Dispute resolution

UK National Security Act 2023 brings in scheme to register 'political influence' arrangements

Published on 19th Dec 2023

FIRS is intended to provide assurance around the activities of certain foreign powers – but what does it mean for businesses?

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Under the National Security Act 2023, UK and overseas businesses will be required to register arrangements under which foreign states direct them to undertake "political influence" activities in the UK. Compliance breaches can lead to criminal liability for both corporates and individuals. 

The requirement to register is intended to improve the transparency around legitimate "political influence" activities undertaken at the direction of foreign powers. It also seeks to strengthen the resilience of the UK's political system and economy against certain specified foreign powers or specified foreign power-controlled entities, which may pose a risk to UK safety and interests.

The legislation received Royal Assent on 11 July 2023, though the majority of its provisions are not yet in force (and confirmation about when this will be is currently awaited). The new Act updates the UK official secrets regime, and introduces a two-tier scheme – the Foreign Influence Registration Scheme (FIRS) – which will require:

  • the registration of arrangements with foreign states under which individuals and entities are directed by a foreign power to carry out, or arrange for others to carry out, political influence activities in the UK; and
  • registration of a broader range of activity where a person is acting at the direction of specified foreign powers or entities that have been assessed as posing a potential risk to UK safety or interests.

FIRS registration does not prevent any activity from taking place. However, the Home Office scheme unit can issue information notices to obtain further information about registered arrangements, or arrangements requiring registration.

FIRS: two aims and two tiers

To implement its two aims set out above, FIRS consists of two "tiers". The first is the "political influence" tier, aimed at improving transparency around legitimate political influence activities conducted by foreign powers in the UK. The second is the "enhanced tier", which requires the disclosure of information by those undertaking activities in the UK at the direction of foreign powers (or foreign power-controlled entities) which the government is to specify as posing a risk to UK safety and interests.

Although these two tiers share fundamental aims around improving transparency and disclosure, they are separate and distinct.

Key concepts

There are two key concepts that are relevant to both tiers of FIRS.

All arrangements must involve a "foreign power". The legislation defines a foreign power as a foreign government/political party in power, head of state, agency or authority of a foreign government, or an authority administering a region of a foreign country.

All arrangements must give a "direction" for an individual or an entity to do something. A direction includes an order or instruction to act, but it can also be a request – although only where a power relationship exists.

A direction can be given to a person/entity to carry out the activities themselves, but equally can be a direction to arrange for the activities to be carried out. For example, an overseas parent may be directed to arrange for its UK subsidiary to carry out the activities.

Political influence tier

To register foreign influence arrangements, individuals or entities must register:

  • an arrangement between themselves and a foreign power;
  • where the arrangement involves a direction from the foreign power;
  • the direction is to carry out, or arrange for others to carry out, 'political influence' activities in the UK; and
  • no exemption applies.

"Political influence" activities include communications or a meeting with senior UK civil servants and public officials or politicians, election candidates, military personnel and police where those activities are for the purpose of influencing UK public life (such as elections, manifesto commitments, the content of legislation or politicians' decisions).

Enhanced tier

Under this tier, individuals or entities must register:

  • arrangements with a specified foreign power or a specified entity which the Secretary of State reasonably believes is controlled by a foreign power;
  • which involve a direction to carry out or arrange for another person to carry out any "relevant activities" within the UK (foreign activity arrangements); and
  • no exemption applies.

"Specified" in this context means specified by the government.

We await secondary legislation under which the government will name these specified foreign powers or entities. However, we anticipate it will be those that have been assessed as posing a potential risk to the UK.

The definition of "control" is wide, and for a company includes:

  • holding, directly or indirectly, more than 25% of the shares in the company;
  • holding, directly or indirectly, more than 25% of the voting rights in the company;
  • the right to direct or control or actually directing or controlling the company's activities (in whole or part); or
  • holding the right, directly or indirectly, to appoint or remove an officer of the company,

so many entities could, in theory, be "controlled" by a foreign power and be specified.

"Relevant activities" are either those activities set out in the secondary legislation, which is currently awaited, or otherwise all activities of any nature (so includes commercial and research activities, and the provision of goods and services).

Exemptions

There are a number of exemptions from registration available to either one or both tiers and these include:

  • certain types of arrangement such as where the UK is a party, or with the Republic of Ireland;
  • certain categories of person such as news publishers; and
  • certain activities such as legal services.

There is no requirement to register information that is subject to legal professional privilege.

The implications for business

Businesses in the UK and overseas that undertake lobbying or similar activities at the direction of a foreign power need to understand the scheme and where they may be required to register those activities.

Arrangements that provide for any activities to be carried out at the direction of certain specified foreign powers or specified entities controlled by a foreign power (foreign activity arrangements) will also be registrable under the enhanced tier, and businesses will also need to be familiar with this part of the scheme.

The obligation to register will apply to existing as well as new arrangements.

Registration and offences

Foreign influence arrangements under the political influence tier must be registered through an online portal within 28 days, and foreign activity arrangements under the enhanced tier within 10 days. Existing arrangements are to be registered within three months.

Failure to register when required to do so, with knowledge the arrangement is in scope, will be a criminal offence.

Where there is a material change to a registered arrangement, there is an obligation to update. Failure to update is also an offence.

The responsibility to register lies with the business that makes the arrangement with the foreign power or foreign power-controlled entity, not with the employee tasked with organising the arrangement.

Offences are punishable by up to two years imprisonment (under the political influence tier) or up to five years imprisonment (under the enhanced tier) and/or an unlimited fine.

Senior managers of a business that commits an offence could also be found to be liable for the offence, if the offence is committed with their consent or connivance, or due to their neglect. For more on this (and in particular criminal liability for "espionage offences"), see our Insight.

Unregistered in-scope arrangements

In addition to the offence for failure to register, it is an offence if a business enters into an in-scope arrangement, knows the arrangement is in scope, does not register it in accordance with the Act and carries out activities pursuant to such unregistered arrangement.

This offence applies to foreign influence arrangements once the registration period has expired, and to foreign activity arrangements from the date of the arrangement.

An offence is also committed by an employee of the party to the arrangement, if they carry out activities pursuant to an arrangement they know to be in scope and the arrangement has not been registered.

Any person may have a defence if they have taken all steps reasonably practicable to determine whether the activities in question are or are not registered, and having taken such steps, reasonably believe that they are registered.

What can a business do now to prepare?

FIRS is likely to become operational in 2024, once detailed guidance is published and the scheme unit to manage registrations has been established.

The government has said that several months' notice will be given to enable businesses to prepare.

Businesses should now consider identifying any arrangements that might require registration and implement training and compliance programmes.

In particular, a business should:

  • establish if it carries out any political influence activities (or if it arranges for others to carry them out) pursuant to a direction in an arrangement with a foreign power;
  • ascertain if it has entered into any arrangement which involves a direction from high-risk countries (or their state entities) to carry out (or arrange the carrying out) of activities in the UK; and
  • make further checks relating to any arrangements with other specified foreign powers and entities once these have been specified in legislation.

If you would like to discuss any of the issues raised in this Insight, please get in touch with your usual Osborne Clarke contact or one of our experts listed below.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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