July 25, 2018 / 5:12 PM / 21 days ago

Britain's new M&A rules pose 'Trojan horse' risk - Clifford Chance

LONDON (Reuters) - The British government’s plan to overhaul the country’s takeover rules to bolster national security could be used as a “Trojan horse” to intervene in deals to safeguard jobs or for protectionism, according to law firm Clifford Chance.

The UK on Tuesday set out a raft of measures to strengthen the government’s powers to block deals and stop British companies operating in sensitive sectors and other strategic assets, such as land and intellectual property, from falling into the hands of foreign powers.

The proposals represent the most far-reaching change to the UK’s takeover regime since the introduction of the 2002 Enterprise Act and follow a shift in stance since Theresa May became prime minister in 2016, when she signalled she would take a tougher approach to foreign investment and mergers and acquisitions in the UK.

Clifford Chance said on Wednesday that the proposals would “combine extremely broad jurisdiction” and “highly subjective and vague criteria for assessing whether national security risks may arise” from a transaction.

“There is a risk that the regime could become a Trojan horse for other, undisclosed considerations to be taken into account by this or future governments, such as protectionism of national champions or a merger’s impact on employment,” lawyers from Clifford Chance wrote in a note analysing Britain’s proposals.

“Whether that is the case may ultimately depend on the willingness of the courts to scrutinise the strength of national security justifications that are relied upon by the government.”

The move by the UK comes as other countries, including the United States, France and Germany, increase their scrutiny of foreign takeovers amid worries that strategic technologies are being acquired by China and other nations.

Britain is undertaking a 12-week consultation on its proposals.

Reporting by Ben Martin; Editing by Alexandra Hudson

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