The National Security and Investment Act 2021 became law on 29 April 2021. It introduces a major new screening regime for investment and M&A activity in relation to targets active in the UK, particularly in certain key sectors that will be subject to the Act's mandatory notification regime. This includes deals relating to key transport infrastructure.
The Government had initially identified 17 key sectors to which that regime would apply. The public consultation on the scope of those rules has now ended and, while the sectors remain unchanged, the Government's response has proposed some adjustments to the types of entities and activities that will be caught within each sector. The responses also offer a guide to the Government's current thinking on where it sees national security risks as most likely to arise, as well as on its appetite for allowing risk (for example, by rejecting proposals that the regime should be subject to a general de minimis financial threshold).
Let's look at the likely scope of the mandatory notification regime in relation to the transport sector.
The approach to ports and harbours has been simplified significantly. An acquisition of an entity that owns or operates a port or harbour will have to be notified if it handled at least one million tonnes of cargo in the preceding year. This threshold will capture all of the UK's 51 major ports. Those who own and operate terminals, wharves or other similar infrastructure within those ports will also be covered. However, the Government has removed any reference to passenger capacity and the type of goods handled at a port, which could have brought a large number of smaller harbours within scope.
The Act's application to airports has also been clarified, with confirmation that an entity operates an airport if it has "overall responsibility for its management". This responds to a concern that subcontractors and service providers who contribute to the running of an airport could have been caught by the mandatory notification regime. The minimum operating size for an airport to be caught remains at six million passenger movements or 100,000 tonnes of freight, but the initial reference year will be 2018 to reflect the recent impact of the COVID pandemic on airport traffic. Providers of en route air traffic services in the UK, and the owners of such providers, are also caught.
This narrowing of the proposed definitions, combined with the raising of the equity threshold at which the regime will apply to deals, will mean that the mandatory regime does not apply to quite as many deals in the transport sector as it might have. It will nevertheless still catch a large number of deals each year, and the Government's consultation response makes clear that deals that no longer fall within the mandatory notification regime will still be reviewed under the call-in regime if necessary (noting the acquisition of smaller ports as an example). The Act will therefore remain a key consideration for many firms active in the UK transport sector, whether they are looking to buy, sell or secure investment.
To hear more about the Act, and for an opportunity to ask questions, sign up to our webinar on 18 May.