UK court rejects first request for interim relief in appeal against an NSIA unwinding order
The UK High Court has handed down its first judgment in relation to an interim relief claim under the NSIA (and only its second NSIA-related judgment) refusing the request made by Chinese investment-backed claimant, FTDI Holding Limited. The request for interim relief was made as part of broader judicial review appeal proceedings in which FTDI Holding Limited is challenging the UK government’s order requiring it to divest its 80.2% share in Future Technology Devices Limited (FTDI).
A reminder of the facts
On 7 December 2021, before the NSIA came into force, FTDI Holding Limited acquired an 80.2% share in FTDI, a semiconductor company specialising in USB technology. On 22 November 2023, the UK government called the transaction in for review and, on 5 November 2024, made a final order requiring FTDI Holding Limited to dispose of its shareholding in full. This was on the basis that the transaction gave rise to national security risks relating to: (i) the transfer of UK developed semiconductor technology and IP to China; and (ii) the potential for FTDI’s ownership to be used to disrupt critical national infrastructure.
As the underlying transaction took place in 2021, the review took place under the ‘look back’ provisions provided under the NSIA. These provisions enable the UK government to review transactions completed between 12 November 2020 and the commencement of the NSIA on 4 January 2022, provided other thresholds are met.
On 3 December 2024, FTDI Holding Limited filed a claim for judicial review of the final order and requested interim relief in the form of an interim injunction or stay suspending the effect of the final order (i.e. the sale of its share in FTDI, pending the determination of the judicial review).
This judgment swiftly follows the High Court’s recent dismissal of LetterOne's appeal of the UK government’s order to divest its completed purchase of Upp (discussed in our recent blog post here). The LetterOne judgment indicated that claimants face high hurdles when attempting to successfully challenge NSIA decisions via judicial review on the basis of the UK government’s substantive national security assessment and/or procedural unfairness.
While this judgment related to interim relief only, it is nevertheless instructive in relation to how the court is likely to consider future interim relief requests and, in particular, the balancing act between a claimant’s commercial interests and the public interest in safeguarding national security. The judgment shows that successfully obtaining interim relief may be an uphill struggle for claimants and, much like the LetterOne appeal judgment, that courts will show a high degree of deference to the UK government, when it comes to establishing and weighing national security threats in this context. The judgment also showed that the court was willing to offer something to claimants by expediting the substantive appeal proceedings in this case to avoid any irreversible steps in the sale of the share in FTDI being taken prior to the hearing of the judicial review challenge.
Implications of the judgment for future requests for interim relief
The court ultimately refused the request for interim relief on the grounds that it had to balance the national security risks identified in the NSIA review (and the public interest in protecting national security) against FTDI Holding Limited’s rights. Following this balancing exercise, the court “came down firmly against the grant of interim relief.”
On the basis of this judgment, succeeding in a claim for interim relief is likely to be challenging for claimants. The court emphasised that it must afford “great respect to the judgement of the executive” in relation to establishing and weighing national security threats and that, where national security is at stake, “public interest weighs heavily against the grant of interim relief”. Much like in the LetterOne judgment, it is notable that significant deference was paid to the government's assessment of national security concerns in the decision to deny the claimant interim relief.
Impact of closed proceedings
In this case, closed proceedings were used for the court to hear arguments relating to issues of national security. Given the nature of the information assessed in an NSIA review, it is unsurprising that materials sensitive to national security are considered in closed proceedings with the assistance of special advocates. However, this does make it difficult for companies to understand the nature of the national security concerns at play and challenge the UK government’s substantive national security assessment head-on.
High Court attempts balancing act by granting expedited hearing
Whilst refusing the request for interim relief, the judgment states that the court granted an expedited full hearing at which the substantive grounds for appeal would be heard. The court stated that it hoped the whole judicial review appeal could be determined before any irrevocable step towards the sale of FTDI is taken. The court appears to be attempting a balancing act between mitigating the commercial impact on FTDI and affording sufficient weight to the public interest in national security.
Are damages an adequate remedy for claimants in NSIA cases?
The court confirmed that damages would not be wholly adequate to make up for the forced sale of FTDI given the strategic importance of the claimant’s investment in FTDI. Equally, the court recognised that as the decision challenged relates to property interests rather than personal liberty or privacy interests, damages would provide some measure of protection.
When does the Secretary of State become “aware” of a transaction?
Notably, in the main judicial review proceedings, FTDI Holding Limited raised an interesting procedural question about when the Secretary of State becomes "aware" of a transaction, for the purposes of calculating the six-month window in which a call-in notice can be issued. The claimant argued that the Secretary of State becomes aware when the officials dealing with the matter on his behalf (in this case, the officials in the Investment Security Unit) become aware. The defendant argued that the relevant time period starts when the Secretary of State is personally aware. The court will respond to this question in the substantive appeal judgment, which is to follow.
