L1T FM Holdings UK Limited & Anor, R (on the application of) v Chancellor of the Duchy of Lancaster in the Cabinet Office

The court reviewed a challenge to a final order made under section 26(3)(b) of the National Security and Investment Act 2021 requiring the claimant to divest its 100% shareholding in Upp Corporation Ltd on national security grounds. The claim raised human rights issues under Article 1 of the First Protocol (A1P1) to the Convention and section 6(1) of the Human Rights Act 1998 (proportionality and compensation), public law challenges (relevant/irrelevant considerations, the Tameside duty and Wednesbury irrationality) and procedural fairness (the adequacy of disclosure of the gist of the adverse case).

The court held that the statutory test in section 26(3)(b) was applied lawfully: officials prepared ISRA, Remedies and Representations assessments, the Secretary of State considered the material (including technical advice from the National Cyber Security Centre) and reasonably concluded that divestment (Remedy A) was necessary and proportionate rather than the package of restrictions proposed by the claimants (Remedy B). The court found the decision‑making process fair in relation to consultation and gist disclosure and that no Tameside duty or irrationality breach was made out. The court also rejected the claim that A1P1 required full compensation, recognising section 30 of the Act gives a discretionary power to provide financial assistance and concluding the fair balance favoured national security.

Background and parties:

• The claimants are companies in the LetterOne group who acquired Upp (a fibre broadband start-up). The Secretary of State (originally Secretary of State for BEIS; responsibility later moved to the Chancellor of the Duchy of Lancaster in the Cabinet Office) made a final order under the National Security and Investment Act 2021 requiring divestment of Upp on national security grounds. Upp was an interested party but did not contest the claim.

Nature of the application / relief sought:

• By re-amended grounds the claimants sought quashing relief, declarations and damages under sections 7 and 8 of the Human Rights Act 1998 and a declaration of incompatibility in relation to section 26(3)(b) of the NSIA (the latter not advanced at hearing).

Procedural posture:

• The Secretary of State relied on closed material. A closed material procedure was permitted under the Justice and Security Act 2013 and Special Advocates represented the claimants in closed sessions. Various assessments (ISRA, Remedies Assessment, Representations Assessment) were prepared by the Investment Security Unit (ISU) and provided to the Secretary of State in a Ministerial Submission.

Issues framed by the court:

1. Human rights (Ground 1): whether the Order was disproportionate under A1P1 because divestment was unnecessary (Ground 1A) and whether the absence of full compensation breached A1P1 (Ground 1B).
2. Public law (Ground 2): whether the Secretary of State took irrelevant considerations or failed to take relevant ones or to make reasonable inquiries (Tameside duty) (Ground 2A) and whether the decision was Wednesbury irrational (Ground 2B).
3. Procedural fairness (Ground 3): whether the claimants were given sufficient gist of the national security risks and a meaningful opportunity to address officials’ concerns about less intrusive remedies.

Court’s reasoning (concise):

• The court emphasised the constitutional allocation of national security judgments to the executive and the role of ISU and other government departments (including the NCSC) in providing specialist input. The ISRA identified risks from ownership linked to sanctioned ultimate beneficial owners and predicted growing risk as Upp expanded. The Remedies Assessment assessed Remedy A (divestment) and Remedy B (a package of restrictions, audits, governance changes) and recommended divestment as most effective and enforceable.
• On procedural fairness the court found the claimants had been given reasonable opportunity to make representations, were informed of the gist in the statutory process and by specific letters and meetings, and that a fair procedure was followed; the closed material procedure and subsequent gists and judicial oversight were adequate.
• On relevant considerations and the Tameside duty the court held that the Secretary of State was not required to explore exhaustively other statutory powers outside the NSIA and that officials had considered relevant alternatives. Diplomatic and resource considerations were not decisive or improper in light of the national security judgment.
• On proportionality under A1P1 the court treated classification (deprivation v control) as not decisive and applied the proportionality limb analysis. Giving weight to the executive’s institutional competence, the court concluded that divestment struck a fair balance and was necessary and proportionate; the suggested remedial package was not judged sufficiently reliable to prevent the predicted risk. The absence of guaranteed full compensation did not render the measure disproportionate; section 30 of the NSIA provides a discretionary mechanism for financial assistance and A1P1 does not impose an absolute duty to pay full compensation in every lawful deprivation.

Outcome: the court dismissed the claim, granting permission only on limited grounds (compensation and procedural fairness) but dismissing them substantively and refusing permission on other grounds.

The claim is dismissed. The court held that the Secretary of State lawfully exercised powers under section 26(3)(b) of the National Security and Investment Act 2021, applying a fair decision-making process (including consultation and consideration of representations), reasonably rejected less intrusive measures as insufficient to prevent the assessed national security risks and struck a proportionate balance under Article 1 of the First Protocol; the absence of guaranteed full compensation did not render the deprivation disproportionate.