Is ‘national security’ fast becoming a tool of protectionism?

By on

Growing use of national security grounds to intervene against foreign investments flies in the face of Theresa May’s ‘open for business’ mantra

The news of UK government intervention against the hostile £7 billion bid for GKN, the multi-billion pound engineering business, is an alarming one. If the deal is blocked, this will be the first time in which an acquisition was blocked on the grounds of national security in the UK.

The inquiry comes after Gavin Williamson, the UK defence secretary, raised national security concerns over the proposed acquisition by the turnaround specialist Melrose Industries. This would entail the break-up of GKN. Given that GKN supplies parts vital to key UK defence assets such as Typhoon fighter jets, it could disrupt the supply chain crucial to UK military capabilities.

According to Marc Israel and Philip Broke, London-based partners at the law firm White & Case, “unlike many other jurisdictions [the UK government] does not… require parties to seek approval from a regulator or the government”. The UK also has no general legal framework that governs inward foreign direct investment, and the legislation of the Enterprise Act 2016, the political involvement of the Secretary of State and other ministers were eliminated in almost all merger decisions. The act stipulates that the government can only intervene in merger decisions where a strictly defined “exceptional public interest”, such as national security, arises, indicating the UK’s relative economic openness.

Want to write for the Legal Cheek Journal?

Find out more

However, since the UK’s vote to leave the European Union, Prime Minister Theresa May has indicated a contrastingly cautious approach. While stressing that Britain is “open for business”, one of May’s first acts as prime minister was to delay the final government approval for the Chinese technology and financing supported development of the £18 billion Hinkley C nuclear plant project, citing security concerns.

Such an action mirrors measures taken by the EU and US. Particularly with the release of the Five-Year Plan by China’s Ministry of Commerce in 2016, which explicitly encouraged technology transfers to China through foreign M&A activities, the subsequent wave of Chinese acquisitions has been met with growing reluctance by the EU and US. The proposal by the European Commission to “defend… [Europe]’s strategic interests” by introducing an M&A screening process signalled a more protective approach to foreign investments in the continent. Meanwhile, the rejection of the proposed acquisition of Lattice Semiconductor by a group of investors, which included the state-controlled China Venture Capital Fund on national security grounds by the Committee on Foreign Investment in the United States showed the increasing willingness to use security concerns against foreign investments.

Similar interventions were again pressed for in the UK. Hytera Communications Corporation’s acquisition of Sepura in February 2017 was investigated on national security grounds. Both the Hinkley and Hytera deals were cleared of any serious national security concerns and subsequently went ahead. However, given the mere handful of cases of security-driven interventions against M&A transactions since the Enterprise Act was first enacted in 2002, its frequent usage in the past 18 months in the UK, as it has been abroad, seems to indicate a growing use of national security grounds to intervene against foreign investments.

Sooyun Chai is a student at Pembroke College, University of Oxford. His interests include commercial law, history, politics and international relations, particularly in relation to the Far-East.

Want to write for the Legal Cheek Journal?

Find out more



Odd that you didn’t make reference the National Security & Infrastructure Review… It came out last year.

Bless this Enterprise, New World Order

You need to look at the venture capitalists. The Chinese venture capitalists are relatively new to the market of high finance. They offer longer term investment models e.g. a 40 year plan – so their terms are more digestible and they can offer a larger “multiplier” price up front for assets, as in the example in your piece.

The trouble is that we are indebted to other venture capitalists and we need to protect them.

As it happens the Chinese political tradition is such that they believe that they rule all under heaven.

Combine that with the fact that Mao was influenced by the deeds of Napoleon and you realise that the government is being steered by our venture capitalists to protect them, as big boys, from the giants of the orient.

Law has always been a hobby for the powerful. It is always about power and narrative, never about principle. Law is short for law and order. The narrative here is national security but it is masking a power struggle, as it did with nuclear investment last time.

The New World Order focusses on the best that human psychology can offer holistically, not Machiavellian power struggles within an existing economy underpinned by Masonic religions*, as now.

*A Masonic religion is a religion which openly is wholesome e.g. religion of peace, thou shalt not kill, love your neighbour but which, in practice, has chaplains in the army, a us funded weapons programme and isis. All of which contribute to the economic aim of replacing, renewing and regenerating masonry of various kinds as the key stone of an economy.


What on earth are you on about

Bless this Enterprise, New World Order

World order, comrade. If Henry Kissinger is interested in world order, then I had better be interested in it too. So should you be.


My thoughts exactly….



The UK is not for sale.



China cross-border M&A Advisor

Good article, well done

Ciaran Goggins

Free Tibet.

Peter Griffin

I’ll take it!

Hello, China? I think I have something you may want, but it’s gonna cost you. That’s right, all the tea.

Join the conversation