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Competitiveness concerns flagged by Foreign Influence Registration Scheme

Author: ICAEW Insights

Published: 17 Nov 2022

ICAEW calls for clear definition of the scope and objectives of the FIRS to make the rules practicable, applicable and relevant, without unnecessarily reducing the UK’s international competitiveness.

An amendment to many of the welcome measures in the National Security Bill, designed to protect organisations from malicious foreign interference, lacks clarity and is at risk of impacting the UK’s competitiveness – with financial services firms and firms offering tax advice likely to be caught in the crossfire, ICAEW is warning.

The National Security Bill (the Bill) was placed before the House of Commons on 11 May 2022 in response to increased hostile activity against the UK by foreign states, in particular the poisonings linked to Russia in Salisbury in 2018. The Foreign Influence Registration Scheme (FIRS) was subsequently introduced on 8 September 2022 as an amendment to the Bill.

While there are similarities between the FIRS and the US Foreign Agents Registration Act (FARA) and Australian Foreign Influence Transparency (FIT) scheme, there are clear exemptions specified in both FARA and FIT that do not seem to apply in the FIRS. In the FIRS there is, for example, an exemption for certain professions including ‘tax advisers’, which, as per the proposed current wording, would not extend to additional accountancy services that can be provided in concert with tax services.

The FIRS is also significantly more stringent in the types of interactions covered; for example, the FIT scheme only applies to foreign government related entities and is not meant to cover business as usual. “The lack of equivalent exemptions from the UK Bill is concerning given the potential scope of all business activities that may be affected,” Miller added. 

Paul Butcher, Public Policy Director at law firm Herbert Smith Freehills LLP, said: “There are legitimate concerns over the foreign activities to which the foreign influence registration scheme is a response. However, the law as proposed raises very serious concerns for business. It is designed in a way that can be easily evaded by malign actors, while at the same time being disproportionately burdensome to legitimate (existing and potential) UK economic stakeholders seeking investments, collaborations, public policy contributions – and their professional advisers. 

Australia brought in a scheme in 2019 which the Home Office have referenced as at least partial inspiration. But the proposed UK version is far less focussed than Australia’s. The implications are not at all what people expect, and I am not sure that it is what the government expects – either in terms of those the scheme catches in its bureaucratic crosshairs and those that it doesn’t.”

Miller said that while it supports the broad objectives of the Scheme, ICAEW is concerned that it has not received the appropriate level of Parliamentary scrutiny to address key issues that could have a significant impact on businesses. It is calling for clear definition of the scope and objectives of the FIRS to make the rules practicable, applicable and relevant, without unnecessarily reducing the UK’s international competitiveness. 

“A clearer outline of the specific aims of the FIRS will allow professional bodies and other representatives to work proactively with government and Parliament to put in place effective measures that are able to be implemented in an effective manner, while avoiding creating a significant increase in bureaucracy and uncertainty. 

“ICAEW will continue to liaise with members to update them throughout the course of the passing of the Bill and will work closely with government and other stakeholders to represent the concerns and possible opportunities presented by the Bill to reduce legitimately malign foreign influence in the UK,” Miller said.

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