National Security and Investment Act

The National Security and Investment Act (NSI Act) came into force on 4 January 2022. The Act gives the government the power to examine and intervene in certain acquisitions made by any individual or organisation that could damage the UK’s national security. The government will be able to enforce certain conditions on an acquisition. If necessary, it will also be able to undo or stop it.

Universities and other research organisations should be aware of the NSI Act when collaborating with other parties to acquire, sell or develop certain entities and assets, known as qualifying entities and assets. The government has powers to assess an acquisition whether it is completed, in progress or in contemplation stage, if it reasonably suspects that such can or might give rise to a national security risk. Note: acquisitions completed before 12 November 2020 are exempt.

The law only applies to qualifying acquisitions referred to as trigger events in the NSI Act. According to the government, your acquisition is a qualifying acquisition if all of the following apply:

• The acquisition is of a right or interest in, or in relation to, a qualifying asset or qualifying entity;
• The entity or asset you are acquiring is from, in, or has a connection to the UK;
• The level of control you acquire over the qualifying entity or qualifying asset meets any of the following thresholds:
  • Your shareholding stake or voting rights in a qualifying entity meets or crosses certain percentage thresholds (for example, it becomes higher than 25%);
  • You acquire voting rights in a qualifying entity that allow you to pass or block resolutions governing the affairs of the entity;
  • You are able to materially influence the policy of a qualifying entity, for example by acquiring the right to appoint members of the board of the entity that enables you to influence the strategic direction of the entity;
  • You are able to use a qualifying asset, or you are able to direct or control its use, or you are able to do so more than you could prior to the acquisition.

A qualifying entity is any entity other than an individual, including a company, a limited liability partnership, any other body corporate, a partnership, or an unincorporated association or trust. In the higher education and research-intensive sectors, a qualifying entity could include, but is not limited to, a foreign or UK:

• University, which is registered as a charitable organisation;
• Private university;
• Trust;
• University spin-out;
• University subsidiary (for example a company that a university has incorporated and carries out specific activities that the university operates);
• Research organisation;
• Private company or corporation doing contractual work with a higher education institution or research organisation.

Qualifying assets include land, tangible, moveable property, and ideas, information or techniques which have industrial, commercial or other economic value (‘intellectual property’). In the higher education and research-intensive sectors a qualifying asset could include but is not limited to:

• Designs;
• Plans, drawings and specifications;
• Software;
• Trade secrets;
• Databases;
• Source code;
• Algorithms;
• Formulae;
• Land;
• Tangible moveable property, such as laboratory equipment.

If you are a party acquiring a qualifying entity or asset in an area that is likely to give rise to national security risks, you might be required by law to notify the government. The 17 sensitive areas of the economy that the government has identified are:

• Advanced Materials;
• Advanced Robotics;
• Artificial Intelligence;
• Civil Nuclear;
• Communications;
• Computing Hardware;
• Critical Suppliers to Government;
• Cryptographic Authentication;
• Data Infrastructure;
• Defence;
• Energy;
• Military and Dual-Use;
• Quantum Technologies;
• Satellite and Space Technologies;
• Suppliers to the Emergency Services;
• Synthetic Biology;
• Transport.

The NSI Act uses mandatory and voluntary notification rules for the acquisition of entities and assets respectively.

You will need to tell the government about a notifiable acquisition by submitting a mandatory notification form online using the UoL NSI notification service registered account. If you complete a notifiable acquisition without submitting a mandatory notification to gain approval from the government, the acquisition is void. There are civil and criminal penalties for proceeding with a notifiable acquisition without gaining the necessary approval.

Acquisition of assets are not subject to mandatory notification. However you can submit a voluntary notification via the UoL NSI notification service registered account if you are a party to a qualifying acquisition that is not covered by mandatory notification and want to gain clarity as to whether the government is going to call in the acquisition. You are not legally required to tell the government about your qualifying acquisition. However, if the government reasonably suspects it may give rise to a national security risk it may still be called in. Submitting a voluntary notification avoids the risk of proceeding with an acquisition that might be later called in and potentially blocked or unwound.

There are 2 different forms that can be used to notify the government about an acquisition:

• Mandatory notification form: the one to use when you are legally required to tell the government about notifiable acquisitions in 17 sensitive areas of the economy.
• Voluntary notification form: the one to use when you are a party to a completed or planned qualifying acquisition that is not covered by a mandatory notification e.g. when selling assets.

To submit a notification form using the UoL NSI notification service registered account, please contact trustedresearch@leeds.ac.uk. All notifications are managed centrally.

Private companies, governments and other organisations are frequently involved in universities’ and other organisations’ research at early stages, often at a pre-commercial stage. Examples of these are contract or sponsored research, sponsoring a research position (e.g. a chair), and sponsoring a research theme. Universities can also be part of research centres in partnership with other public and private stakeholders. In addition, universities can develop spin-out companies for which they might retain some IP ownership. They can also host PhDs and other academic placements from various sources for which the IP might not reside entirely with the university.

If through these agreements a person gains control over a university or research organisation’s qualifying assets, which can include both tangible moveable and intellectual property, for example where such assets are licensed out (exclusively or non-exclusively) by a university, then this is a qualifying acquisition under the NSI Act.

It is also a qualifying acquisition if a party gains control over a qualifying asset generated by the research it has funded. Any agreement that provides for this is also in scope of the NSI Act as a contemplated qualifying acquisition.

Qualifying asset acquisitions do not have mandatory notification requirements and the government can only call in a completed or contemplated qualifying acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a national security risk. You can however, submit a voluntary notification.

UoL takes a risk-based approach to voluntary notifications. If you believe a voluntary notification to the government might be required, please contact trustedresearch@leeds.ac.uk in the first instance.

For more details, examples and access to the mandatory and voluntary notification forms please follow the relevant links below.

• Guidance - National Security and Investment Act

https://www.gov.uk/government/publications/national-security-and-investment-act-guidance-for-the-higher-education-and-research-intensive-sectors/national-security-and-investment-act-guidance-for-the-higher-education-and-research-intensive-sectors

• Guidance - The National Security and Investment Act: guidance for universities

https://www.universitiesuk.ac.uk/what-we-do/policy-and-research/publications/national-security-and-investment-act

• National Security and Investment notification service: mandatory, voluntary and retrospective forms. Accessible at:

https://www.gov.uk/government/publications/national-security-and-investment-notification-service-mandatory-voluntary-and-retrospective-forms