Alongside serving as an example of one of the most challenging and hard-hitting outcomes arising under the Act, this particular case and the circumstances surrounding it are interesting for a few reasons:
A) The acquisition was called in under the Act as the ultimate beneficial owners of the acquiror (and therefore the new beneficial owners of the target company) were Russian nationals with alleged ties to the Russian President and Government. However, the acquisition completed over a year before Russia’s invasion of Ukraine (the transaction completed in January 2021, whereas Russia’s offensive began in February 2022), and sanctions were not imposed by the UK on the relevant individuals until March 2022 – this suggests that the Act can be used to intervene in a transaction even if there is no obvious or material national security risk at the time of the transaction itself;
B) Before the acquisition took place (and before the Act came into force), representatives of the acquiror consulted with Government to establish whether it was likely to intervene in the transaction, either under then-existing legislation or when the Act was put in force, and they were reassured by a member of the Senior Civil Service that they “could not imagine” any such intervention – indicating that informal reassurances, even from senior Government figures, do not offer protection from the Act, with the only true protection being to make a formal application and receive clearance;
C) At the time of the acquisition, the company in question was non-operating (it was several months after the transaction until it began to truly conduct business and take on customers) – this demonstrates that the Act can apply even where the operations of the business evolve over time;
D) The outcome of the case suggests that the scope for judicial review of decisions made under the Act by the relevant Secretary of State is limited – meaning Government may have wide discretion in the measures it decides parties should take;
E) The acquisition in question occurred before the Act came into force (in January 2022) – it is therefore also an example of the Act having retrospective effect.
