• SP
Choose your location?
  • Global Global
  • Australia
  • France
  • Germany
  • Ireland
  • Italy
  • Poland
  • Qatar
  • Spain
  • UAE
  • UK

National security concerns lead to UK's first NSI Act acquisition block

15 September 2022

An order has been issued by the UK government preventing the University of Manchester from licensing IP to Chinese company Beijing Infinite Vision Technology Company Ltd. 

Background

The UK government has blocked the licensing of intellectual property (Proposed Agreement) developed by the University of Manchester (UoM) to Beijing Infinite Vision Technology Company Ltd (BIVT). This is the first time that the government has exercised its power under the National Security and Investment Act 2021 (the Act) to make a final order blocking an acquisition.

The technology

The intellectual property (known as SCAMP-5 and SCAMP-7) was for vision sensing technology. According to the University of Manchester Innovation Factory website, SCAMP is a low-power, high-speed machine vision device using cutting image sensors to execute a variety of vision algorithms, enabling new embedded vision applications in areas such as robotics, virtual reality and surveillance.

The aim of this IP, as set out in a funding proposal, was to "tightly integrate novel sensing and processing hardware, together with vision, navigation and control algorithms, to enable the next generation of autonomous robots" and the Proposed Agreement was for BIVT to use the SCAMP technology to "develop, test and verify, manufacture, use, and sell licenced products". According to BIVT website its work centres on the use of 3D rendering technologies to create still images, animation, and virtual reality for cultural and commercial projects.

Why was it blocked?

However, under the Act, the Proposed Agreement was blocked. The Act allows the government to review and prevent transactions if it considers that the transaction in question will pose a risk to national security. For more background information on the Act, please refer to our comprehensive guide here.

There were risks that if the licensing under the Proposed Agreement were to go ahead, BIVT could use the SCAMP technology to build defence technology such as missiles or military drones, which could present a national security risk to the UK. On this basis, the Proposed Agreement was blocked.

Notification under the Act

The Act provides for both mandatory and voluntary notification regimes, with qualifying acquisitions taking place within one of 17 "sensitive" sectors subject to mandatory notification requirements. Such acquisitions must be notified to the government for approval before they take place. Transactions which are not required to be notified under the mandatory notification regime may still be notified to the government, if there are concerns that that transaction could give rise to national security concerns.

Interestingly, the proposed Agreement did not fall under the mandatory notification regime. The UoM therefore voluntarily notified the Proposed Agreement to the government, which then blocked it.

Conclusion

This appears to demonstrate a willingness by the government to take an interventionist approach to the exercise of its powers in order to protect national security, even in areas falling outside of the scope of the mandatory notification regime. It is also a reminder of the broad scope of government power under the Act. Parties involved in transactions, in which national security issues may arise, should therefore always remain aware of the possibility it may be blocked or only cleared subject to specific conditions.

Parties should similarly be aware that even if not voluntarily notified, transactions may be called in for review up to six months after the authorities become aware of the transaction, subject to a long stop date of five years following completion of the transaction.

If you think you will be involved in a transaction which may require mandatory or voluntary notification to the government under the Act or would like to discuss any points raised in this article, please contact one of the authors.

Authors: Jonathan Branton, Dimitris Sinaniotis and Katie Hurst

Further Reading