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Enhancing Public Accountability: Key Elements of the Public Office (Accountability) Bill 2025
Kirsty Cook
The National Security and Investment Act 2021 (NSIA), the UK’s first standalone national security law, has been in force since January 2022. It established a regime for the UK Government to evaluate and potentially intervene in certain corporate and commercial transactions if they posed a UK national security risk. NSIA requires the submission of a mandatory notification if the subject entity carries on activities falling within one or more of the 17 specified sectors of the UK economy.
One of the specified sectors is “Artificial Intelligence”. The rationale for characterising AI as a high-risk sector of the economy is well-understood: AI can be used in ways that are antithetical to the UK’s national security interests and sometimes has, or can be adapted to have, military (or dual use) applications.
Whilst the definition of Artificial Intelligence in the legislation addresses these concerns, it arguably goes way beyond this. Because of its breadth it could, for example, catch many digital marketing agencies and indeed other digitally-enabled businesses that on any reasonable measure pose no UK national security risk.
The Government recognised this in its recent Call for Evidence on NSIA in which it said: “the Government has however received feedback that [the Artificial Intelligence specified sector] captures activities that do not present national security risks. The Government would therefore welcome feedback on whether there are activities within the AI section of the Regulations that stakeholders believe should be removed.”. In the Call for Evidence response published last month, the Government confirmed that it will launch a formal public consultation on updating the mandatory sector definitions by the summer.
Unless and until the Government meaningfully restricts the scope of the Artificial Intelligence specified sector, transaction parties (and particularly buyers/investors, given their additional risk of criminal liability) should proceed with caution and take early steps in the transaction process to identify and evaluate any AI developed, produced or researched by the subject entity, including the applications such AI is being used for. It’s likely that only a small subset of AI software or technology will fall unambiguously outside the ambit of the Artificial Intelligence specified sector as currently formulated.
We have considerable experience in advising potential buyers, sellers and investors on the application of the National Security and Investment Act to their transaction and managing the notification process. Please do get in touch here if you would like to discuss further.
Further information
If you have any questions regarding this blog, please contact Glafkos Tombolis in our Corporate, Commercial and Finance team.
About the author
Glafkos Tombolis advises a broad range of corporate and private clients on M&A, joint ventures, private equity and growth capital transactions and general company law matters.
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