Challenging Final Orders Under the NSIA – Merely Difficult, or Impossible?

Scottish chip firm loses temporary injunction application for relief while divestment decision is challenged by judicial review, following the UK issuing its third Annual Report on the NSIA.

FTDI Holding Ltd’s Divestment Order

The UK High Court of Justice has denied a request from a China-owned entity for a temporary injunction against a government order requiring it to divest its stake in a Scottish chip design firm.

In R (On the Application of FTDI Holding Ltd) v Chancellor of the Duchy of Lancaster [2025] EWHC 241 (Admin), the Court ruled against FTDI Holding Ltd’s (FTDI) application for interim relief while a judicial review of the order is conducted. The order mandates the company to sell its 80.2% share in FTDI, a fabless semiconductor firm specializing in USB devices.

Although FTDI Holding is registered in Britain, Companies House records show it is owned by five China-based limited partnerships connected to Jiayin Investment Ltd, a state-owned investment company.

The UK government highlighted that on 7 December 2021, FTDI Holding Limited (FTDIHL) gained control of FTDI by increasing its shareholding from less than 75% to 75% or more. This acquisition was deemed a trigger event under section 8(2)(c) of the National Security and Investment Act.

Three years later, the Chancellor of the Duchy of Lancaster issued a final order requiring FTDIHL to divest its 80.2% stake in FTDI within a specified timeframe and through a designated process.

The final order issued noted the national security concerns, and seeks to mitigate the risks associated with:

• The potential misuse of UK-developed semiconductor technology and intellectual property in ways that could compromise UK national security.
• FTDI’s ownership being leveraged to threaten critical national infrastructure that relies on its products.

Refusal To Grant Injunctive Relief

The court ultimately denied the request for interim relief, determining that it needed to balance the national security risks identified in the NSIA review and the broader public interest in safeguarding national security against the rights of FTDIHL. After weighing these factors, the court determined “public interest weighs against the grant of interim relief.”

This judgment suggests that securing interim relief in similar cases will be challenging for claimants. The court stressed the importance of deferring to the executive’s assessment of national security risks, emphasizing that when national security is at stake, the “public interest weighs heavily against the grant of interim relief.” ⁱ As has historically been the case, the decision of the judge in FTDI’s case reflects significant judicial deference to the government’s evaluation of national security concerns.

Given the sensitive nature of information reviewed under the NSIA, mechanisms exist so that materials may be examined in closed sessions with the support of special advocates. However, this process makes it difficult for companies to fully understand the specific national security concerns involved and directly challenge the UK government’s substantive assessment.

National Security Interests – an Insurmountable Hurdle?

The FTDI case demonstrates that the judicial reluctance to overturn decisions made on the basis of national security interests is significant. Final order decisions are made personally by the Chancellor, following assessments by other Secretaries of State to reflect wider governmental interests. This follows a trend where the courts have historically, in matters unrelated to the NSIA, shown notable unwillingness to intervene in matters pertaining to national security.

Case law confirms that the government has a wide margin of discretion to assess national security risks.  The courts have established that the government is entitled to consider the potential influence of malign actors through various means, including deceit, manipulation or coercion, particularly as such actors may have no regard for UK law or compliance commitments. As a result, the Government is not required to limit its assessment to  the confines of company law when evaluating the risk of external influence.

Furthermore, case law has also confirmed that procedural fairness does not obligate the government to engage in a detailed dialogue with parties subject to investigations. The level of communication currently provided, including lists of potential remedies under consideration and the final order outlining the imposed measures, has been deemed sufficient to meet the government’s consultation duties under both the NSIA and common law. There was no requirement for the government to disclose the internal documents it had relied upon in making its decision.

Finally, it has further been established that the government is not obligated to explore whether national security risks could be addressed through other statutory powers, such as industry specific regulations, which serve different policy objectives than the NSIA.

Conclusions

As the judgment in the FTDI Holding Ltd application only addresses the request for interim relief, its evidentiary value in indicating the broader direction of substantive judicial reviews in NSIA cases is somewhat limited. It will be necessary to await the forthcoming judgment on the substantive grounds of appeal to determine whether judicial review genuinely offers claimants a realistic chance to contest NSIA decisions, or if the option to pursue judicial review is largely symbolic. Nevertheless, even with its limited scope, the judgment does reinforce the inference drawn from the first case that courts are likely to show considerable judicial deference when evaluating the UK’s national security assessments.

What appears clear is that the scope for judges to intervene in evaluating national security risk, including making predictions about the future, is limited.

However, the courts may be more inclined to intervene in matters of procedural fairness, particularly where the statutory process might be augmented by implied common law duties, and in the protection of human rights. Specifically, the Court noted that section 30 of the NSIA provides for financial assistance, which future order recipients may request. Nonetheless, the Chancellor will continue to enjoy broad discretion regarding any such financial awards.

Third Annual NSIA Report

On 10 September 2024, the Government released the third NSIA Annual Report for the period from 1 April 2023 to 31 March 2024, along with a detailed spreadsheet that includes all data since NSIA’s inception.

Notifications

The report shows a slight increase in notifications, from 865 to 906 (about a 5% rise). Of these, 753 were mandatory, 120 voluntary and 33 were retrospective validation applications. The vast majority of notifications were approved, with only about 3% rejected. Rejections by the Secretary of State were typically due to incorrect notification types—such as mandatory filings being submitted as voluntary and vice versa (42%). Only two notifications were turned down due to insufficient information.

On average, the ISU took six working days to process a mandatory notification and eight for a voluntary one. Notifications spanned multiple sectors, with the highest number relating to the defense sector (48%), followed by critical government suppliers (19%). UK-based acquirers constituted 61% of notifications, with the USA at 26%.

Call-ins

During the reporting period, 41 acquisitions were called in (about 5%), a decrease from 65 in the previous period (a 37% reduction). The defense sector had the highest number of call-ins (34%), followed by military and dual-use (29%). Chinese acquirers were involved in 41% of these notices, with the UK close behind at 39%. It took the ISU an average of 29 working days to issue call-in notices for both mandatory and voluntary notifications.

Final Orders

Only five final orders were issued during this period, a significant decrease of about 67% from the 15 orders in the previous period. Unlike the prior period, where five acquisitions were blocked or unwound, this period saw none. Most final orders concerned the defense sector (four), with communications, and military and dual-use sectors each seeing two orders. Notably, no final orders involved Chinese acquirers, a sharp drop from eight in the last period.

ⁱ [2025] EWHC 241 (Admin), para 42, available at https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Admin/2025/241.html.