On 17 October 2017, the UK Government announced a set of short- and long-term proposals to amend the UK merger rules. These proposals are significant and seek to more closely scrutinise foreign investment deals that affect national security.
The first set of proposals seeks to lower the merger notification thresholds for two key sectors: the sector of design and production of military and dual use items and the advanced technology sector. For transactions in these sectors, the proposal seeks to allow the UK Secretary of State to intervene when the UK turnover of the target exceeds GBP 1 million (currently, the threshold is set at GBP 70 million). Further, the proposal would remove the current requirement for such transactions to increase the share of supply to or over 25%. According to the UK proposal, small businesses which undertake niche activities or produce highly specialised products in these sensitive sectors may hold information or items which carry significant national security risks. The UK Government proposes to address the anomaly that transactions concerning such small businesses may evade UK review as they fall below the existing merger control thresholds. The proposal would apply equally to foreign and UK investors. It is open for consultation until 14 November 2017.
In addition, the UK Government has proposed a second set of far-reaching measures. These seek: (i) to enhance the call-in power of the UK Secretary of State to review transactions when it is reasonable to believe that UK national security is at risk and when "significant influence or control" is acquired by a national or foreign investor over a UK company; and (ii) to adopt a mandatory notification regime for the acquisition by a foreign investor of significant influence or control over an enterprise active in key national security sectors, such as the civil nuclear, defence, communications, energy and transport sectors. These more wide-reaching proposals are open for consultation until 9 January 2018.
According to the proposal document, the UK Government considers that the proposed reforms are not mutually exclusive. In other words, a reform package could include some or all of the proposals in order to allow the UK Government to find the best balance between its "need to know and ability to act".
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