Notice

MoU between BEIS and the CMA on the operation of the National Security and Investment Act 2021

Updated 6 February 2024

Introduction

The National Security and Investment Act 2021 (NSIA 21) will operate alongside a number of other statutory and regulatory regimes. It is likely that some acquisitions being assessed by the Department for Business, Energy and Industrial Strategy (BEIS) may also be scrutinised by the Competition and Markets Authority (CMA) under its powers in Part 3 of the Enterprise Act 2002 (EA 02).

This Memorandum of Understanding (MoU) establishes a framework for cooperation, coordination and information sharing in the operation of the NSIA 21 between the CMA and BEIS, collectively referred to as “the parties” throughout this document.

This MoU sets out the legal framework and broad principles for collaboration on the timing of investigations, interim measures, remedies and the sharing of relevant information between the parties. The shared aims of this MoU are to enable closer working between the parties to assist them in effectively discharging their respective regulatory functions.

This MoU is a statement of intent which will guide and be taken into account by the relevant staff and does not give rise to legally binding obligations on the part of either the CMA or BEIS. The arrangements set out in this MoU are subject to what is required or permitted by law.

Background

Under the EA 02, the Secretary of State has powers to intervene in mergers and acquisitions that raise public interest concerns in relation to national security, stability of the UK financial system and public health emergencies. The power to intervene in relation to media plurality is exercised by the DCMS Secretary of State. The national security public interest consideration will be removed from the EA 02 at the commencement of the NSIA 21 creating two distinct regimes, one focusing on national security concerns, the other, under the EA 02, covering competition and non-national security public interest considerations.

The NSIA 21 gained Royal Assent on the 29 April 2021 and will come into force on 4 January 2022. The NSIA 21 modernises government’s powers to investigate and intervene in potentially hostile foreign direct investment, while advancing the UK’s world-leading reputation as an attractive place to invest.  

The role and function of the Investment Security Unit (ISU)

The Investment Security Unit (ISU) sits within BEIS and is responsible for the operation of the NSIA 21.

The ISU will be responsible for coordinating cross-government investment screening activity and for the end-to-end management of national security risks arising from domestic and international economic interactions. The ISU will make use of existing expertise within all relevant organisations, including specific sector teams. The ISU will draw on input from relevant teams to inform recommendations to the Secretary of State. 

The role and function of the CMA

The CMA is a non-ministerial department, established under the Enterprise and Regulatory Reform Act 2013.

The CMA works to promote competition for the benefit of consumers, both within and outside the UK, to make markets work well for consumers, businesses and the economy. ^{[footnote 1]}

The CMA’s statutory responsibilities, in so far as relevant to the matters that are the subject of this MoU, include the review of mergers under Part 3 of the EA 02.

The CMA has a duty to refer for an in-depth ‘phase 2’ investigation any relevant merger situation where it believes that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition (SLC) in a UK market. Following a reference for a phase 2 investigation, the CMA conducts a more detailed analysis to determine whether: (i) there is a relevant merger situation falling within the UK merger control regime; (ii) that relevant merger situation has resulted, or may be expected to result, in an SLC, and (iii) it should take action to remedy any SLC identified.

Although the treatment of national security public interest matters has changed as a result of the NSIA 21, public interest intervention grounds relating to media plurality, financial stability and public health emergencies remain under the EA 02. This means that the CMA’s merger control role may intersect with both the NSIA 21 and the public interest intervention regime. This could involve processes concerning two directorates/units within BEIS (national security and other public interest areas), but also the potential for a merger to be of interest to the CMA, BEIS and a third government department, such as DCMS.

Principles of information sharing

Section 54(1) NSIA 21 empowers a public authority to disclose information to the Secretary of State for the purpose of facilitating the exercise by the Secretary of State of functions under NSIA 21. Section 54(2)(a) empowers the Secretary of State to disclose information received under the NSIA 21 for the purpose of facilitating the exercise by the Secretary of State of functions under the NSIA 21.

Section 241 of the EA 02 empowers public authorities to disclose information for the purpose of facilitating the exercise by the authority of any function it has under the Enterprise Act. Both parties have market monitoring capabilities, and it is not envisaged that either will rely on the other to identify transactions of interest to either statutory regime.

However, both parties may seek to share information on transactions being considered under the NSIA 21 or the EA 02, or both, to enable effective coordination and alignment by the authority of any function it has under the EA 02 or NSIA 21.

This MoU sets out example circumstances in which the parties may consider disclosing information to each other, and the principles and processes which will typically be applicable. It may not always be appropriate to share information, such as for reasons of national security.

CMA

The CMA will continue to engage on an informal basis with BEIS in relation to mergers which are notified to the CMA or which the CMA becomes aware of which might be relevant to the ISU.

In addition, where the CMA is informed that an acquisition has been called in by the ISU, it will endeavour, as soon as reasonably practicable and providing advance notice where it is able, to notify (and update, as appropriate) the ISU on the status of a particular merger. For example:

• if the merger is called in by the Mergers Intelligence Committee or notified to the CMA
• when the CMA intends to launch its Phase 1 investigation
• if the CMA identifies potential competition concerns and intends to proceed to a case reference meeting (CRM)
• when the CMA makes its Phase 1 decision
• if the CMA launches a Phase 2 investigation
• when the CMA issues its Phase 2 provisional findings and any notice of possible remedies
• when the CMA makes its final Phase 2 decision, including on any remedies
• if the CMA issues a notice of extension in relation to an investigation
• if the CMA intends to accept undertakings at Phase 1 in lieu of a reference or if it intends to impose or accept remedies at Phase 2 to address competition concerns
• if the CMA intends to issue an interim order and/or to take any steps under that order (eg whether to grant a derogation, appoint a monitoring trustee or issue directions)

BEIS

The ISU will continue to engage on an informal basis with the CMA, where appropriate, in relation to acquisitions which are notified to the ISU or which the ISU becomes aware of, which the ISU considers may be considered by the CMA at the same time.

In addition, where the ISU is informed that an acquisition is being reviewed by the CMA, it will endeavour, as soon as reasonably practicable and providing advance notice where it is able, to notify (and update, as appropriate) the CMA. For example:

• of the status of the ISU’s investigation, including:
  • when the initial period begins and ends
  • when the SoS issues an additional period notice
  • if the SoS and the parties agree to an additional voluntary period
• if the SoS intends to issue an interim order and/or to take any steps under that order (e.g. to grant a derogation, appoint a monitoring trustee or issue directions)
• if the SoS intends to impose remedies or accept undertakings
• if the SoS intends to use other powers under the NSIA 21 (in particular under section 56 NSIA 21 (duty to provide information and assistance) and section 31 NSIA 21 (interaction with CMA functions))

This information will be disclosed through established points of contact (see below).

Requests for Information and Assistance

Under section 56 of the NSIA 21, the CMA has a duty to provide such information in its possession and any other assistance as the Secretary of State may by direction reasonably require to enable the Secretary of State to exercise his functions under the Act.

Where possible, prior to formally issuing a request under section 56, BEIS will engage with the CMA to discuss the content and timing of the request, taking into account the extent of the request, the resourcing implications for the CMA and whether the CMA already has possession of the information.

BEIS will aim to give the CMA at least five working days to respond to a request under section 56. Depending on the complexity of the request, a longer time period may be reasonable. Where information is required urgently, agreed arrangements should be followed in order to maximise the chance of successful contact.

The types of information and assistance may include, but are not limited to:

• information on current or historical CMA cases
• information the CMA may hold on competition within a given sector
• information on existing interim orders, derogations, final orders or undertakings; or
• information on requests to issue or amend a derogation

Some of the information outlined above will be available in the public domain and BEIS will not seek information from the CMA that can be obtained through public sources or can be obtained through its own resources.

Remedies

Prior to issuing interim orders, final orders or final notifications under NSIA 21 in cases where the CMA is likely to have an interest, BEIS will seek to inform the CMA ahead of time and consider any representations from the CMA.

Similarly, prior to issuing interim orders, derogations, accepting undertakings or issuing final orders under EA 02 in cases where BEIS is likely to have an interest under NSIA 21, the CMA will seek to inform BEIS ahead of time and consider any representations from BEIS.

Through engagement in case meetings and directly with other government departments, appropriate remedies will be developed to mitigate national security risks. Where appropriate, BEIS might seek advice on remedies from the CMA.

In order to avoid potential conflicts between remedies imposed (or accepted) under the NSIA 21 and EA 02, BEIS will, where appropriate, consider aligning the review processes of BEIS and the CMA should it be judged helpful in certain cases, by requesting a voluntary extension period with the merger parties to ensure that remedies are effective and that BEIS and CMA avoid any clash in remedies. This will in general follow the application of an interim order. For national security reasons, it may not always be appropriate to align review processes.

Where a potential conflict may arise between remedies being sought by BEIS and the CMA, this will be escalated to SCS1 level within both BEIS and the CMA for resolution, with further escalation to SCS2 level, (which would include the inquiry group if the CMA is undertaking a phase 2 investigation), if necessary.

Any decisions made under NSIA 21 must be taken on the basis of national security. Where multiple remedies are available to mitigate national security risks, BEIS officials will consider representations from the CMA as to their relative impact on any competition concerns identified by the CMA.

Interaction with CMA Functions Under Part 3 of the EA 02 (NSIA 21, Section 31)

Section 31 NSIA 21 provides for situations where a trigger event considered under the Act for national security reasons is also subject to consideration by the CMA under the merger control regime in Part 3 of the EA 02.

Section 31 NSIA 21 gives the Secretary of State the power, if a final order is in force or a final notification has been given under the NSIA 21, to direct the CMA to do, or not to do, anything under the merger control regime in relation to the trigger event if the Secretary of State reasonably considers that the direction is necessary and proportionate for the purpose of preventing, remedying or mitigating a risk to national security.

Where there are multiple directions available, BEIS officials will consider representations from the CMA as to their relative impact on any competition concerns identified by the CMA.

Engagement with the CMA will be an important part of this assessment. The required consultation with the CMA prior to the Secretary of State giving a direction under section 31 of the NSIA 21 will be facilitated through agreed points of contact at the CMA and BEIS. BEIS will seek to give the CMA as much advanced notice as possible of a direction by the Secretary of State.

Review Period

The parties will maintain regular communication on the functioning of this MoU through the points of contact. Minor changes to the MoU may be agreed in writing between the parties. If, through regular communication, it becomes clear the MoU requires substantive changes, the MoU will be revised.

Points of Contact

The CMA can contact BEIS (ISU) through established named contacts and the shared mailbox: investment.screening@cabinetoffice.gov.uk.

BEIS can contact the CMA via the usual routes.

Time frames under the NSIA 21

Timelines where a mandatory notice or voluntary notice is given:

	What must be done	Timeframe
Mandatory or voluntary notice	SoS must decide whether to accept or reject the notice (s.14(5) and s.18(5))	As soon as reasonably practicable after receiving the mandatory notice
If the SoS rejects the mandatory or voluntary notice	SoS must provide reasons in writing for that decision to the person who gave the notice (s.14(7) and s.18(7))	As soon as practicable
If the SoS accepts the mandatory or voluntary notice	SoS must notify each relevant person (s.14(8)(a)) and s.18(8)(a))	As soon as practicable
	SoS must give a call-in notice in relation to the proposed acquisition or notify each relevant person that no further action will be taken	Within the review period – 30 working days beginning with the day that a notification under s.14(8)(a) or s.18(8)(a) is given.

Process once a call-in notice is given:

	What must be done	Timeframe
Call-in notice given	Assessment period begins on the day the call-in notice is given (s.23(2))
Initial period	30 working days beginning with the day the call-in notice is given (s.23(3)(c))	The assessment period ends at the end of the initial period unless, before the end of the initial period, the SoS gives an additional period notice (s.23(4))
Additional period	45 workings days with the first working day after the day on which the initial period ends (s.23(3)(b))	The assessment period ends at the end of the additional period unless, before the end of the additional period, a voluntary period is agreed (s.23(5))
Voluntary period	Is such period of working days, beginning on the first working day after the day on which the additional period (or the previous voluntary period) ends, as may be agreed in writing between the SoS and the acquirer (s.23(3)(c))	If a voluntary period is agreed, the assessment period ends at the end of the voluntary period, or at the end of any further voluntary period which is agreed (s.23(6))
The SoS must make a final order or give a final notification that no further action will be taken (s.26(1) and (2)(a)).	Before the end of the assessment period

The clock stops during the assessment period from the day on which the SoS issues an information notice under s.19 or attendance notice under s.20 until the SoS gives a notice under section 24(3) that the SoS is satisfied that the requirements of the information or attendance notice have been complied with, or (if earlier) the time specified for complying with the requirements in the notice have passed (s.24(4)).

Confidentiality and Data Protection

The parties will keep any non-public information including the fact of requests and information contained therein confidential.

The parties will comply with data protection legislation in relation to processing personal data when acting as data controllers or data processors.

Signatories

Signed on behalf of BEIS:

Jacqui Ward, Director for National Security and International
Date: 02/12/2021
Department for Business, Energy and Industrial Strategy

Signed on behalf of CMA:

John McInnes, Senior Legal Director
Date: 03/12/21
Competition and Markets Authority

1. Enterprise and Regulatory Reform Act 2013 (ERRA 13), Section 25(3) ↩