National Security and Investment Act: UK High Court reviews first interim relief application

The Court dismissed the claimant's application for an interim injunction against the final order, and emphasised that, where issues of national security are in play, the courts must show great respect to the Government's judgment about whether relevant national security risks are made out and about the weight to be attached to them.

The background

In December 2021, FTDI Holding Limited (FTDIH) acquired an 80.2% share in Future Technology Devices International Limited (FTDIL), a Scottish semiconductor company specialising in USB technology. At the time, the parties did not – and could not – notify the transaction under the NSIA as it had not yet come into force.

The transaction was subsequently called in for review in November 2023 by the UK Government's Investment Security Unit (ISU) under the NSIA's 'look back' provisions, which allow the ISU to review certain transactions completed before the NSIA's entry into force. In its review, the Government expressed concerns over:

• FTDIH, a company beneficially owned by five limited partnerships based in China, owning – and potentially transferring overseas – UK-developed semiconductor IP and technology; and
• the potential for FTDIL's ownership to be used to disrupt critical national infrastructure via knock-off chip sales, which had previously been found to result in unstable products.  

In November 2024, the Government concluded that a final order requiring FTDIH to dispose of its 80.2% share was necessary and proportionate to mitigate the risk to national security.

FTDIH issued judicial review proceedings to challenge the Government's decision and sought an interim injunction suspending the divestment requirement of the final order pending the determination of the proceedings challenging the final order.

The Court's consideration of the application for an interim injunction

The High Court rejected FTDIH's application for an interim injunction, emphasising that, in cases of national security, "great respect" must be shown "to the judgment of the executive about whether the relevant risk is made out and about the weight to be attached to it". The Court noted that "in many cases it may be difficult to find interests sufficiently weighty to outweigh the public interest in national security".

The Court recognised that its assessment of the cogency of the Government's consideration of the national security risk might change after hearing more detailed evidence and submissions in the judicial review proceedings, but found that – on the initial evidence presented at the interim stage – there was no basis to find that the Government's decision was irrational or otherwise vitiated by a public law error.

The Court also considered the impact on FTDIH's rights of refusing interim relief. The Court noted that the refusal of an interim injunction would not necessarily be determinative of FTDIH's claim in the judicial review proceedings, and that in this case the judicial review proceedings would be determined before any irrevocable step towards divestment was required. It also noted that, if the Government's final order decision was found to be unlawful in the subsequent judicial review proceedings, damages would provide at least some measure of protection to FTDIH's property interests (albeit the Court recognised that damages would not be a wholly adequate remedy, as they would struggle to reflect the strategic importance of the FTDIL investment to FTDIH).

In these circumstances, the Court found that the public interest weighed heavily against the grant of interim relief, even for the few months that it would take for an expedited hearing in the judicial review proceedings to take place.

Our expertise

Fieldfisher's expert team of lawyers regularly helps clients navigate national and international foreign direct investment regimes. We have a breadth of experience in advising businesses and investors from the UK and abroad on various types of transactions. Our expertise covers initial considerations as to whether a transaction should be notified, the notification process and Government engagement, and post-completion advice for those situations where the regime operates retrospectively. We also have extensive experience in challenging Government decisions and representing clients in judicial review proceedings.

If you would like to discuss any of the issues covered in this blog, please contact Partner Miguel Vaz, Senior Associate Asfand Gulzar, or Solicitor Andrea Carrera.

With thanks to Harry Barder, Trainee Solicitor, for his contribution to this blog.

The content of this blog does not constitute legal advice and is provided for general information purposes only. Specific legal advice should be sought before taking any actions based on the content of this blog.