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

Under the National Security and Investment Act 2021, the Secretary of State may impose a final order where divestment is reasonably considered necessary and proportionate to prevent, remedy or mitigate a national security risk. In assessing that question, the court must respect the executive’s institutional competence and democratic accountability in predicting national security risks, while conducting its own assessment of fairness and Convention proportionality. The common law may supplement the Act’s procedures, but fairness requires only a meaningful opportunity to answer the gist of the adverse case. The Secretary of State need not consider powers under different statutory schemes directed to different risks. A1P1 does not invariably require full compensation for compulsory divestment. The claim was dismissed.

The claimants challenged a final order made under section 26(3) of the National Security and Investment Act 2021, requiring the first claimant to divest its entire shareholding in Upp Corporation Ltd, a fibre broadband company.

The challenges alleged breach of A1P1, failure to consider relevant matters and to comply with the Tameside duty, irrationality, and procedural unfairness. The claimants argued that a package of governance, information, audit and access restrictions would have been a less intrusive remedy than divestment and that full compensation was required.

The central issues were whether the decision-making process was fair, whether the Secretary of State had acted unlawfully in selecting divestment, whether the order was proportionate under A1P1, and whether the absence of full compensation was unlawful.

1. Outcome. Permission was granted on Grounds 1B and 3, but those grounds failed substantively. Permission was refused on Grounds 1A, 2A and 2B. The claim was dismissed.
2. National security and institutional competence. Parliament had entrusted assessment of national security risk to the executive. The court therefore accorded respect to the Secretary of State’s predictive and multifactorial assessment, including material obtained through consultation with specialist government bodies. The statutory question was whether the order was reasonably considered necessary and proportionate to prevent, remedy or mitigate the risk; it was unnecessary and impermissible to reformulate that question as whether alternative measures would merely reduce the risk.
3. Procedural fairness. The common law could supplement the procedural provisions of the Act where necessary, but the content of fairness depended on the statutory language and context. The claimants had received the gist of the risks, had made representations on three occasions, had attended meetings with officials, and had been invited to address possible remedies. The Secretary of State was not required to disclose every document or to engage in a continuing dialogue. The process was fair.
4. Relevant considerations and Tameside. The Secretary of State was not required to consider powers under other statutory schemes whose purposes differed from the NSIA. The alternative telecommunications, investigatory, data protection and regulatory powers did not perform the same function as a final order under the Act. The Tameside duty required reasonable inquiry, not every sensible or desirable inquiry. That duty was satisfied.
5. Proportionality. The four-limb proportionality framework applied. The court conducted its own assessment of fair balance, while giving weight to the Secretary of State’s view. In the national security context, the question whether less intrusive measures could have been used was not a search for a single correct answer. The Secretary of State was entitled to conclude that governance restrictions, audits and access controls would leave a residual possibility of malign influence and would not meaningfully mitigate the identified risks. Divestment was proportionate.
6. Compensation. The distinction between deprivation and control of property did not need to be resolved because proportionality was decisive. Section 30 of the Act provided a discretionary power to give financial assistance and did not require full compensation in every case. A1P1 required a fact-sensitive fair balance, not an inflexible rule of full reimbursement. In the circumstances, national security outweighed the claimants’ financial interests.

First-instance judicial review proceedings. The judgment records earlier interlocutory disclosure decisions by Swift J, including [2024] EWHC 386 (Admin), but this court did not reopen those decisions.