I've previously written on whether the uptick in the UK Government’s (“Government”) intervention rate was symptomatic of the UK public interest regime being used as a means of extracting political commitments, rather than as a means of addressing genuine national security concerns (available here). We also noted that further Government reform to the regime was expected, albeit the timing was unclear.
On 21 June 2020, the Government announced reforms to strengthen its existing powers to intervene in mergers on public interest grounds under the Enterprise Act 2002 (“EA02”). The immediate changes introduce “The need to maintain in the United Kingdom the capability to combat, and to mitigate the effects of, public health emergencies” as a ground upon which the Secretary of State (“SoS”) can intervene as part of the existing merger control regime. Whether the new ground was required is debatable given the existing power of Government to intervene in deals raising “national security” concerns. Public health related concerns seem clearly within the purview of “national security”. This amendment was introduced under Covid-19 emergency legislation and takes effect from 23 June 2020.
It is clear that the tech sector in particular remains high on the Government’s agenda, and deals involving UK tech companies involved in sensitive technology – such as AI and cryptography – can expect to be subject to ever increasing scrutiny. This is especially but not exclusively so for deals involving acquirers who might be seen as “hostile”, such as those with links to China. We also expect to see wider political concerns continue to be reflected in these interventions, making an already less predictable and evidence-based process (as compared to the standard merger control regime) potentially even more unwieldy.
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“The UK is open for investment, but not for exploitation,” the business secretary said. “These powers will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the UK government is prepared to act where necessary to protect our national security.”