The National Security & Investment Act 2021 (the "Act") has now been in force for a little over a year and although the number of final orders made by the Secretary of State in its first 12 months is conservative, it is clear that the legislation has a definite "bite" to it and cannot be dismissed when considering corporate transactions. So, what have we learned since 4 January 2022?

1. Transparency. The lack of transparency both during the notification process and BEIS' decision-making has been criticised. Failure to keep the relevant parties up-to-date has caused irritation and concern to those involved, while the final orders given have provided minimal information for BEIS' decision, thereby preventing advisors and principals from getting a real "feel" for the types of transactions which are causing problems. 

2.  Timing. Although the legislation sets out time periods in which the government has to respond, it is important to remember that the clock stops when an information request is issued, only to start again once the information has been provided. This can result in the timetable being extended to several months; not ideal in a transactional context. 

3. Wide-ranging final orders. The final orders so far issued have been wide-ranging, including the imposition of conditions such as security controls and information barriers and, in five cases, the prohibition of the transaction, two of which had already completed. Although the possibility of prohibition was anticipated prior to the Act coming into force, its use shows that the government will not shy away from these, arguably, draconian outcomes. 

4. Limited appeal avenues. Any appeal against a final order can only be made via judicial review proceedings, i.e. the actual merits of a case cannot be reopened. This is likely to discourage parties from appealing, although it is expected that Nexperia, whose acquisition of Newport Wafer Fab was prohibited, will instigate judicial review proceedings. It will be interesting to see the outcome. 

5. Sectors. It appears from the final orders published that the transactions affected have all been within one of the 17 critical sectors which are subject to the mandatory notification regime under the Act; so far, other sectors do not appear to have been caught. However, this is not to say that they won't be in the future.

6. Nationality. Prior to the Act coming into force, the suggestion was that principals involved in certain jurisdictions may be more likely to be affected than others, with acquirers from so-called "friendly" nations being less likely to be "called-in". This does not appear to be the case, although four of the five prohibited transactions did apply to Chinese investors, with the other being Russian. However, the conditional decisions have affected entities in other countries, including the USA and Germany. 

The annual report to be published by the government in respect of the Act is due in the next few weeks so we may be able to glean more from that, but it's possibly still too early to say that the first year has given advisors and principals a detailed understanding of how transactions are being affected, other than to reiterate that transactions ARE being affected and the need for notification should be considered at the start of any deal. Maybe, I'll diarise a follow-up article in 12 months...