🕵️♀️ WTF is NSI?
In today’s email:
Send me your topic ideas
A win for Vodka & Coke drinkers
Be the first person ever to listen to this tune
The perfect business card for a divorce lawyer
How the UK government is stopping foreign spies
Why the Bank of England is raising interest rates again (and what that actually means)
… and more!
EDITOR'S RAMBLE 🗣
You might not believe me, but the thing I love most about this newsletter is receiving emails from you telling me what you want to see more of.
It makes sure I’m giving you what you want to see (and saves me time having to research a topic).
A few weeks ago, I mentioned the NSI Act in one of the news stories that week.
I had a few people reach out to me asking me if could write about the Act and explain what it is.
So, that’s how today’s newsletter topic was decided.
If you have any ideas for topics, feedback about the newsletter or just want to say hi, drop me an email — I reply to every single one.
🔈️ Quick shoutout — a massive thank you to Anvita Sinha for sharing the newsletter this week! You can use your referral code below to spread the word.
FEATURED REPORT 📰
🕵️♀️ WTF is NSI?
What’s the NSI Act?
The National Security and Investment Act 2021 (NSI Act) is a new set of laws that give the UK government the powers to intervene in business transactions to protect national security.
For example, if a Chinese company is buying a UK company that makes military equipment, the government might rely on the Act to examine the deal.
When did it come into force?
It came into force from 4 January 2022.
Why should law firms care about it?
The NSI Act could affect a bunch of different transactions that commercial law firms will advise on - you’ll see this in the next section below.
If their clients don’t follow the rules, they can end up getting in big trouble - we’ll also get to that later.
So, as a commercial lawyer, you’ve got to know your stuff here.
What type of transactions does it apply to?
There are 17 specific sectors that the government is concerned about (stuff like AI, military equipment and robots).
The Act doesn’t just apply to mergers and acquisitions — it can also apply to:
💼 minority investments (where someone buys a small portion or a minority stake in another company),
🔄 intra-group transactions (transactions that take place within a group of companies and involve no one outside that group),
🗳️ acquisitions of voting rights (when someone buys enough shares or ownership in another company to gain the power to vote on important matters), and
📦 buying of assets including land and intellectual property (IP) — although investigations of assets are more rare than shares in a company.
The NSI Act doesn’t just capture UK deals. If there’s a foreign deal with a link to the UK, that’s also caught — so non-UK lawyers, you also need to be aware of this.
Another thing that makes the application of the Act even wider is that there’s no ‘de minimis’ or minimum threshold to which it applies. So all transactions, regardless of their size or value, must be notified to the government if they meet the criteria for notification.
Here’s a handy flowchart from the law firm Norton Rose Fulbright showing how the NSI Act works (source) 👇️
Who’s actually checking the transactions?
A new team called the Investment Security Unit (ISU) has been put together to review the applications.
However, according to the law, it is ultimately the Secretary of State for Business and Trade (currently Kemi Badenoch) who has the power to decide whether to review a specific transaction and determine what happens next.
How long does the review process take?
The initial review’s done within 30 working days.
The ISU can decide to call the deal in for a full assessment which can another 30 working days — but this assessment time can be extended by another 45 days if needed.
Now, imagine you’re a lawyer advising a time-sensitive client who keeps asking you what the hold-up is — this is how the Act has real-life time implications on deals, even if the deal does finally get approved.
How many deals are affected?
The government released a report about the NSI Act covering January 2022 to March 2022 (its first three months in operation).
In those three months:
222 notifications were made, and
17 deals were given a closer look.
These numbers are way lower than what the government had predicted before the law came into force.
This could be:
because people didn’t know of the rules yet so they failed to report their deals, or
because of lower business activity in that period (it was during Covid and deals slowed down then).
One thing is for sure, though. The number of national security reviews under the NSI Act is much higher than under the previous law - the Enterprise Act - where there were hardly any reviews.
Has the government used the NSI Act to actually block any deals yet?
Yup – the first deal they blocked a Chinese tech company trying to get hold of IP developed in the UK by the University of Manchester. They believed the technology could be used for military purposes and might pose a risk to national security.
Since then, they’ve also blocked two more transactions and imposed conditions on nine other deals.
What happens if you don’t follow the rules?
If a buyer fails to report a transaction that they should have reported, they can get in trouble with:
💰 huge fines,
👮♂️ imprisonment for up to 5 years, or
🚫 the transaction being made void.
What’s good about the NSI Act?
✅ Protects UK's national security: The NSI Act gives the government the power to intervene in business that could harm the UK's national security. So, assuming it works as planned, we’ll be safer because of it.
What’s bad about the NSI Act?
❌ Uncertainty over how it works: The Act has been designed to give the government flexible powers — but that can make it hard to know how the rules will be applied. For example, the term ‘National Security’ is intentionally not defined in the Act so it’s hard to know what it means. Also, if you do make an application, the ISU doesn’t tell you who is investigating the deal. This is to reduce the risk of people trying to influence the individual reviewer. But, for lawyers, it’s frustrating as you don’t have the chance to ask questions or follow up with someone to see how the investigation’s going.
❌ Delays deal timelines: If you’re a lawyer working on a deal where you have to get clearance from the ISU, it could add extra time to you completing the transaction - kind of annoying for you and your client.
❌ Could stifle foreign investment: The NSI Act could deter foreign investment in the UK, as investment from some ‘high risk’ nations could be needlessly blocked. This is bad for the UK economy and could slow down innovation here.
A BIT OF FUN 😄
The perfect divorce lawyer business card doesn't exi- 👇️
IN OTHER NEWS 🗞
Italy has stopped a Chinese state-owned company from taking over Pirelli, a big tire-making company. Italy's government supposedly wants to protect Pirelli's independence. This happened while the US secretary of state visited China (which probably made things a bit awkward).
🥤 Coca-Cola Hellenic Bottling Company (if you didn’t guess, they bottle Coca-Cola) is buying the owner of Finlandia vodka for £172m. Coca-Cola has been distributing Finlandia for many years and they see this acquisition as a way to offer a wider range of drinks to their customers. Herbert Smith is advising Coca-Cola in this deal.
📈 The Bank of England is about to raise interest rates for the 13th time in a row this week. This is in an effort to slow down inflation. To understand how changing interest rates affects inflation, check out our post here.
📱 Foxconn, a company that makes iPhones, is focusing on electric cars instead. This is due to tense relations between the US and China. Foxconn thinks electric vehicles will drive the company's growth anyway. They are already moving some production lines from China to Mexico and Vietnam.
AROUND THE WEB 🌐
🌍️ World: Have a look at the calendar of holidays from every country around the world.
🎶 Music: Check out Spotify Forgotify - the place to discover Spotify tracks with 0 streams. Find some undiscovered music.
🗞️ News: If you’re after apolitical, jargon-free commercial awareness from around the world, you’re in luck! Join 35,000+ readers who start their day with International Intrigue. 100% free.*
* This is an affiliate link. It's free to join for you and if you sign up through us, we will receive a small commission.
STUFF THAT MIGHT HELP YOU 👌
📣 Advertise with us: If you're looking to reach an engaged audience of over 7,000 aspiring lawyers, drop us an email.
👥 Community for aspiring lawyers: If you're struggling with motivation for law firm applications, check out FlowHuddle - a supportive online community, hosting remote co-working sessions, expert office hours and in-person meet-ups.
How did you find today's newsletter?