AC-2024-LON-003985 - [2025] EWHC 1922 (Admin)

FTDI was founded in 1992 and registered in Glasgow by Fred Dart. It remains a UK registered company that develops semiconductor devices and related cables and software devices, all of which focus on USB connectivity. Since the early 2010s, the management of FTDI, as well as research and development, has taken place in Singapore. It operates what has been called a ‘fabless’ model, meaning that it is not a manufacturer (or fabricator) of the products it designs. That is outsourced to third party foundries and assembly houses in Taiwan, South Korea, Japan and the USA. FTDI has offices for customer sales and support in the UK, the USA and China. FTDI’s products are in widespread use across a range of systems.

Until 7 December 2021, FTDI was owned by Stoneyford Investments Ltd (96.5%), Dormwood Ltd (2.5%) and John C McCrossan (1%). Stoneyford Investments Ltd is 100% owned by the C Dart Family Trust. From 7 December 2021 onwards, FTDI has been directly owned by Stoneyford Investments Ltd (19.8%) and by FTDIHL (80.2%). FTDIHL is a UK registered holding company which was established for the sole purpose of acquiring a stake in FTDI. The sale occurred because FTDI’s founders wanted to diversify their assets; and was negotiated following an international marketing exercise administered by Barclays Capital.

FTDIHL is owned, via two other SPVs (one a Hong Kong, one a Chinese company), by five Chinese funds, each bearing a name commencing ‘Dongguan Jianguang’. The general partner of the five funds is Beijing Jianguang Asset Management Co Ltd (‘JAC Capital’), a Chinese state-backed private equity company. JAC Capital itself owns a small stake in each of the funds. The full corporate structure is set out in the diagram which appears at Annex 1 to this judgment.

The acquisition by FTDIHL of a more than 75% shareholding in FTDI on 7 December 2021 was a ‘trigger event’ for the purposes of NSIA, although the Act was not at that point in force.

The evidence reveals that concerns within government about an acquisition of FTDI were first raised by officials in DCMS’s Economic Security Unit in or around July 2022. Those concerns did not, at that point, relate to the acquisition of FTDI by FTDIHL which had, in fact, occurred in December 2021. The focus at that stage was, instead, on what was understood to be an acquisition or planned acquisition of FTDI by a Chinese company called Electric Connector Technology Co Ltd (‘ECT’). DCMS officials raised this with officials in the Investment Security Unit (or ‘ISU’), which is the group responsible for administering NSIA on a day-to-day basis, which works out of the Cabinet Office and is answerable to CDL.

ISU opened what was called a ‘Market Monitoring’ (or ‘MM’) case, which is where a transaction, not notified by the parties, has been identified as being of interest through ISU’s procedures for monitoring the market. ISU proceeded to collate information on the transaction.

Consistent with ISU’s approach to MM cases, Information Notices were prepared and sent to FTDI. The first was served on 8 November 2022. In relevant part, this stated:

On 16 November 2022, FTDI responded to that Information Notice, saying that they:

On 29 November 2022, FTDI wrote to ISU saying:

On 9 December 2022, ISU served a further Information Notice on FTDI, which asked FTDI to:

On 15 December 2022, FTDI provided ISU with Board Resolution Minutes and a public announcement showing that the ECT transaction was not proceeding. This apparently led to the MM case being closed.

On 23 May 2023 Ms Jacqui Ward, the Director of ISU, became aware that FTDIHL might have acquired FTDI. From that point, ISU conducted due diligence to determine whether such an acquisition had taken place, when it had taken place, and the identity of the previous owners of FTDI. Further Information Notices were sent on 10 July, 31 July and 22 September 2023.

On 20 November 2023, the then Deputy Prime Minister and Secretary of State in the Cabinet Office, the Rt Hon Sir Oliver Dowden MP, received written advice from ISU about a call in decision in relation to FTDIHL’s acquisition of FTDI. He was provided with a submission analysing the acquisition with reference to the provisions of NSIA, and recommending that he call in the transaction. He reviewed the advice and decided to call in the transaction. A Call-In Notice under s. 1 NSIA was sent by email to FTDI on 22 November 2023.

The Call-In Notice was addressed to FTDI only, and was sent only to FTDI email addresses. The covering email stated:

FTDI forwarded the Call-In Notice to FTDIHL on 23 November 2023. On 1 December 2023, FTDI responded to the ISU email confirming that it had circulated the Call-In Notice to FTDIHL and provided contact details for FTDIHL.

Thereafter, further requests for information were made by ISU and responded to by FTDI from November 2023 to February 2024. A face-to-face meeting between FTDI, representatives of FTDIHL and the ISU was held on 16 April 2024. Video conferences were also held on 11 December 2023, 25 March 2024, 8 April 2024, 24 May 2024, 3 September 2024 and 29 October 2024.

On 23 May 2024, the ISU issued a request for representations (‘First Request for Representations’) and made an interim order under s. 25(1) of NSIA preventing FTDI and FTDIHL from taking steps that might frustrate any final order and requiring the submission of compliance statements. The ISU’s letter contained, inter alia, the following:

FTDIHL and FTDI submitted representations on 5 July 2024, including a package of suggested measures, which they believed would address any concerns which the Secretary of State might have. Amongst other things, complaint was made that insufficient information as to the gist of the Secretary of State’s concerns had been provided for the process to be a fair one.

A meeting was held on 30 July 2024 between officials from the ISU, the Department for Science and Technology, and from other government departments. At or as a consequence of that meeting ISU developed a concern that the risk to Critical National Infrastructure (‘CNI’) involved in the acquisition could not be mitigated without the need to invoke powers under the NSIA. It was agreed by officials in ISU that a new request for representations should be sent to the parties to give them an opportunity to make representations on the risk to CNI.

On 30 August 2024, ISU issued a second request for representations (‘Second Request for Representations’). That letter identified the national security risk which was said to arise from the transaction as relating to:

In their representations in response, dated 11 October 2024, FTDI and FTDIHL made a number of points. One, made in paragraph 13, was as follows:

In paragraph 21 of the 11 October 2024 representations, it was stated that, even if FTDI products were used in CNI, FTDI believed that its products and/or current ownership structure could not be used to disrupt that CNI. The following points were made: (1) that FTDI has very few UK customers; (2) that FTDI does not have control over the end location of its products; (3) that FTDI does not retain control over its products or have the ability to manipulate them once sold; and (4) that FTDI does not have a significant market share and similar products with the same functionality are available from multiple suppliers at similar prices.

On 2 October 2024, a director-level board took place within government, with attendees from the relevant departments, to discuss and agree on the recommended approach to remedy what ISU had identified as the risks in the present case. The evidence of Ms Newland, Deputy Director of the ISU, is that at that meeting there was broad agreement that the ISU should recommend to CDL that he order a divestment of the entirety of FTDIHL’s shareholding in FTDI, and that alternative measures short of divestment would be inadequate. There was a dissenting view from HMT.

On 29 October 2024, ISU submitted final written advice to CDL, who by now was Rt Hon Pat McFadden MP. The documentation provided to CDL included: (a) the Submission; (b) an Investment Security Risk Assessment (or ‘ISRA’); (c) a Diplomatic Assessment; (d) an Economic Assessment; (e) a Remedies Assessment; (f) a Summary of Representations; (g) a Representations Analysis; (h) letters from other government departments. The ISU’s recommendation was that CDL agree to issue a final order, requiring a divestment of FTDIHL’s entire 80.2% shareholding in FTDI.

The Remedies Assessment document made it clear that the recommendation for divestment was based only on the risk posed to CNI. It stated, in part:

On 5 November 2024, CDL reviewed the submission and held a meeting with ISU officials. He agreed with the ISU recommendation and signed the Final Order. This was then issued and notice of it was given on gov.uk. On 6 November 2024 ISU wrote to FTDI and FTDIHL about the Final Order.

The Final Order identified the national security risks in the same way as they had been stated in ISU’s letter of 30 August 2024, quoted above. The Final Order provided, in paragraph 8, that FTDIHL should divest its entire shareholding in FTDI in accordance with the process and deadlines set out in the Order. These included that FTDIHL should provide a draft Disposal Plan, including an indicative valuation of FTDI and a list of its assets, by 17 December 2024 (later extended to 17 January 2025). Other provisions of the Final Order related to the provision of compliance statements, the appointment of a monitoring trustee and the appointment of a divestiture trustee.