, or removing or amending any existing specified consideration.22 Under Section 42(3) of the Enterprise Act, the Secretary of State may also intervene based on public interest considerations that are not specified in the Enterprise Act, but that in the opinion of the Secretary of State ought to be so specified.

Although all public interest considerations could, in principle, be applicable to foreign investors, national security considerations (including national security, public security and UK security) are clearly of greatest relevance to FDI, given the potential importance of the nationality of the investor.

iii Treaty on the Functioning of the European Union

While the United Kingdom remains within the EU, FDI is to a certain extent affected by EU law. One of the key aims of the TFEU is the establishment and development of an internal market between EU Member States. To this end, the TFEU contains provisions to remove tariff and non-tariff barriers to trade, establishment and the movement of capital between Member States. The TFEU thus largely acts to lower the barriers to FDI, at least from other parts of the EU. The prohibition against restrictions on the freedom of establishment for nationals of one EU Member State in the territory of another Member State23 and the prohibition against restrictions on free movement of capital between EU Member States24 are particularly relevant.

There are, however, some limitations on the freedoms granted by the TFEU. In particular, the TFEU provisions enshrining freedom of establishment and free movement of capital have been interpreted to be subject to overriding considerations, such as the protection of national security.

Furthermore, Article 346(1) TFEU underlines that obligations in the TFEU do not preclude a Member State's rights to take certain steps to protect its essential security interests. Article 346(1) TFEU is a permissive article, and acts to disapply the TFEU rules in certain circumstances. In this way, Member States can derogate from the TFEU protections where justified by that Article.

iv Golden shares

Following the privatisation of certain companies in the 1980s and early 1990s, the government retained 'golden shares'.25 Golden shares do not give the government a general right to intervene in a company's day-to-day affairs, but generally the company's articles of association provide that, without the consent of the holder of the special share (that is, the government department concerned), no shareholder may hold more than a stated percentage (usually 15 per cent) of the equity share capital of the company.26

The Court of Justice of the European Union (CJEU) has previously held that the use of these golden shares can, in certain cases, contravene EU law on the free movement of capital and on the freedom of establishment, and that their use is acceptable only in specific circumstances and subject to strict conditions.27

There have been cases in which the CJEU has not accepted the legality of specific golden shares; for example, in 2003, it held that the government golden share in BAA plc breached EU law, although it confirmed that a potential justification existed for EU Member States holding a degree of influence over private companies that were originally public undertakings if they were active in providing services in the public interest or strategic services, provided the restrictions applied equally to nationals of the Member State concerned and of other EU Member States, and complied with the principle of proportionality.

Hinkley Point contract approval 2016

Hinkley Point C is an £18 billion project to construct a nuclear power plant in Somerset, England. It is intended that construction will be mainly financed by EDF (the largely state-owned French utility company) with around one-third of the finance coming from two state-owned Chinese nuclear power companies. Following the board decision of EDF to approve the Hinkley Point plant, Prime Minister Theresa May's Conservative government decided to launch a further comprehensive review of the project prior to entering into a contract with EDF. This signalled a more cautious approach than that previously taken by former Prime Minister David Cameron's government, which had championed the project. The further review was seen as being motivated, in large part, by security concerns over Chinese involvement.28 In September 2016, the government gave the final go-ahead to Hinkley Point C under a revised agreement.29 The government announced that it would have a golden share in the project, which gives it the right to block any change of ownership or control of the power plant during the construction period. The government indicated that future approval of nuclear projects would also be conditional on it holding golden shares.30 At the same time as this approval, the government further stated its intention to pursue wider reform of the legal framework for foreign investment in critical British infrastructure. Draft proposals have now been introduced, as is discussed further in Section VII.

v UK Industry Act 1975

Under the terms of Section 13 of the UK Industry Act 1975, the Secretary of State can block an acquisition by a non-UK-based entity of an 'important manufacturing undertaking' when it appears to the Secretary of State that a change of control would be contrary to the interests of the United Kingdom, or to any substantial part of it.

An 'important manufacturing undertaking' is an undertaking that, insofar as it is carried on in the United Kingdom, is wholly or mainly engaged in the manufacturing industry, and is considered by the Secretary of State to be of special importance to the United Kingdom, or to any substantial part of it.31

There is no public record of this provision having ever been used to block an acquisition of a UK business and so this provision will not be considered further in this chapter. Ultimately, the EU law provisions on freedom of establishment and free movement of capital will be relevant to its exercise.


There are generally no specific legal considerations facing foreign entities seeking to set up new facilities or businesses, or to carry out mergers and acquisitions in the United Kingdom, above and beyond the considerations that also face domestic investors.

i Corporate law residency requirements

There are no corporate law residency requirements when investing in the United Kingdom, regardless of whether an investment in a UK company is by way of share purchase or asset purchase.

ii Rules pertaining to takeover bids by foreign companies

There are generally no additional rules relating to the takeover of public or private UK companies by foreign investors as compared with domestic investors.

While acquisitions of interests in non-regulated private companies are generally not subject to specific procedural requirements, a takeover bid by any company (whether domestic or foreign) of a UK public company is usually subject to the City Code on Takeovers and Mergers (the Takeover Code). The Takeover Code provisions cover, inter alia, the timing of takeovers, disclosure requirements and various obligations regarding documentation and announcements to shareholders of a target company. In particular, bidders must make specific statements of intent regarding their plans for a target company, including regarding the company's research and development functions, pension schemes, any material change in the balance of the skills and functions of the target's employees and management and the location of the company's headquarters. Such statements assist target companies' boards, employee representatives and pension scheme trustees to give their opinions on the offer and increase the information available to shareholders. In some circumstances, companies may also voluntarily make legally binding post-offer undertakings in which they commit to take or not take particular actions (see also Section VI). This may be advisable to address concerns about the effects of the transaction on jobs, pensions and the long-term direction and location of the company. Pursuant to Part 28 of the Companies Act 2006 (the Companies Act), the Panel on Takeovers and Mergers is the supervisory and regulatory authority in respect of UK public takeovers.

iii Asset purchases and share purchases

With the exception of industries that are regulated or involve national security, there are no notable differences between a foreign investor and a domestic investor in respect of share purchases or asset purchases. Tax treatment may vary for many reasons, including the domicile or residence of the acquirer.

iv Joint ventures

There are no specific UK rules governing a foreign investor's ability to enter into a UK joint venture, whether with a domestic partner or otherwise. The benefits and risks of entering into a UK joint venture are the same as those for a domestic investor.

v Corporate ownership structures

The key corporate ownership structures under English law are as follows.


A company is a business vehicle with a separate legal identity from that of its owners, and can therefore enter into contracts on its own behalf. All companies incorporated in England and Wales are registered with the Registrar of Companies for England and Wales (otherwise known as Companies House).

The Companies Act provides for four types of companies:

  1. limited by shares (which can either be public or private);
  2. with unlimited liability;
  3. limited by guarantee and having share capital; and
  4. community interest.

The vast majority of companies used for investment structures will be companies limited by shares. In addition, under European legislation introduced in 2001, a Societas Europaea (European company) can be created and registered in any one EU Member State, including the United Kingdom. The European company structure allows companies established across more than one EU Member State to merge and operate under a single set of rules and with a unified management and reporting system.


Generally, partnerships do not constitute separate legal entities; therefore, when investing in a partnership, the foreign investor will do so under its own name and will be directly responsible for all business conducted by the partnership. However, there are two alternative partnership structures that are also used:

  1. limited partnership (LP) formed under the Limited Partnerships Act 1907 (as amended) – an LP is similar to an ordinary partnership, in that it does not have separate legal personality, but an LP will typically have a general partner and one or more limited partners; and
  2. limited liability partnership formed under the Limited Liability Partnerships Act 2000 – the partnership takes on its own legal identity, similar to that of a company.

Foreign branch

Broadly, a foreign branch registered with Companies House (in accordance with the Companies Act) is not a legal entity in itself and cannot contract on its own behalf. The foreign branch acts as the UK agent for its overseas entity, which acts as the principal. Tax is a key driver in selecting the optimal investment structure.


i Thresholds for notification and review of foreign investment transactions

EUMR notification thresholds

For a transaction to be reviewable under the EUMR, it must consist of a 'concentration' (i.e., the merger of two or more independent undertakings or parts of undertakings, the acquisition of direct or indirect control of the whole or parts of another undertaking or the formation of a 'full function' joint venture) that has an 'EU dimension'.

Concentrations will have an 'EU dimension' when (1) the combined aggregate worldwide turnover of all the parties to the transaction exceeds €5 billion and the EU-wide aggregate turnover of each of at least two parties exceeds €250 million, or (2) the combined aggregate worldwide turnover of the parties exceeds €2.5 billion, the aggregate EU-wide turnover of each of at least two of the parties exceeds €100 million, in each of at least three Member States the combined aggregate turnover of all the parties exceeds €100 million, and in each of the same three Member States the aggregate turnover of each of at least two of the parties concerned exceeds €25 million; unless, in each case, each of the parties involved achieves more than two-thirds of its EU-wide turnover in one and the same EU Member State.

When the thresholds are met, a merger filing is mandatory. In certain circumstances, a transaction that meets the EUMR thresholds may be referred entirely or partially to a Member State for review by the national authority.

UK merger notification thresholds

For a transaction to be reviewable under the UK merger control regime, the transaction must constitute a 'relevant merger situation'. The regime covers mergers, acquisitions of minority shareholdings, asset purchases and joint ventures.

A relevant merger situation will generally be created if two or more enterprises cease to be distinct by virtue of being brought under common ownership or control (or if the CMA believes there is an arrangement in progress or contemplation that will lead to this) where either (1) the UK turnover associated with the enterprise being acquired exceeds £70 million or (2) the transaction creates or enhances a 25 per cent share of supply or purchases of any goods or services in the United Kingdom, or in a substantial part of it (the 'share of supply test').32 The term 'enterprise' is defined as the activities or part of the activities of a business (it need not, therefore, be a separate legal entity).33 'Control' is not limited to the acquisition of outright voting control but includes situations of material influence falling short of outright voting control. Intervention is thus possible with respect to acquisitions of minority shareholdings (material influence will be presumed at 25 per cent and can arise at lower levels still, e.g., 10 or 15 per cent).34

For certain 'relevant enterprises', the thresholds have been recently lowered (as of June 2018). A relevant enterprise is one that is involved in specified activities connected with (1) military or dual-use goods subject to export control, (2) computer processing units or (3) quantum technology.35 The test for review in these cases requires (1) the enterprise being acquired to have turnover in the United Kingdom of over £1 million, (2) the meeting of the share of supply test or (3) the relevant enterprise being acquired to have a share of supply or purchase of goods or services in the United Kingdom of 25 per cent or more, made in connection with activities by virtue of which it is considered a relevant enterprise (there is no need for an increase in share in such circumstances). Whereas the changes in these thresholds open a wider range of transaction to potential competition review by the CMA, the key driver of the reforms was to reduce the thresholds for government intervention under the public interest regime for transactions raising national security concerns (which, as described below, are based on the same tests). The CMA has indicated in guidance that it would not expect to open competition investigations into deals that fall within its jurisdiction only because of the new thresholds. In line with its usual policy, the CMA will only investigate a transaction on its own initiative if there is reasonable chance that the transaction may give rise to both a relevant merger situation and a realistic prospect of a substantial lessening of competition.36

Thresholds for intervention in public interest, special public interest and EU legitimate interest cases

For public interest cases, the Secretary of State must have reasonable grounds for suspecting that it is or may be the case that a 'relevant merger situation' has been or will be created (i.e., the relevant UK merger control thresholds are met) and must believe that it is or may be the case that one or more public interest considerations are relevant to the consideration of the transaction.37

For special public interest cases (i.e., those not reviewable under either the UK or EU merger control regimes), the Secretary of State must have reasonable grounds for suspecting that a 'special merger situation' has been or will be created (as defined below) and that it is or may be the case that one or more public interest considerations are relevant to the consideration of the transaction.38

A special merger situation may arise if, immediately before the enterprises ceased to be distinct:

  1. at least one of the enterprises39 concerned was carried on in the United Kingdom, or by or under the control of a body corporate incorporated in the United Kingdom, and where a person who was carrying on one or more of the enterprises concerned is a relevant government contractor;40 or
  2. in relation to the supply of newspapers or broadcasting of any description, at least 25 per cent of all the newspapers or broadcasting of that description in the United Kingdom, or a substantial part of it, were supplied by the person or persons by whom one of the enterprises concerned was carried on.41

For EU intervention notices, the Secretary of State must have reasonable grounds for suspecting that it is or may be the case that a 'relevant merger situation' has been or will be created (i.e., the relevant UK merger control thresholds are met), that the EU merger control thresholds are met, must be considering whether to take appropriate measures to protect legitimate interests as permitted by Article 21(4) of the EUMR, and believe that it is or may be the case that a public interest consideration is relevant to the consideration of the transaction.42

iii Procedure and timeline to obtain public interest clearance for transactions and other investments

In respect of each of the categories of public interest mergers under the Enterprise Act, the regime consists of the following stages:

  1. The Secretary of State, having been notified by the CMA of a Phase I merger case that the CMA believes raises public interest considerations43 or, at its own instance,44 issues an intervention notice to the CMA requesting that it prepare a report in relation to the specified public interest considerations (perhaps following interactions with the parties or third parties regarding the fact that they are minded to intervene).
  2. The CMA issues an invitation requesting third-party comments on the public interest considerations (and competition issues if relevant) and consults other government departments, sectoral regulators, industry associations and consumer bodies regarding the public interest considerations.
  3. The CMA conducts its review and prepares its report for the Secretary of State (usually within 40 business days, but depending on the date stipulated in the intervention notice)45 considering jurisdictional issues and summarising any representations received in relation to public interest issues (and in the case of public interest cases, explaining whether the transaction raises competition concerns).
  4. In addition to the CMA's report, advice on public interest issues will also normally be provided to the Secretary of State (directly or indirectly via the CMA) by the relevant government department or public body (e.g., Ofcom in the case of newspaper and media mergers,46 the MOD for defence mergers, Ofgem for energy sector mergers, and the Financial Conduct Authority and Bank of England for mergers concerning the stability of the UK financial system). In the case of Ofcom, the regulator will conduct its own public consultation as part of its review.
  5. The Secretary of State must then decide as soon as reasonably practicable whether to refer the transaction for a Phase II investigation on public interest grounds (and perhaps also on competition grounds in the case of public interest cases),47 to accept undertakings from the parties in lieu of a reference to a Phase II investigation or not to make a reference (including referring the case to the CMA where public interest concerns are no longer considered relevant but the CMA has identified that competition concerns are relevant).48 The threshold for referral is low and the relevant Secretary of State has a wide margin for exercising his or her discretion (i.e., he or she has the power to make a referral if he or she believes there is a risk that is not 'purely fanciful' that the merger 'might be expected to operate' against the public interest (see the statements of the Secretary of State in Fox/Sky (2017)).49 Parties will have five working days from the announcement of the Phase I decision to offer undertakings in lieu of a reference to Phase II. The Secretary of State must decide whether to pursue these undertakings after a further period of five working days. The negotiation and acceptance of the undertakings must then take place within a further 40 working days, at the end of which acceptance must be announced, although there is also a possibility of a 40-working-day extension in exceptional cases.
  6. When the Secretary of State refers the case for a Phase II investigation, the CMA is required to conduct an in-depth inquiry into the public interest considerations (and any competition concerns in public interest cases, if referred also on this basis) and to prepare a detailed report for the Secretary of State. The CMA has 24 weeks to prepare the report – this period may be extended by eight weeks where 'special reasons' exist for doing so. The report will include the CMA's conclusion as to whether the merger operates or is expected to operate against the public interest and its recommendations for remedies.
  7. Upon receipt of the CMA's recommendations, the Secretary of State must decide whether to make an adverse public interest finding (or whether to take no decision at all in public interest cases).50 The Secretary of State must publish the decision within 30 days of receipt of the CMA's report.51 The Secretary of State must accept the CMA's conclusions as to whether the transaction will result in a substantial lessening of competition in public interest cases and the CMA's jurisdictional assessment; the Secretary of State will have 'regard to' but is not bound by the CMA's recommendations for remedies or the wider public interest issues.52 If no action is taken by the Secretary of State in public interest cases, the CMA will proceed to deal with any remaining competition issues.53

The CMA has the power to take by interim order any action it considers necessary to prevent or unwind pre-emptive action (i.e., integration steps that may prejudice the later imposition of remedies), for example by appointing a monitoring trustee or hold separate manager. These powers can be used both in completed and anticipated deals. For example, with respect to the proposed acquisition by Gardner Aerospace of Northern Aerospace (2018), following the issuing of a public interest intervention notice on 17 June, the CMA issued an initial enforcement order on 19 June preventing any action that might lead to integration of the two businesses, transfer of the ownership or control of the businesses, or otherwise affect the ability of the businesses to compete independently in any market affected by the transaction.54

In terms of filing fees, the usual merger fee (ranging from £40,000 to £160,000) will be payable to the CMA in public interest cases. No merger fees are payable in special public interest or European intervention cases.

iv Substantive test for clearance of public interest cases

In public interest mergers under the Enterprise Act, the Secretary of State assesses the public interest issues raised by the transaction and adopts a decision based on whether the merger operates or may be expected to operate against the public interest (the public interest test).

The following are recent examples of cases considering the various grounds for intervention. For further details about how particular grounds will be considered or investigated, reference should be made to relevant cases.

National security

Until recently, transactions reviewed on this basis have tended to be defence mergers with public security concerns being dealt with through a range of undertakings negotiated or proposed by the MOD, including the maintenance of strategic capabilities within the United Kingdom and the protection of classified information and technology.55

By way of example, in May 2009, when AEUK (a subsidiary of Atlas Elektronik GmbH, based in Germany) sought to acquire Qinetiq's Underwater Systems Winfrith division (USW, a key supplier of research, advice, enabling technology, systems and support to the UK's armed forces), the Secretary of State issued a special intervention notice on the grounds of national security public interest concerns.56 AEUK gave a number of undertakings to avoid a reference to a Phase II review, which the Secretary of State accepted. The security undertakings committed AEUK companies to the maintenance of strategic capabilities. In particular, the AEUK companies undertook that, for as long as any of the AEUK companies remained a supplier to the MOD under military programmes:

  1. a sufficient number of the directors of such an AEUK company would be UK security-cleared British citizens to enable security-sensitive issues to be resolved at board level should the need arise; and
  2. the military programmes would continue to be directly controlled by a company or companies incorporated in the United Kingdom.

The AEUK companies also undertook to inform and consult the MOD at least six months prior to the removal of any significant part of the UK military capability to any location outside the United Kingdom, the disposal of any significant part of the UK military capability to any entity not directly or indirectly controlled by the AEUK companies, or the reduction in any significant way of the UK military capability with respect to funded programmes. Undertakings concerning the protection and exploitation of technology and information provided that all matters concerning military programmes and security within the AEUK companies that relate to military programmes would be maintained in line with UK national security regulations. The AEUK companies also undertook to adhere to obligations between the MOD and the AEUK companies regarding confidential information, any commercial exploitation levy and UK export control duties, and principles to prevent conflicts of interest in relation to research conducted by AEUK.

In the case of Melrose/GKN (April 2018), concerns were also raised regarding the intended period of ownership and plans for a defence-related business, based on the fact that the acquirer, Melrose (a British listed company), was a turnaround specialist (which acquires, improves and sells businesses). The Secretary of State did not deem it necessary to intervene on public interest grounds based on undertakings agreed by Melrose with the MOD, and binding undertakings offered by Melrose through the takeover process to allay additional concerns held by the Secretary of State, discussed further below. The undertakings agreed with the MOD included an agreement to seek government consent for plans to divest a business, a component of a business or assets engaged in activities that the MOD considered had national security implications (allowing the MOD to first seek relevant protections from the subsequent purchaser), to ensure the continuation of contractual obligations to protect intellectual property and classified information, and to ensure the continued maintenance of any capabilities with a national security dimension. Further, the MOD was granted powers to inspect information and facilities to ensure the protection of classified information.57

Other recent cases have signalled a greater willingness to apply the national security review to broader aspects of public security. For example, the case Hytera Communications Corporation Ltd/Sepura plc (2017) concerned the purchase by a Chinese radio systems manufacturer (Hytera) of a Cambridge-based radio systems provider (Sepura) for £74 million. The Secretary of State issued a public intervention notice on national security grounds on the basis that Sepura supplied communication equipment systems to emergency services across the United Kingdom. Concerns were raised regarding the protection of sensitive information and technology, and for ensuring the maintenance of UK capabilities in maintaining and servicing radio devices used by the UK emergency services. The Secretary of State accepted a series of undertakings, in line with advice received from the Home Office, instead of referring the merger to a Phase II review. The undertakings required the parties to implement enhanced controls for the protection of sensitive information and technology from unauthorised access, as well as granting the relevant agencies, including the Home Office, rights of access to premises and information to audit compliance with the security measures. The two companies also undertook to continue repair and maintenance of relevant radio devices for as long as it is required by the Home Office.58

Newspaper plurality

Trinity Mirror's proposed purchase of the Express and Star newspapers from Northern & Shell (2018) was reviewed on the basis of the need for (1) free expression of opinion, and (2) sufficient plurality of views in newspapers (since Trinity Mirror also owned the Daily Mirror). The Secretary of State ultimately accepted Ofcom's conclusions that the merger did not raise concerns in relation to either ground, and decided not to refer the merger for a Phase II review. In its report, Ofcom noticeably mentioned that 'newspapers face significant financial challenges as news production and consumption increasingly moves online' and that '[m]easures that support the longer-term viability of newspapers and their websites should be welcome'.59

Media plurality and broadcasting standards

In the proposed acquisition by 21st Century Fox of Sky plc,60 the Secretary of State conditionally cleared the transaction following a Phase II review by the CMA. The deal was reviewed on the basis of media plurality and commitment to broadcasting standard grounds.61 The conclusion by the Secretary of State was that the merger may be expected to operate against the public interest on grounds of media plurality but that the merger may not be expected to operate against the public interest on grounds of the parties' commitment to broadcasting standards. The key concern in this case was that, following the merger, the Murdoch family trust would control both News Corp (which owns News UK, a publisher of newspapers such as The Times, The Sunday Times and The Sun) and Sky News. An undertaking was given to divest Sky News to the Walt Disney Company, or to an alternative suitable buyer. Undertakings were also given by the Walt Disney Company, including not to sell Sky News without Secretary of State approval for 15 years (should it acquire Sky News). Further, the Walt Disney Company undertook (among other things) to maintain a Sky News branded service for 15 years that would abide by the principle of editorial independence and integrity in news reporting and that, for each of these 15 years, total funding available to Sky News would not be less than £100 million. Fox committed (among other things) to pay funding to Sky News for a period of 15 years.62

Financial stability

The Lloyds TSB plc/HBOS merger (2008) is the only case reviewed on this basis to date. In its report to the Secretary of State, the Office of Fair Trading (the predecessor of the CMA) found that the merger may result in a substantial lessening of competition and recommended that the merger be referred for a Phase II review. However, the Secretary of State decided to clear the merger without referring it for an in-depth review, concluding that the merger would result in significant benefits to the public interest (as it related to ensuring the stability of the UK financial system) that outweighed the potential anticompetitive outcomes identified.63

UK merger control

In the UK merger control context, the test is whether the merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

v Powers of the competent authorities to interfere with a transaction

The Secretary of State may take any action considered reasonable and practicable to remedy, mitigate or prevent any effects adverse to the public interest that have resulted from, or may be expected to result from, the transaction.64 This includes, if necessary, prohibiting the merger, accepting undertakings from the parties in lieu of a reference to a Phase II review or imposing remedies after a Phase II investigation. The CMA will advise the Secretary of State of the appropriateness of undertakings and will negotiate those undertakings with the parties.65

Since the introduction of the Enterprise Act, the Secretary of State has been willing, for the most part, to accept undertakings to mitigate identified public interest concerns.

In normal merger control processes, the CMA has the power to address concerns through accepting undertakings, imposing remedies or by recommending that others (e.g., government or sectoral regulators) take action to address concerns. If it is not possible to address concerns, the CMA can prohibit a merger. The three possible options are unconditional clearance, conditional clearance and prohibition.

vi Remedies available to challenge a negative decision in public interest cases

Any person aggrieved by a decision in connection with a reference or a possible reference in a public interest case (i.e., any of the three types discussed in this chapter) may appeal to the Competition Appeal Tribunal (CAT) for review of that decision. The CAT determines such appeals in accordance with judicial review principles, and has the power to quash the whole or part of the relevant decision or to dismiss the application.66

Subject to judicial leave to appeal, decisions given by the CAT may be appealed before the Court of Appeal of England and Wales, the Court of Session in Scotland, or the Court of Appeal in Northern Ireland, or in certain cases the UK Supreme Court. The decision of the Secretary of State may also be subject to judicial review by the High Court on limited grounds of errors of law and procedure.

vii Measures for the protection of confidential information

The Enterprise Act contains a general restriction on disclosure of specified information, including information submitted to a public authority in the exercise of any function it has pursuant to the Enterprise Act.67 Disclosing information in contravention of the Enterprise Act is a criminal offence.

The Freedom of Information Act 2000 (FOIA) gives any person a right of access to information that is held by a public authority. However, the FOIA contains several exemptions to the general right of access, including, in relation to information that must not be disclosed to safeguard national security,68 and information where disclosure would be likely to prejudice the defence of the British Islands or any colony, or the capability, effectiveness or security of the armed forces or any forces cooperating with those forces.69

viii Lobbyist registration requirements

Foreign investors that choose to engage external political lobbyists in connection with their proposed or existing investments in the United Kingdom should be aware of the statutory regime requiring registration of consultant lobbyists in the United Kingdom. Under the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 (the Lobbying Act), organisations and individuals that carry on the business of consultant lobbying of ministers or permanent secretaries must be entered in the Register of Consultant Lobbyists.70 Any person or organisation intending to conduct the business of consultant lobbying must be entered on the Register before doing so.71 To comply with the Lobbying Act, consultant lobbyists must provide a quarterly update that includes the names of the clients on whose behalf oral or written communications were made (or payment was received to make) personally to a minister, permanent secretary (or equivalent) relating to UK government policy, legislation, the award of contracts, grants, licences or similar benefits or the exercise of any other government function.72 The registration regime does not cover in-house lobbyists advancing the interests of their own company.


Foreign investors in the United Kingdom are principally protected by a network of more than 90 bilateral investment treaties (BITs) that the United Kingdom has entered into with countries around the world.73 The EU now has exclusive competence over FDI under Article 207 TFEU and is negotiating and concluding several BITs;74 however, the European Commission can grant authorisation for Member States to negotiate and enter treaties with third countries independently.75

In the case of Slovak Republic v. Achmea, the CJEU has held that BITs between EU Member States are incompatible with EU law.76 This raises a question mark over the possibility of future claims under BITs between the United Kingdom and EU Member States while the United Kingdom remains in the EU.

If the United Kingdom opts out of the EU's common investment policy in whatever arrangement is in place when the United Kingdom leaves the EU, the consequences for third countries will be that:

  1. the United Kingdom will not be part of any future BITs concluded between the EU and third countries, and any claims will have to be brought by foreign investors pursuant to UK BITs; and
  2. the United Kingdom will be able to retain, renegotiate and conclude BITs with third countries without any limitation.

Additionally, after the UK's departure from the EU, there should no longer be any obstacles to bringing claims under BITs between the United Kingdom and EU Member States.

The UK's existing BITs with third countries outside the EU framework should be unaffected by its withdrawal from the EU.

While the precise scope of any BIT depends on its terms, it is possible to identify general terms contained in most BITs concluded by the United Kingdom. These treaties provide both general standards of treatment for nationals of one of the states party to the BIT that has investments in the territory of the other state party, and access to international arbitration against the host state if an investor considers that any of these standards have been
breached. In this way, UK BITs make the broad standards of investor protection they contain meaningful and enforceable. These standards generally include:

  1. the non-discrimination standards of most-favoured nation treatment and national treatment, entitling the investor to treatment as favourable as that provided to investors from third countries and domestic investors respectively;
  2. a right to 'fair and equitable treatment', which encompasses both due process norms of procedural fairness and protection for investors' substantive legitimate expectations;
  3. a right to 'full protection and security', implying a duty of care on the part of the host state to safeguard the physical (and potentially the legal) security of investment property;
  4. a right to compensation at full market value in the event that investments are expropriated, either directly or through regulatory measures with equivalent effect;
  5. protection against arbitrary or unreasonable measures that may impair the management, maintenance, use, enjoyment or disposal of investments; and
  6. a commitment by the host state to observe any undertakings it has entered into with respect to an investment.77

In addition, investors in the United Kingdom may also be protected by domestic human rights legislation, namely on the basis spelled out in the Human Rights Act 1998 by reference to due process, non-discrimination and property rights norms set forth in the European Convention on Human Rights and Fundamental Freedoms.78


Unlike other jurisdictions where foreign investors may need to consider issues such as structuring a transaction around local investment protection legislation, discriminatory taxation of inward investors and restrictions around the extraction of cash, considerations such as these are not relevant for foreign investors investing in the United Kingdom.79

Nevertheless, there are considerations that foreign investors should be aware of in connection with investments in UK assets, regardless of the fact that their application is not limited to foreign investors. For example:

  1. the identity of the target company or the company selling assets (i.e., whether it is a public or private company), as this will determine the relevant statutory regimes that will apply and the regulatory bodies that will have to be consulted;
  2. the sector in which the target company operates (broadly speaking, the national security, defence, financial, media and utilities sectors are the most heavily regulated);
  3. any company law requirements relating to shareholder and other approvals (as these may affect the time frame of the investment); and
  4. the jurisdiction of the investor and whether it is a jurisdiction in respect of which any current UK (or other) sanctions are in place (which may, for instance, restrict a seller's ability to transact with the foreign investor).

In addition to the above, foreign investors should not ignore political and public perception considerations in connection with their proposed investments. In recent times, the following have been at the forefront of public debate:

  1. Tax avoidance and tax evasion - a foreign investor may find itself an easier target for media accusations of 'offshoring' UK profits to reduce its group's tax bill, and may need to consider recently introduced tax rules targeting such situations (e.g., diverted profits tax). The investor may also need to consider whether it has appropriate group-wide anti-tax evasion policies and procedures in place that would reach the standard required under the UK Criminal Finances Act 2017.
  2. The negative perception of investments that result in the extraction of economic value from the United Kingdom (if a transaction is likely to be sensitive and to attract a high profile in terms of media or political interest, transacting parties may need to consider whether it would be appropriate to instruct public relations advisers and whether it would be appropriate to make public undertakings in the context of public deals), by way of example:
    • the Kraft/Cadbury takeover in 2009 – the future of a Cadbury factory in the United Kingdom was heavily debated prior to the completion of the takeover;80
    • the Pfizer/AstraZeneca attempted takeover in 2014 – the potential for job losses and reduction in research and development (R&D) expenditure in the United Kingdom was the focus of significant media and political attention and led to representatives of both Pfizer and AstraZeneca appearing before parliamentary select committees to answer questions about the consequences of the transaction for the United Kingdom. Notwithstanding commitments offered by Pfizer to,inter alia, complete the construction of the planned AstraZeneca Cambridge campus to create a substantial R&D innovation hub, and integrate the operations of the combined company so as to employ a minimum of 20 per cent of its total R&D workforce in the United Kingdom,81 the overall tenor of the press and political commentary was generally hostile towards Pfizer. The Secretary of State suggested the government could use public interest powers to intervene in the takeover.82 In May 2014, UK ministers were said to have begun exploratory talks with EU officials regarding the expansion of the specified list of public interest considerations in the Enterprise Act (see Section II). Shortly afterwards, Pfizer decided to drop its bid after it was rejected by AstraZeneca's board;83
    • the Softbank/ARM takeover in 2016 – SoftBank's £24.3 billion acquisition of ARM Holdings was announced in the weeks following the Brexit vote in June 2016. Such a large acquisition of a British technology company faced a strong risk of opposition from the media and government. SoftBank sought to deal with potential concerns about the takeover by becoming the first bidder to give legally binding post-offer undertakings under the UK Takeover Code.

      Among other things, SoftBank undertook to:
      • at least double the employee head count of ARM in the United Kingdom within five years;
      • increase the employee head count of ARM outside the United Kingdom within five years; and
      • maintain ARM's global headquarters in Cambridge for five years.84
      SoftBank's chief executive personally spoke to the Prime Minister, who decided to welcome the investment and the commitments to increase jobs in the United Kingdom. The Chancellor of the Exchequer stated (via Twitter) that the deal demonstrated the health of the British economy post-referendum, suggesting that this may be a counterbalancing factor for similar deals in the near future: 'Decision by SoftBank to invest in @ARMHoldings shows UK has lost none of its allure to global investors – Britain is open for business';85 and
    • the Melrose/GKN takeover in 2018 – the Secretary of State raised several concerns about GKN being acquired by a turnaround specialist in terms of its effect on the economy, including the effect on employment (GKN being a valuable employer in the United Kingdom, direct and through its supply chain), the UK's Industrial Strategy (in light of the importance of GKN's R&D activities), the fact that GKN benefited from government-sponsored contracts and participated in a sector that enjoyed active engagement from government-sponsored R&D and the large number of pensioner stakeholders who depended on GKN's ability to fund its pension schemes. In particular, the government felt that companies that benefit (directly or indirectly) from long-term public sector contracts or indirectly from government-supported R&D should adopt appropriate time horizons on investment decisions so as to safeguard public funds.86 In response, Melrose offered legally binding undertakings under the UK Takeover Code, including undertaking to:
    • maintain a UK stock exchange listing and its UK headquarters for at least five years;
    • ensure that a majority of directors are resident in the United Kingdom;
    • ensure that both the aerospace and drive-line divisions retained the rights to the GKN name; and
    • guarantee that spending on R&D would at least maintain GKN's previous levels, amounting to a minimum of 2.2 per cent of sales for the next five financial years.

      Melrose also undertook not to dispose of the aerospace business for at least five years without the government's consent and offered to meet officials and the Secretary of State every six months to provide updates on its ownership.87
  3. Anti-bribery and corruption issues and, in particular, whether investors are connected to jurisdictions perceived as high risk from an anti-bribery and corruption perspective, or whether they have appropriate group-wide policies and procedures in place that would reach the standard required under the UK Bribery Act 2010. This is the case despite the fact that there is some debate as to the extent to which the Bribery Act applies to a multinational organisation's global operations as a result of the existence within the group of a UK business or subsidiary. Companies incorporated outside the United Kingdom will only be caught by the Bribery Act if they are 'carrying on a business or part of a business in the UK'. In the absence of any other factors, the mere fact that a UK entity, which operates independently, exists within the group will not, in itself, be enough to extend the reach of the Bribery Act to other group entities.

Given the increasing emphasis on FDI screening, and the expanded UK national security regime, it will also be important to analyse early on when considering a potential transaction whether the government will have jurisdiction to review a transaction from a public interest or competition perspective and to analyse the potential risks of public interest and competition concerns arising with respect to a particular transaction, including the risks of intervention.

Deal documentation should address the need and risk associated with any required regulatory processes or approvals, in particular by:

  1. covering required approvals in regulatory conditions precedent, the seller will also want to seek obligations on the buyer to satisfy conditions to closing; and
  2. ensuring cooperation between the seller and target during the pre-closing period in obtaining required approvals and with any government public interest intervention process.88

Depending on the likelihood of a public interest intervention notice being issued, it may (for example) be appropriate to make the transaction conditional on the Secretary of State not having referred the transaction for a Phase II review by a certain date.

The effect of a public interest (or any other regulatory) review on a deal's timetable should also be taken into account. In particular, the issuing of a public interest intervention notice can have important timing implications since certain parts of the process are not subject to statutory deadlines. The importance of anticipating the impact of such processes on deal timetables is illustrated by the recent acquisition by Gardner Aerospace of Northern Aerospace, which was nearly derailed when contractual timing for the deal lapsed because of regulatory scrutiny (on competition and national security grounds) and the parties failed to agree on a timeline extension. The seller (Better Capital) announced that it had cancelled plans to sell Northern Aerospace. However, when the Secretary of State and the CMA announced that the transaction was being cleared unconditionally on the basis that there were no national security or competition concerns, the transaction was reinvigorated, closing on 24 July 2018.89

Parties may want to consider proactively engaging with the relevant Secretary of State or government department early on to help determine whether a public interest intervention notice is likely to be issued and to proactively discuss any potential concerns. It may, for example, be possible to avoid the issuance of a public interest intervention notice or an in-depth review if an agreement can be reached directly with the relevant government department regarding suitable undertakings to remedy any potential public interest concerns presented by the transaction. This process has, for example, been followed in cases involving the defence sector that do not raise significant public interest concerns and where, therefore, the full process may not be warranted. For example:

  1. in Gardner Aerospace Holdings/Northern Aerospace (2018), the Secretary of State cleared the transaction unconditionally and did not deem it necessary to refer it to a Phase II review. In its report to the Secretary of State, the CMA noted that the MOD had obtained written assurances from Gardner confirming that previously agreed protections between Northern Aerospace and its current owner would continue to apply to Gardner. These protections were designed to prevent Northern Aerospace's owner accessing restricted information and required the appointment of an independent auditor and the establishment of a series of auditable security arrangements to affirm the protection of restricted information;90 and
  2. in April 2018, the Secretary of State decided not to intervene in the proposed acquisition by Melrose Industries of aerospace and automotive parts maker GKN. The Secretary of State said that the MOD had completed a 'detailed analysis' of the deal and had agreed with Melrose a set of undertakings to allay any national security concerns.91


i Proposed legislative reforms to the national security review regime

On 24 July 2018, the UK government published the National Security and Investment White Paper, containing proposals for a new, voluntary, national security review regime (the White Paper).92 At the time of writing, the White Paper is subject to consultation (until 16 October 2018). The government is then expected to refine its proposals based on the responses it receives, ahead of introducing primary legislation to bring the regime into force. The regime is not specifically limited to foreign investors.

Once the new review regime has been implemented, parties will be encouraged to notify the government of 'trigger events' that they consider may raise national security concerns. The 'trigger events', as currently proposed, allow the government to review transactions in a much wider range of circumstances as compared with the current regime.93 For example, no 'safe harbours' are provided based on the target's turnover or the transacting parties' share of supply. Further, acquisitions of particular assets (e.g., real or personal property, or intellectual property) may be subject to review and the regime will apply to new projects (e.g., new developments, and other business activities that are not yet functioning enterprises).94 The regime will capture entities incorporated or otherwise established outside the United Kingdom, assets situated outside the United Kingdom and rights arising under, or governed by, foreign laws, so long as the entities carry on activities or supply goods or services to persons in the United Kingdom, or the assets are used in connection with activities taking place in the United Kingdom, or the supply of goods or services to persons in the United Kingdom.95 A key purpose of the consultation is to seek views on the proposed trigger events, and thus, the government may amend the above-mentioned proposals following the consultation.

In terms of identifying the trigger events that 'may pose a risk to national security', the government is to publish a detailed statement of 'policy intent', providing guidance on the key factors that will make it more likely that a trigger event will be of national security interest to the government. Through publishing this document, the government aims to assist transacting parties in determining whether they should submit a formal notification or engage in informal interaction with government officials. A draft of this document was published on 24 July 2018 and, at the time of writing, is still subject to consultation.96 The document suggests that, when assessing national security concerns, the relevant Cabinet minister will consider (and, therefore, the parties to the 'trigger event' will also need to consider) the target risk, the trigger event risk and the acquirer risk.97 In particular:

  1. with respect to target risk, the focus is on the nature of the entity's activities and of the assets (in the case of land, the nature of the land, its location and proximity). Core areas (i.e., those more likely to pose national security risks), include military and dual-use technologies, certain parts of the national infrastructure sectors (including parts of the civil nuclear, communications, energy and transport sectors and the defence sector), critical direct supplies to the government and the emergency sector, and some advanced technologies.98 The government also acknowledges that the following areas are more likely to give rise to national security risks as compared with the wider economy: critical suppliers who supply, directly and indirectly, the core areas and parts of the national infrastructure and advanced technologies sectors not in the core areas.99 However, it is made clear in the document that this is not an exhaustive list and that national security concerns could potentially arise in any sector of the economy; and
  2. with respect to acquirer risk, the document suggests that foreign nationality may make it comparatively more likely that an acquirer may pose a risk to national security (although this does not negate the fact that the vast majority of foreign nationals pose no national security risk). Assessments will be conducted on a case-by-case basis, taking into account the people controlling the acquiring entity, the entity's track record in relation to other acquisitions or holdings and transaction rationale (e.g., investing to achieve financial objectives, with no intention to interfere with operations, will indicate a lower risk). In the case of individuals, an assessment will consider the existence of any criminal record and information related to their affiliations. The government is more likely to call in transactions involving 'hostile parties' (i.e., those who may seek to use their acquisition to undermine national security), including other states that are hostile to the UK's national security and parties acting on their behalf or affiliated to hostile states (e.g., through coercion or legal or regulatory control). The assessment will also take into account cumulative ownership (i.e., entities or assets already owned by the would-be acquirer). The risk posed by an acquirer would be comparatively greater if it has control over other entities within the sector or significant holdings within a core area.100

According to the White Paper, regardless of whether parties choose to submit a notification, the government will have the power to call in a transaction for review if it has a reasonable suspicion that (1) it is or may be the case that a trigger event has taken place or is in progress or contemplation, and (2) the trigger event may pose a risk to national security owing to the nature of the activities of the entity or of the asset.101 This call-in power will continue for a prescribed period after the event (the current White Paper suggests up to six months).102 Once called in, the parties must not complete the trigger event until approval is obtained, although they can still take preliminary or preparatory steps (e.g., continuing to discuss contractual or commercial terms). If the trigger event has already taken place, the parties will not be able to take further measures to increase the acquirer's control or take steps that would make it more difficult for the trigger event to be unwound. In such cases, the government may also impose interim restrictions, such as prohibiting the sharing of information or access to certain sites by certain individuals (if there are reasonable grounds to suspect that there is a risk to national security if such measures were not imposed).103 In this respect, it may be in the interest of transacting parties to actively engage with the government early on, if they believe that the government may be incentivised to review the transaction.

The review period currently proposed is 30 working days, potentially extendable by a further 45 working days for cases that raise national security risks, with opportunities for the government to stop the clock while information requests are outstanding.104 For voluntary notifications, the government will undertake a screening process (up to 15 days, extendable by a further 15 days) to identify transactions that do not raise national security concerns such that they need not progress to the full review.105 The government intends to increase its resources and invest in tools and systems dedicated to market monitoring, and will introduce powers to request information in response to specific trigger events to help inform their assessment of whether to call in a particular transaction.106 In addition, it is anticipated that the MOD will implement changes to its contractual arrangements to ensure that defence contractors (and subcontractors) are required to notify it of any plans to sell the business or particular assets.107

As under the existing regime, it is anticipated that the government would be able to approve, impose conditions on or, in extreme cases, block or (fully or partially) unwind a transaction. There would also be penalties (civil, criminal and/or director disqualification) for non-compliance with remedies, completing a trigger event prior to clearance or non-compliance with other orders (e.g., information-gathering requests). If parties felt that conditions had been imposed in an unfair manner, they would have the right to seek an appeal with the High Court challenging the lawfulness of the decision (based on principles of judicial review). Reviews of financial civil penalties would be based on a full merits appeal.

The government expects the new regime to produce 200 notifications per year, with half of those cases requiring a full national security assessment and half of those cases (i.e., around 50 cases per year) requiring conditions for clearance. This constitutes a significant increase in reviews, with only eight cases to date having been reviewed for national security concerns since the Enterprise Act came into force in 2002. The new regime is thus likely to affect deal timing in a number of cases going forward. Owing to the relevance of the buyer to the government's decision to intervene and risk assessment, there may also be a greater focus during auction processes on the risk a bidder poses in terms of national security concerns (in addition to those posed from an antitrust perspective) going forward. There is no indication in the White Paper as to when the government expects the new regime to come into force, so companies will need to remain vigilant to developments in this area. However, since primary legislation will be required to introduce the new regime, it is not expected to enter into force during 2018.

When the new regime is introduced, the government will remove the national security considerations from the public interest and special public interest regimes under the Enterprise Act. In doing so, this will remove national security concerns from the remit of the CMA. Although the CMA will remain the competent authority for competition law purposes (and its role in public interest interventions related to media plurality and financial stability will remain the same), national security matters will be assessed separately and dealt with by the government.

The government was keen to emphasise when first introducing the prospect of long-term reforms that '[s]crutiny does not mean making any part of the UK's economy off-limits to foreign investment' and that the proposals are not 'in any way designed or intended to limit market access for any individual countries'.108 The government also stressed its intention for the United Kingdom to remain 'amongst the most open economies to foreign investment' and emphasised that the measures will 'reinforce this by strengthening safeguards'. Greater opportunities for scrutiny does not mean prevention; however, this process will need to be factored into deal timelines, and appropriate assurances in terms of cooperation from both the target and the seller and appropriate risk allocation mechanisms built into transaction documents, going forward.

ii Brexit

Following the referendum held on 23 June 2016, the British people voted to leave the EU. The United Kingdom is due to leave the EU on 29 March 2019. After a time-limited implementation period (subject to the Withdrawal Agreement being ratified), to conclude at the end of 2020, the United Kingdom and the EU will enter into a new relationship. At the time of writing, it is unclear exactly what this relationship will be.

Until the United Kingdom leaves the EU, it will need to continue to comply with EU law, including the aforementioned thresholds for interfering with the freedom of movement of capital and freedom of establishment principles. In addition, the EUMR will continue to apply to concentrations meeting the relevant thresholds.

On exiting the EU, the United Kingdom will remain a member of the World Trade Organization (WTO) and will need to continue to meet its obligations under its BITs and the WTO General Agreement on Trade in Services, which sets out WTO members' rights and freedoms in relation to investing in the UK's markets. It will also continue to act in accordance with its commitments on freedom of investment as a member of the Organisation for Economic Co-operation and Development (OECD). The government has asserted in this respect that the 'UK will remain an open economy that welcomes foreign investment'.109

The effects of Brexit on the current competition merger control process will depend upon the Brexit deal agreed. Unless the new regime alters the position, the UK and EU merger control regimes will be separated and there will be the potential for parallel reviews by the CMA and the Commission, which is likely to increase costs for transacting parties.110

In terms of the effects of Brexit on the public interest intervention regime in the United Kingdom, if the United Kingdom joins the EEA (which seems unlikely in the political climate at the time of writing), the same rules on interventions in the public interest will apply as under the terms of EU membership. However, if Britain is outside the EEA, the UK government would be free to widen the regime to intervene on industrial policy or public interest grounds, subject to international obligations and BIT terms.

The long-term effects of Brexit (in whatever form it takes) on foreign investment into the United Kingdom remains highly uncertain. The EY UK Attractiveness Survey 2018 reported some decline in predicted foreign investor sentiment towards the United Kingdom in the long term. In particular, while the proportion of investors intending to establish or expand operations in the United Kingdom during the next 12 months remained stable (at 24 per cent of respondents), more than one-third of investors globally (36 per cent) expected the UK's attractiveness for FDI to decline in the next three years. Further, while 30 per cent of investors said that Brexit may cause them to move assets out of the United Kingdom in the future, only 8 per cent of investors expected to reduce their UK activities in the next three years.111

iii EU Foreign Direct Investment Screening Resolution

In September 2017, the Commission unveiled proposals to set up a European framework for screening FDI into the EU.112 The initiative allows for greater cooperation between Member States, with obligations to inform other Member States and the Commission of the intention to screen a FDI within five working days and to be open to comments from other Member States. The Commission could also issue a (non-binding) opinion on an FDI planned or completed in a Member State.113 The proposal is currently under discussion among governments and European Parliament lawmakers. If the initiative comes into force before the end of any Brexit implementation period, the United Kingdom will be subject to the regime until the implementation period concludes in December 2020. This EU-level FDI screening regulation is likely to come into effect in the summer or autumn of 2020.


1 Alex Potter is a partner at Freshfields Bruckhaus Deringer LLP. The author would like to thank Sarah Parker (associate), Alex Calloway (senior associate), John Tolman (senior knowledge lawyer) and Evgeniya Rubinina (senior associate) for their contributions to this chapter.

2 Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (EU Merger Regulation (EUMR)).

3 For example, in the water sector, a special regime applies to mergers between licensed water companies. The Competition and Markets Authority has a duty to refer mergers involving two or more water enterprises to 'Phase II' unless certain turnover thresholds are not exceeded (Sections 32 and 33 Water Industry Act 1991, as amended by Section 15 Water Act 2014). There are limited exceptions to this duty. It will be able to accept undertakings in lieu of a mandatory reference in certain circumstances (Section 33D Water Industry Act 1991 as inserted by Section 14 Water Act 2014). Water supply and sewerage licences are also granted by Ofwat based on an assessment of a potential operator's managerial, financial and technical competencies.

4 For example, the acquisition or increase of 'control' over a UK authorised financial services firm (including banks, investment firms and insurers) requires the prior approval of the appropriate UK financial services regulator. Acquiring control for these purposes includes where a person holds 10 per cent or more of the shares or voting power of the authorised firm or, as a result of its shares or voting power, is able to exercise significant influence over management. Control is increased when the percentage of shares or voting power held crosses certain specified thresholds, or if the acquirer becomes a parent undertaking of the UK authorised firm. A parallel notification regime exists for reductions in control crossing particular thresholds (see Sections 178 to 184 Financial Services and Markets Act 2000).

5 For example, European Union (EU) rules, implemented in the United Kingdom, specify that an entity operating an airline within the EEA must be majority-owned and effectively controlled by an EEA Member State or nationals of such Member States. This requirement is reflected in the basic licensing requirements for commercial air carriers whose principal place of business is the United Kingdom. See https://www.caa.co.uk/Commercial-industry/Airlines/Licensing/Requirements-and-guidance/Airline-licensing/.

6 See Government Green Paper, 'National Security and Infrastructure Investment Review', October 2017, at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/652505/
2017_10_16_NSII_Green_Paper_final.pdf (National Security Review Green Paper), pages 2 and 7.

7 For further information, see https://www.gov.uk/government/organisations/department-for-international- trade/about-our-services. Further, www.great.gov.uk, a DIT website, provides information about investing in the United Kingdom.

8 'National Security and Investment' White Paper, available at https://www.gov.uk/government/consultations/national-security-and-investment-proposed-reforms (the White Paper), see Foreword, page 3.

10 EY UK Attractiveness Survey, June 2018: 'In transition', available at www.ey.com/uk/en/issues/business-environment/ey-uk-attractiveness-survey, see page 4.

11 Ibid., pages 4 and 5.

12 Ibid., page 8.

13 In certain cases, transactions meeting the EU thresholds may be reviewed in whole or in part by competent authorities of Member States (under Article 4(4), 9, 21(4) or 346 of the EUMR). Transactions not meeting the EU thresholds can also be referred to the European Commission (the Commission) in certain cases (under Articles 4(5) and 22 of the EUMR).

14 The Competition and Markets Authority (CMA) considers whether the transaction may result in a substantial lessening of competition within any market or markets in the United Kingdom or a substantial part of it for goods or services. The Commission considers whether the transaction may significantly impede effective competition in the EU or a substantial part of it.

15 Article 21(4) EUMR.

16 In Case No. IV/M.567, Lyonnaise des Eaux/Northumbrian Water [1995], the Commission recognised the legitimate interest of the UK authorities in applying the relevant provisions of the water regulatory regime contained in the Water Industry Act 1991. However, in Case No. IV/M.1346, EDF/London Electricity [1999], the Commission rejected the UK's request for use of the legitimate interest provisions to apply aspects of the electricity regulatory regime. It held that the EUMR would not prevent the UK authorities from imposing regulatory measures on the electricity industry and, as such, the interest in question was not aimed at the transaction itself.

17 This provides that 'any Member State may take such measures as it considers necessary for the protection of the essential interests of its security' so long as such measures 'shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes'. Using this provision, Member States have in the past investigated the military aspects of a transaction, while the Commission investigated the civilian aspects.

18 The Secretary of State for Business, Energy and Industrial Strategy has the power to intervene in all public interest cases, except media mergers, in which the Secretary of State for Digital, Culture, Media and Sport can intervene.

19 Section 59 Enterprise Act.

20 See Lockheed Martin Corporation/Stasys Ltd (2005) and Atlas Elektronik GmbH UK/ Qinetiq's Underwater Systems Winfrith Division (2009).

21 Section 58 Enterprise Act.

22 Section 58(3) and (4) Enterprise Act. In October 2008, the Enterprise Act was amended to include the interest of maintaining the stability of the UK financial system as a specified ground for intervention by the Secretary of State. The new ground was specified to accommodate the Lloyds TSB Group plc/HBOS plc merger, which took place in the context of the financial crisis in 2008 and raised a number of competition law concerns (discussed further below).

23 Article 49 of the Treaty on the Functioning of the European Union (TFEU) prohibits, with certain exceptions, restrictions on the freedom of establishment of nationals of one EU Member State in the territory of another Member State.

24 Article 63 TFEU prohibits, with certain exceptions, restrictions on the movement of capital between EU Member States.

25 The UK government holds golden shares in a number of companies, particularly in the defence sector, including Rolls-Royce, BAE Systems and Qinetiq – see The Economist, 'Defence industry: Take your partners' (9 April 2016), available at www.economist.com/news/britain/21696551-defence-firms-look-joint-ventures-boost-exports-and-profits-take-your-partners. In August 2017, the UK government completed the sale of the state-backed Green Investment Bank (GIB) to a consortium led by the Macquarie Group. Following the sale, five independent trustees will hold 'special shares', giving them power to approve or reject any changes in GIB's green purposes in the future. See https:// www.gov.uk/government/news/uk-governments-sale-of-green-investment-bank-completed.

26 Practical Law Company, Practice note, 'Competition regime: Utilities', available at https://uk.practicallaw.thomsonreuters.com/Document/Ib5554892e83211e398db8b09b4f043e0/View/FullText.html.

27 Case C-98/01 Commission v. United Kingdom [2003] ECLI:EU:C:2003:273, Paragraphs 44 and 52.

28 See 'Hinkley Point: Is the UK getting a good deal?', at www.ft.com/content/9037d7c4-7ade-11e6-b837-eb4b4333ee43.

30 Ibid.

31 Section 11(2) Industry Act.

32 Sections ۲۳ and ۲۶(۱) Enterprise Act.

33 Section 129 Enterprise Act. A business also need not be trading to constitute an enterprise.

34 For completed transactions, the authority only has jurisdiction to investigate within four months of the date of the merger's completion, or, if later, from the earlier of (1) the date on which material facts about the merger are made public or (2) the date on which the CMA is informed of the merger.

35 Section 23A of the Enterprise Act lists the activities by which a company will be considered a 'relevant enterprise'. The list is relatively wide-ranging, for example capturing enterprises whose activities include 'owning, creating or supplying intellectual property relating to the functional capability of computer processing units'.

36 See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/715167/guidance_on_changes_to_the_jurisdictional_thresholds_for_uk_merger_control.pdf, page 6. The new lowered thresholds for intervention were used for the first time on 17 June 2018 when the Secretary of State issued a public interest intervention notice with respect to the anticipated sale of Northern Aerospace to Gardner Aerospace Holdings Limited (a subsidiary of Chinese aerospace and mining company Shaanxi Ligeance Mineral Resources Co Limited). Northern Aerospace had turnover in the United Kingdom exceeding £1 million and manufactured products that constituted 'restricted goods' within the meaning of the Act. The transaction concerned the UK aerospace industry, which was described as 'a strategic priority for defence' by the Ministry of Defence (MOD) in its representations to the CMA, suggesting that similar transactions may also be subject to review going forward. For further details, see https://www.gov.uk/government/publications/proposed-acquisition-of-northern-aerospace-limited-by-gardner-aerospace-holdings-limited-decision-notice.

37 Section 42(1) and (2) Enterprise Act. The CMA must also not have made a reference to a Phase II investigation on competition grounds nor taken a decision not to make a reference or to accept undertakings in lieu of a reference.

38 Section 59(1) and (2) Enterprise Act.

39 Section 129 Enterprise Act; the term 'enterprise' is defined as the activities or part of the activities of a business.

40 Section 59(3B) Enterprise Act.

41 Section 59(3C) and (3D) Enterprise Act.

42 Section 67(1) and (2) Enterprise Act.

43 The CMA is under a formal obligation to bring to the attention of the Secretary of State any cases it believes raise material public interest considerations under review from a competition standpoint (see Section 57(1) Enterprise Act), which is what, for example, provoked the government's probe into Trinity Mirror's proposed purchase of the Express and Star newspapers from Northern & Shell in April 2018.

44 Mergers that raise public interest considerations may come to the attention of the Secretary of State through press coverage, or as a result of representations made by third parties. Government departments and public bodies, such as the utility sector regulators, are also expected to be alert to the possibility of public interest concerns arising in relation to a merger and to raise concerns with the Secretary of State. Department procurement policy and standard contractual terms or other regulatory requirements may bring a transaction to the attention of a government department (e.g., the MOD requires contractors to notify it of any intended, planned or actual change in control of a contractor).

46 When the Secretary of State has intervened on media public interest considerations, Ofcom is required to give a report to the Secretary of State on the public interest considerations of the case (Sections 44A and 61A Enterprise Act and Section 4A Enterprise Act 2002 (Protection of Legitimate Interests) Order 2003 (PLIO)).

47 The Secretary of State must accept the CMA's competition and jurisdictional assessment, including on the need for a reference to Phase II and whether undertakings in lieu of a reference would be suitable; however, the final decision concerning referral remains with the Secretary of State. A finding that a merger results in a substantial lessening of competition will be treated as adverse to the public interest unless it is justified by one or more public interest considerations (see Section 45(6) Enterprise Act).

48 Section 56(1) Enterprise Act.

50 Sections 54(2) and 66(2) Enterprise Act and Section 12(2) PLIO.

51 Sections 54(5) and 66(3) Enterprise Act and Section 12(3) PLIO.

52 Sections 55(3), 54(7), 66(4) and 66(7) Enterprise Act and 12(5) and (8) PLIO.

53 Section 56(6) Enterprise Act.

55 See Finmeccanica SpA/AugustaWestland NV (2004), Finmeccanica SpA/BAE Systems plc's avionics and communications business (2005), General Dynamics/Alvis PLC (2004), Lockheed Martin Corporation/Stasys Ltd (2005), General Electric Company/Smiths Aerospace (2007), Atlas Elektronik GmbH UK/Qinetiq's Underwater Systems Winfrith Division (2009). Also see Gardner Aerospace Holdings/Northern Aerospace (2018), MOD undertakings referred to in the CMA report.

56 The MOD and other third parties raised various concerns, including that (1) AEUK might choose to rationalise its defence activities, and that essential UK capabilities (from Qinetiq's Underwater Systems Winfrith division (USW) could be run down, sold off or transferred abroad to be combined with AE GmbH other foreign-based activities, (2) ultimate ownership and control of USW would pass to a non-UK company (Atlas Elektronik GmbH), which could influence USW in ways that could prejudice national security, (3) USW was privy to classified information and technology, some of which was only available to UK nationals – leaks to non-UK owners could prejudice the operational security and capability of the UK armed forces and of any other country that agreed to share sensitive information with the United Kingdom, and (4) USW's acquisition by AEUK, a major manufacturer of underwater systems, could call into question the future independence and impartiality of research output and customer support provided by USW for the MOD.

62 Other cases reviewed from the perspective of media plurality include BSkyB's acquisition of a 17.9 per cent stake in ITV (2007). In this case, the Secretary of State imposed remedies recommended by the competition authority of requiring BSkyB to partially divest its shares in ITV down to a level below 7.5 per cent, with behavioural undertakings not to dispose of the shares to an associated person, not to be represented on the ITV Board and not to re-acquire shares in ITV. See https://assets.publishing.service.gov.uk/media/55194c63ed915d1424000382/sky_berr_decision.pdf. In August 2012, the acquisition by Global Radio Holdings Limited of Guardian Media Group's radio stations. Following the advice of Ofcom, the Secretary of State did not make reference to a Phase II review on media plurality public interest grounds and the case fell to be reviewed on competition grounds by the competition authority. See https://www.gov.uk/government/news/global-radio-and-guardian-media-group-radio-merger-not-to-be-considered-on-media-plurality-grounds--2. In 2010, News Corp's proposed acquisition of 60 per cent of shares in BSkyB that it did not already own was also reviewed.

64 Sections 55(2), 66(6) and Schedule 8 Enterprise Act and Section 12(7) PLIO.

65 The MOD will negotiate undertakings with the parties on the Secretary of State's behalf for mergers involving national security considerations.

66 Where it quashes the whole or part of that decision, the Competition Appeal Tribunal (CAT) may refer the matter back to the original decision-maker with a direction to reconsider and make a new decision in accordance with the ruling of the CAT.

67 Section 237 Enterprise Act.

68 Section 24 of the Freedom of Information Act 2000 (FOIA).

69 Section 26 FOIA.

70 Section 1 Lobbying Act. For more information on the process of registration, see the web page of the Office of the Registrar of Consultant Lobbyists, available at http://registrarofconsultantlobbyists.org.uk/.

71 Office of the Registrar of Consultant Lobbyists, 'Guidance on the requirements for registration', available at http://registrarofconsultantlobbyists.org.uk/wp-content/uploads/2015/12/20151111Guidance-on-the-

72 Section 5 Lobbying Act.

73 At the time of writing, according to the United Nations Conference on Trade and Development (UNCTAD), the United Kingdom has signed 105 bilateral investment treaties (BITs), of which 94 are in force (see UNCTAD Investment Policy Hub listing of UK BITs, available at http://investmentpolicyhub.unctad.org/IIA/IiasByCountry#iiaInnerMenu).

74 For example, negotiations are complete for the Comprehensive Trade and Economic Agreement with Canada (CETA), which entered into force provisionally on 21 September 2017 pending ratification by all Member States; however, the sections of CETA dealing with investment protection do not apply provisionally and will only enter into force when CETA has been ratified by all Member States (http://ec.europa.eu/trade/policy/in-focus/ceta/).

75 TFEU, Article 2, Paragraph 1. According to the Commission, by mid 2016, it had given 93 authorisations to open new negotiations and 41 to open renegotiations. In addition, it granted 16 authorisations to conclude new agreements and 21 authorisations to conclude protocols for existing BITs with third countries. See S Schacherer, 'Can EU Member States Still Negotiate BITs with Third Countries?', 10 August 2016, at https://www.iisd.org/itn/2016/08/10/can-eu-member-states-still-negotiate-bits-with-third-countries-stefanie-schacherer.

76 Slovak Republic v. Achmea B.V., Case C-284/16, Judgment, 6 March 2018.

77 Ibid. See Article 2(2) of the UK Model BIT.

78 Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols No. 11 and No. 14, Rome, 4 November 1950.

79 Although the United Kingdom is currently proposing to extend its tax base to non-resident investors disposing (directly or indirectly) of UK real estate, this is not dissimilar to the approach taken by many other jurisdictions and would put foreign investors in a similar position to UK resident investors (who have always been within the scope of UK tax on such disposals).

80 Kraft made certain statements during the offer process suggesting that, at the time, it did not intend to cease operations at the UK factory should its bid for Cadbury be successful. Despite this, Kraft proceeded to close down the UK factory following the takeover and moved its operations to Poland, an act that caused public outcry and, ultimately, resulted in an amendment to the Takeover Code to require bidders to provide more detail about their plans for a target's business and to bind them to those statements.

82 See Reuters, 'Britain could intervene in Pfizer bid for AstraZeneca – Vince Cable' (6 May 2014), available at http://uk.reuters.com/article/uk-astrazeneca-pfizer-lawmakers-idUKKBN0DM13Q20140506.

83 See The Guardian, 'Pfizer's battle to buy AstraZeneca – timeline', at www.theguardian.com/business/2014/may/14/pfizer-takeover-approach-astrazeneca-timeline.

84 See University of Oxford business law blog, 'UK Takeover Code – Bidder Elects to Give Post-Offer Undertakings for the First Time', at https://www.law.ox.ac.uk/business-law-blog/blog/2016/09/uk-takeover-code-bidder-elects-give-post-offer-undertakings-first.

86 See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/694572/Letter_from_Business_Secretary_to_Melrose_Industries_Plc.pdf. The government also suggested that to protect public funding, it may insert change of control provisions into funding agreements to allow the government to claw back funding in the event that a takeover means that the new company does not meet the eligibility criteria to receive the grant or the new company intends a fundamental change to the purpose for which the grant was given. See National Security Review Green Paper, page 18 (see footnote 6).

88 Sellers may also want to explore remedies if conditions to closing are not satisfied for reasons other than their own fault (e.g., through reverse break fees, which may vary according to particular trigger events), if the financial consequences to not closing are sufficiently serious.

93 The trigger events currently proposed include (1) the acquisition of more than 25 per cent of an entity's shares or votes, (2) significant influence or control over an entity, (3) further acquisitions of significant influence or control over an entity beyond these thresholds, (4) acquisitions of more than 50 per cent of an asset, or (5) significant influence or control over an asset. The definition of 'asset' includes real and personal property, intellectual property and contractual rights. The trigger events are currently broadly defined to capture points at which the right or ability to direct an entity's operations or strategic direction or the operation of an asset is acquired. Further guidance is given in the government's draft statement of policy intent as to the meaning of significant influence or control over an entity or asset, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728311/20180717_Statement_of_policy_intent_-_shared_with_comms.pdf. For further information, please refer to Chapter 3 of the White Paper and Chapter 5 of the statement of policy intent.

94 See Chapter 3 of the White Paper, Paragraphs 3.88 et seq.

95 See Chapter 6 of the White Paper, Paragraphs 6.36 et seq.

96 The draft statement of policy intent, as of 24 July 2018, is available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728311/20180717_Statement_of_policy_ intent_-_shared_with_comms.pdf. The final statement will be subject to parliamentary approval.

97 See Chapters 2 to 4 of the draft statement of policy intent for further details.

98 For more details on the core areas and the types of entities and assets more likely to raise national security concerns, see Chapter 2 and Annex A of the draft statement of policy intent.

99 See Chapter 2 of the draft statement of policy intent, Paragraphs 2.30 to 2.34.

100 See Chapter 4 of the draft statement of policy intent for further details.

101 See Chapter 6 of the White Paper, Paragraph 6.03.

102 Ibid., Paragraph 6.32.

103 See Chapter 7 of the White Paper, Paragraphs 7.18 to 7.27.

104 Ibid., Paragraphs 7.28 to 7.30 and 7.37.

105 See Chapter 5 of the White Paper.

106 See the Executive Summary to the White Paper, Paragraph 33.

107 See Chapter 4 of the White Paper, Paragraph 4.13.

108 See National Security Review Green Paper, pages 2 and 7 (see footnote 6).

109 Ibid., Paragraph 151.

110 In the White Paper setting out a proposal for the future relationship between the United Kingdom and the EU (published in July 2018), there is reference to the operation of parallel merger control regimes. In particular, the government included a proposal that it would maintain its current merger control system with 'rigorous UK enforcement of competition law alongside strong co-operation with EU authorities'. Recognising the importance of ensuring that parallel competition decisions are compatible, it further stated that 'the UK will seek to work with the EU to build on established cooperative arrangements, such as those found in existing FTAs, to manage parallel merger and antitrust investigations. This should include provisions on sharing confidential information and working together on live cases, and ensuring that the UK and the EU continue to take a robust approach in enforcing competition rules' (see Paragraphs 108 and 116 of the White Paper, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf). Also see the government's response to the House of Lords EU Internal Market Sub-Committee report on UK competition policy after Brexit (April 2018), available at https://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-internal-market-subcommittee/inquiries/parliament-2017/brexit-competition-inquiry/brexit-competition-publications/.

111 See EY UK Attractiveness Survey, June 2018: 'In transition', available at www.ey.com/uk/en/issues/business-environment/ey-uk-attractiveness-survey,page 3.