My Lords, I speak to Amendments 4, 7 and 8 in this group in my name, but, before I do that, I will quickly say that I also support Amendments 2 and 6, in the name of the noble Lord, Lord McNicol of West Kilbride. In Committee, I said I was unable to support his amendments because I felt that a blanket ban on foreign state involvement in our nuclear programme went much too far, so I am delighted that he has now found a more flexible formulation, which would enable the Secretary of State to decide who should be barred from the nuclear programme.
The amendments in my name are intended to cover a similar point, but perhaps more widely and slightly more flexibly. Last week, we spent a lot of time discussing the importance of being able to identify the ultimate beneficial owners of property in the UK. It seems to me considerably more important that we should always be certain of the identity of any party that may be able to exercise significant control over a nuclear company, either directly or indirectly, and that we should be able to take action to prevent undesirable parties, should they attempt to obtain significant control of a nuclear company. My amendments simply seek to achieve that.
As I mentioned in Committee, it was ruled out of scope when I tried to introduce an amendment that would have allowed the Secretary of State to revoke the licence of a nuclear company if an undesirable party obtained significant control. My amendments here are restricted to the designation under the Bill, but the comments I am about to make apply every bit as much to the licensing regime, and I ask the Minister to keep that in mind.
I have revised my amendments from Committee so that my three amendments now introduce a regime for designated nuclear companies that is similar to that which applies to persons with significant control of UK companies. They further give the Secretary of State the ability—not the obligation—to revoke the designation of a nuclear company either where the Secretary of State is not satisfied that the identity of a party with significant control has been verified, or if a party later obtains significant control and the Secretary of State is not satisfied that they are a fit and proper party to own or control a company.
I am very grateful to the Minister and his team for their helpful engagement on this point—again, unfortunately, just before the deadline for submitting the amendments. They have pointed me towards the National Security and Investment Act 2021—the NSI Act—as providing the protections that I am seeking and, to an extent, they are right. But there remain important gaps, and I want to raise them and hear what the Minister thinks.
First, the NSI Act comes into play only if there is a notifiable transaction, so it does not apply at the point when a nuclear company is applying to be designated. It seems to me important that we designate companies only where we are satisfied that we know the identity of all parties that might have significant control, so Amendment 4 adds a new condition that the Secretary of State is satisfied that the identity of any party with significant control has been verified.
I am sure the Minister will tell us that the Government will of course carry out this verification as part of their due diligence—he is nodding—before a designation is granted. If the Government intend to carry out this step anyway, why not accept the amendment? Secondly, it is, sadly, not uncommon for due diligence not to be completed as thoroughly as we might like—1 am sure we can all think of examples of that. The amendment would not add any burden to the Government, but it would ensure that this critical verification step must be included in the due diligence, so why not accept it?
There is another reason. If the due diligence failed to identify such a party for some reason, without Amendments 4 and 7 taken together there would be no mechanism in the Bill to remedy the situation after the designation had been granted. The NSI Act would not apply, because no qualifying transaction would have taken place. So we would be stuck with a party that we had not verified, which cannot be right.
The next problem with relying on the NSI Act is that the first remedy under the Act is that, if a notifiable transaction takes place without authorisation, it is void. But that can apply only to UK companies. If, for example, a nuclear company has a 51% shareholder that is a Japanese company, and a Chinese company later takes a stake in that Japanese company, there is no way we can void that transaction, regardless of what the NSI Act says.
4.30 pm
In such a case, the Secretary of State can call in the transaction and, following an investigation, make an order. That order can require a
“person, to do, or not to do, particular things”.
In such a situation, I do not think the Secretary of State can actually revoke either a licence or a designation. While the Secretary of State can impose restrictions on the use of the licence or designation, the nuclear company would retain that licence or designation. I am not totally sure about that—the NSI Act, frankly, is not as clear as it could be in that respect—so perhaps the Minister could confirm whether I am right. If I am, does the Minister agree that having the ability to revoke a licence or designation would be a simple and powerful remedy that ought to be in the Secretary of State’s armoury? That is what Amendment 8 tries to do: to strengthen the hand of the Secretary of State, if they are not satisfied that a person with significant control is a fit and proper person to own or control a UK nuclear company.
The clue to the final problem about relying on the National Security and Investment Act is in its name: it can be used to intervene only in situations where a risk to national security arises. That is obviously critical, but it is easy to think of many other situations that do not amount to a national security risk, but where we might not consider such a person to be a fit and proper person to obtain significant control. I can give a few examples: a company with a poor safety record, a poor environmental record, a poor record of employment practices, with a previous criminal record or with commercial conflicts of interest with the nuclear company. Would we want any of these companies to obtain significant control of a nuclear company? Clearly not, but there is nothing in the NSI Act or this Bill that would stop it happening. Does the Minister agree and how do the Government intend to deal with such situations if they arise?
I am not going to divide the House on these amendments, primarily because, as I said before, their scope has had to be limited just to the designation process, so they would have a limited impact anyway. But transparency around the ownership and control of key assets has rightly become a real area of concern recently, for obvious reasons. I hope I have demonstrated
that there are real gaps in our current ability to know who might hold or obtain significant control over a licensed nuclear company. Relying primarily on the NSI Act for our protection against undesirable parties becoming involved in our nuclear industry also leaves substantial gaps, especially in what action we are able to take where it is not clear cut whether this is a national security risk.
I hope the Minister can confirm that the Government will take a close look at this and carefully consider whether there is anything we should do to close these gaps, particularly by looking at the circumstances in which we might wish to have the ability to revoke a nuclear generation licence.