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Huawei and UK National Security - A new technology cold war?

11 December 2018. Published by Neil Brown, Partner and Charles Buckworth, Partner

Chinese technology giant, Huawei, has been making plenty of headlines recently. First, a number of Western governments (including the US, Australia and New Zealand) have banned Huawei equipment from being used in 5G networks, citing national security concerns. Next, Huawei's CFO was arrested in Canada in connection with alleged breaches of international sanctions.

So where does the UK stand in what some are describing as the dawn of a new technology cold war?   Last week, BT (the owner of mobile network EE) announced that it would bar Huawei's equipment from the core of its upcoming 5G network, and would be removing Huawei from the core of its existing 3G and 4G networks.  Yet so far, no action has been taken by the UK government. Why?

White paper on UK national security and investment

The reason may be that the UK government currently lacks the legal power to make a greater intervention.  In fact, the UK government is currently consulting on proposed new legislation to give the UK government far greater powers to intervene in "transactions" (in the broadest possible sense) on national security grounds.  Such legislation would replace the existing limited powers under the Enterprise Act 2002.

Why is new legislation being proposed?

The proposals are being made in response to:

- advances in technology (and dependence on technology) meaning there are a far greater number of ways in which the national security and infrastructure of the UK could be attacked or undermined.  Last week's breakdown on the O2 network is a timely reminder of just how dependent on technology our modern society has become.  Imagine how much damage could be caused, for example, by a concerted attack on all IT infrastructure of the NHS;

- the evolution of geopolitics, globalisation and changes to those who might be considered "hostile" to UK national security.

If the UK were to implement the white paper proposals, it would be following the lead of other countries such as Germany, Japan and Australia, each of whom have adopted similar rules recently.  The US has had the far reaching Committee on Foreign Investment in the United States (CFIUS) regime since the days of Ronald Reagan, and it has been significantly strengthened under Donald Trump.

Whilst many will see the white paper proposals as sensible and pragmatic, there will be others who will be critical of far reaching powers which are open to abuse (whether on grounds of economic protectionism or otherwise).  The white paper has attracted relatively little press comment, perhaps owing to Brexit dominating the current scrutiny of legislative reform.  

The white paper only uses the word "China" once.  However, what little press comment there has been has firmly identified China is the main target of the proposals.  The current tensions in relation to Huawei only serve to underline this point.

In our next blog, to be published next week, we will explain more of the detail of the white paper's proposals.  As we will see, this will be relevant to a much wider group of businesses and people than might have been expected.