By William James
LONDON (Reuters) - The British government will get new powers to block takeovers and corporate deals that threaten national security, according to proposed legislation published on Wednesday that covers potentially sensitive sectors such as defence and energy.
The National Security and Investment Bill will give ministers greater powers to scrutinise and intervene in "malicious" foreign investment, the business department said.
In doing so, it must balance fears that delays, uncertainty and state over-reach might deter sought-after overseas investment, against long-standing concerns that some deals could compromise security or vital infrastructure.
"Hostile actors should be in no doubt – there is no back door into the UK," said business minister Alok Sharma.
"This bill will mean that we can continue to welcome job-creating investment to our shores, while shutting out those who could threaten the safety of the British people."
Earlier this year, ministers blocked Chinese firm Huawei from parts of the UK's telecoms network over concerns about spying. Huawei has said the concerns are groundless.
In 2016, Britain delayed a nuclear power project in England over concerns about Chinese state funding.
Both episodes drew criticism from China but highlighted an increased wariness of perceived threats to national security posed by Beijing, and doubts about existing legislation which provides only limited scope for government intervention.
The United States and Australia have recently upgraded oversight powers.
The new bill will ask companies to seek approval for any potential deal - from takeovers to asset and intellectual property sales - involving a range of sectors, such as defence, energy, transport, artificial intelligence and encryption.
"The new regime involves a sea-change in the UK's approach to national security assessments and will cast a very wide net," said Nigel Parr, partner at law firm Ashurst.
He said there was potential for more uncertainty in deal making and a significant impact on the time it takes for deals to be completed.
The government said the vast majority of transactions would be approved without intervention, and sought to offset concerns about the creation of barriers to investment by promising decisions within 30 days.
Ministers will have the power to retrospectively scrutinise deals they were not told about for up to five years, although deals that took place prior to Wednesday's announcement will be exempt.
A consultation prior to the publication of the bill highlighted concerns that it disproportionately expanded the government’s powers to intervene in the market. In response, ministers said the laws would explicitly state that national security is the only ground for intervention.
Firms that fail to comply could be fined, and executives could be jailed. Any transaction where notification is deemed mandatory would be declared legally void if procedures are not followed.
(Reporting by William James; editing by Stephen Addison and Mark Potter)