This post is part of a series on ‘Economic Aspects of the Constitution’. The other posts in the series will be available here.
Introduction
Section 12 of the Justice and Security Act 2013, the statute which made ‘closed material procedures’ available in civil proceedings generally, requires the Secretary of State to prepare an annual report which provides details of (amongst other things) the number of applications made under that Act and the number of declarations by the courts that proceedings before it are ‘proceedings in which a closed material application may be made to the court’. These reports function in practice as a useful overview of the sorts of matters that are being litigated in the national security sphere. In recent years, the reports show what is in effect a new category of proceedings: cases involving a challenge to an order made under the National Security and Investment Act 2021 (‘NSIA’), the centrepiece of the United Kingdom’s efforts to protect its ‘economic security’. This post outlines the Act, the use to which it has been put, and the litigation which had so far taken place in relation to it. It concludes by considering briefly the place of the Act within what has become a much bigger project of ‘economic security’ in the modern UK.
The 2021 Act
The NSIA 2021 is organised around the concept of a ‘trigger event’, where a person takes control of a ‘qualifying entity’ or ‘qualifying asset’ (defined broadly, so as to include for example ‘ideas, information or techniques which have industrial, commercial or other economic value’ such as source code or algorithms). The Secretary of State (in practice now the Chancellor of the Duchy of Lancaster) may ‘call in’ such an acquisition where it is reasonably suspected that a trigger event has taken place (or will, if plans are carried out, take place) and that event has given or may give rise to a risk to national security. Certain types of acquisition are, by virtue of a set of regulations made under the Act, ‘notifiable’ – the Secretary of State must be informed of them in order to decide whether to call them in, and a notifiable acquisition which is completed without the Secretary of State’s approval is void (though can be retrospectively validated). Otherwise, notification can take place on a voluntary basis. And an acquisition can be called in even where it has not been notified. Acquisitions, we might note, are subject to these rules regardless of the jurisdiction with which the acquirer is associated: this is not purely about foreign involvement in sensitive facets of the economy.
Ultimately, the Secretary of State is empowered to make what are called in the Act ‘final orders’ where satisfied (on the balance of probabilities) that a trigger event has taken place (or will take place if plans are carried out) which has or would give rise to a risk to national security and where he or she ‘reasonably considers that the provisions of the order are necessary and proportionate for the purpose of preventing, remedying or mitigating the risk’. What might be required by a final order under the Act is stated very broadly: it may, most strikingly, include provision ‘requiring a person, or description of person, to do, or not to do, particular things’. The content of a final order can be kept secret, including from those on whom the Act requires it to be served, on commercial or security grounds. There is provision within the Act for the giving of ‘financial assistance’ in relation to the making of final orders, though the annual reports so far published all state that no such assistance was given in the relevant period.
The notifiable acquisition regulations originally identified seventeen categories of acquisition that had to be notified to the authorities, under headings such as ‘advanced materials’, ‘quantum technologies’ and ‘synthetic biology’. Several of these categories link directly and clearly to other prominent aspects of the economic security project: ‘advanced materials’ encompasses ‘critical minerals’, the subject of a recent Government strategy document, while the category of ‘energy’ addresses an area of the economy which has been the subject of repeated interventions over the last few years. The government has recently confirmed its intention to make a number of changes to these regulations, the most notable of which are the addition of ‘water’ as one of the categories of notifiable acquisition and the amendment of a number of categories to exclude acquisitions considered to present only a low risk. Generally, however, the Government has taken the view that the NSIA regime is ‘a system that is working’.
The use of the 2021 Act
A full assessment of the use of the 2021 Act is beyond the scope of this post. However, three points are worth making. One is that, although the Government is keen to emphasise that most businesses will never need to interact with it, the 2021 Act has been used at scale. The most recent of the annual reports whose publication is required by the Act shows, for example, show that over 1000 acquisitions were reviewed between 1 April 2024 and 31 March 2025: around 90% of these following a mandatory notification, and the rest following a voluntary notification. This is not, therefore, a niche project, reviewing only exceptional or unusual acquisitions. The second point perhaps follows logically from this first. Not all of the acquisitions which are reviewed will be those of entities whose national security significance is immediately obvious. Indeed, even some final orders under the Act – made in relation to only a small fraction of acquisitions reviewed (17 in 2024-25) – stand out on this basis. Late last year, for example, a final order was made in relation to the acquisition of Investigo Limited by Career International AP (Hong Kong) Limited. The acquisition was approved subject to the condition that the parties comply with ‘a comprehensive package of security and handling requirements that protects data and information.’ Investigo is a recruitment consultancy; its purchaser describes itself as a ‘Leading Total Talent Solutions Provider’. While no doubt the Chancellor of the Duchy of Lancaster and those who advised him would be able to explain how the test in the 2021 Act was met in relation to this acquisition – almost certainly as a result of connections between the acquiring party and China – the transaction is perhaps not what one would instinctively associate with a regime of investment screening for national security purposes.
Third, and again perhaps following from the range of circumstances in which final orders have been made, the nature of what is required under a final order varies very widely. Many of them require that apparently minor internal arrangements be made. So, for example, when a chunk of British Telecom was bought by the Indian conglomerate, the final order required that BT ‘establish a National Security Committee within BT to oversee strategic work that BT performs which has an impact on or is in respect of the national security of the United Kingdom.’ Other typical requirements are to ‘provide advance notification to HM Government before undertaking certain business activities’ or to ‘retain certain existing operational activity in the UK’. In some cases, however, the final order has been significantly more intrusive. In late 2022, for example, a final order was made in relation to the purchase, by Nexperia BV, of Newport Wafer Fab, a semi-conductor fabrication plant in Wales, with the purchaser taking its 14% shareholding to 100%. The order required Nexperia BV to sell at least 86% of the entity it had bought ‘within a specified period and by following a specified process’, apparently on the basis that Nexperia is owned by a firm part-owned by the Chinese state. Nexperia later sold the plant to an American firm.
Similarly, when the regional broadband provider Upp was purchased by the investment company LetterOne, a final order was made requiring that LetterOne sell it (and that Upp ‘complete a security audit of the Upp network prior to sale’). The reason for this final order was, it is known, that LetterOne was ultimately owned by a group of Russian individuals, several of whom were sanctioned by the EU and the UK following the Russian invasion of Ukraine as a result of their links to the Kremlin or support for the Government of Russia. This acquisition had taken place in January 2021; though the NSIA was not enacted until the end of that year, it was drafted so as to permit the calling in of acquisitions which took place in the period between the Bill’s introduction into Parliament and its commencement.
Litigating the 2021 Act
A challenge to a final order under the 2021 Act is by way of judicial review, subject to a 28-day time limit (barring ‘exceptional circumstances’). I noted above that such challenges have begun to show up in the annual reports under the JSA. So far, two appear to have been decided by the High Court (a challenge to the final order relating to the Nexperia purchase was widely reported but seems not to have proceeded). The first such challenge which was determined was that to the final order made in relation to LetterOne, where a number of familiar public law grounds were invoked. Of most interest was the consideration of A1P1 of the ECHR, with it being accepted that the right in question – that is the right to peaceful enjoyment of one’s possessions – was engaged by the forced sale, though the parties disagreed on whether it should be conceptualised as an expropriation or mere control of property (Mrs Justice Farbey suggested, at [192], that the ‘degree of State involvement in overseeing and monitoring the sale of Upp’s shares under the stringent terms of the Order brought the practical difference between a de facto expropriation and control of use to near vanishing point.’)
Either way, the question resolved itself into one of proportionality, which in turn centred on the absence of compensation to make up the difference between what the claimants considered to be fair market value and the price they had achieved via the forced sale. The judge identified (at [225]) a series of reasons for thinking that notwithstanding the grant of compensation there had been no failure to strike a fair balance, as is required by the Bank Mellat formulation of the proportionality test:
An appeal (on the compensation point alone) was dismissed by the Court of Appeal late last year, though the Supreme Court has granted permission to appeal. One question will be whether the Supreme Court is willing to go beyond the extant Strasbourg jurisprudence, none of which, the Government told the Court of Appeal, ‘“comes close” to requiring that a State must compensate against any diminution in value flowing from a forced sale, or for past investment and/or possible future profits’ ([93]). In the appellants’ favour is that it seems to be accepted by all concerned that no harm would be done to the UK’s national security by compensating them: what mattered to the Government was that those who had bought Upp ceased to control it.
The other case under the 2021 Act so far decided by the High Court relates to the acquisition of Future Technology Devices International Limited, which ‘develops semiconductor devices and related cables and software devices, all of which focus on USB connectivity.’ A final order made in late 2024 required the purchaser, FTDI Holding Limited – established by a group of investment funds backed by the Chinese state – to sell its share of the entity it had just purchased. Here too the A1P1 challenge failed: in light of an assessment to which the court of course gave great weight, it was accepted that there was a ‘real risk to national security from the acquisition’ which was ‘of sufficient seriousness to justify the imposition of significantly intrusive measures on the acquirers’ ([115]). Perhaps the most notable part of the FTDI judgment relates to the adequacy of the reason given for the making of the final order, with Mr Justice Butcher noting that ‘the only potentially relevant paragraphs of the Final Order [were] largely formulaic, uninformative and by no means comprehensive’ ([133]). Nevertheless, it was concluded ([134]) that this inadequacy did not in fact ‘reflect the absence of a focus by the decision-maker on what the reasons were’, with those reasons encapsulated in documentation which had been provided to the court. The question then arose of what the consequence of this should be. What followed from failure to give adequate reasons? In the absence of express provision in the 2021 Act requiring such a result, the court rejected the idea that non-compliance with the duty to give reasons had the effect of invalidating the order. The final order was upheld. Earlier this year, however, it was reported that the sale required by the final order had not yet taken place. Any potential purchaser will of course be aware of the likelihood that its own acquisition of FTDI will be scrutinised under the NSIA regime.
So far, then, we might group the NSIA case law together with the modern case law on sanctions (see in particular Shvidler) in suggesting that – contrary to what one might expect on the basis of the history of the common law – the right to property under the ECHR is not, or at least not at this point in time, any more substantial an obstacle to the state’s pursuit of its national security goals than is, say, the right to a private and family life. Prominent within this emerging body of case law, that is, is an emphasis on the primacy of Parliament’s judgment in enacting the statutory scheme, and the need to give due respect to the executive’s judgment in putting that scheme to work. This is significant given that the economic security project of which the NSIA is, by all accounts, the centrepiece would seem liable to see various forms of interference take place with property rights on national security grounds: see, in this regard, the government’s desire to hold on to the idea that the forthcoming nationalisation of British Steel is necessary, at least in part, in the interests of national security. Though the common law of course provides its own protection – in the form of a series of interpretive presumptions – to property rights, these appear not to have been relied on so far, and the treatment of the principle of legality in Ismailov (another sanctions case) would suggest that there is little scope for such a challenge to succeed, notwithstanding that the language of section 26 of the 2021 Act seems, in the terms of Simms, strikingly ‘general’.
Conclusion
The language of ‘economic security’ is omnipresent lately. The phrase occurs a number of times in the recent King’s Speech, following on from the Prime Minister’s stated desire – in last year’s National Security Strategy – to ‘unite society behind a simple argument that economic security is national security.’ So far, however, a logical core of the economic security project in the United Kingdom is difficult to discern. For every occasion on which the phrase is used to connote something relatively precise, there would seem to be many uses that are much looser: see, for example, the claim in the King’s Speech that the government ‘believes that the United Kingdom’s economic security depends on raising living standards in every part of the United Kingdom.’
At its core, however, the economic security project would seem to be about minimising the UK’s exposure to ‘economic coercion’, where some other state ‘weaponizes’ the UK’s reliance on it for goods – raw materials or components, or something else – on which the UK state or its economy relies. In that light, though it does other things too, the NSIA makes a direct and obvious contribution to the project, preventing control over actors and assets deemed vital from being taken over by those who will manage them without reference to, or even against, the country’s interests. This, though, is the easy part of the economic security project: these actors and assets already exist, and the question is who exercises control over them. In a much greater range of cases, what the United Kingdom needs in order to protect itself against economic coercion does not (yet) exist within the jurisdiction. To the extent that the economic security project involves creating the relevant things (a stockpile of critical minerals, say, or an energy supply which is insulated against developments in the Strait of Hormuz) it will prove more difficult – is already proving much more difficult – than the making of a few final orders under the National Security and Investment Act.
Paul Scott teaches at the University of Glasgow
(Suggested citation: P. F. Scott, ‘Economic Security and the NSIA 2021’, U.K. Const. L. Blog (16th June 2026) (available at https://ukconstitutionallaw.org/))
UK Constitutional Law Association 