The facts
On 7 December 2021, FTDI Holding Limited – a Chinese-registered firm – acquired a 80.2% share in Future Technology Devices Limited (FTDI) – a British semiconductor company. The deal was called in for review by the UK government on 22 November 2023. A year later, the UK government issued a final order requiring FTDI Holding Limited to divest its majority stake in FTDI on national security grounds. In particular, the government considered that the transaction resulted in risks relating to the transfer of UK developed IP and technology to China and the potential for FTDI Holding Limited’s ownership to disrupt critical national infrastructure. On 3 December 2024, FTDI Holding Limited (the Claimant) challenged the government’s final order by filing a claim for judicial review and applied for an interim injunction or stay suspending the effect of that final order, pending the determination of its judicial review claim on the substance.
Test for interim relief: American Cyanamid principles
The test for considering whether applications for interim relief in public law cases are adequate is set out in the case of American Cyanamid (American Cyanamid Co. v Ethicon Ltd [1975] AC 396.). According to the test, the courts will consider: whether there is a serious question to be tried, whether damages would be an adequate remedy, and if not, whether the ‘balance of convenience’ rests with maintaining the existing factual scenario or intervening through interim relief.
The judgement
Applying the test laid down in American Cyanamid, the court refused the Claimant’s application for interim relief.
1. Serious question to be tried: The Defendant argued that the merits threshold in public law cases is whether the claimant has a ‘strong prime facie case’ as opposed to ‘serious question to be tried’, which was rejected by the Court who emphasised that the merits threshold is not higher in public law cases than in any other case. The court concluded, however, that merits would be a significant factor in assessing the balance of convenience in public law cases. In any case, the court determined that the balance strongly opposes the granting of interim relief, regardless of whether the grounds for challenge reveal merely a 'serious question to be tried' or a 'strong prima facie case'.
2. Adequacy of damages: The Court concluded that damages would not be a wholly adequate remedy in this case because it would be difficult for damages to reflect the “strategic importance to the claimant’s business of its investment in FTDI”. In addition, the Court noted that from the defendant's perspective, the interest purportedly served by the challenged decision is UK national security, and “any detriment to that interest is plainly not compensable through an undertaking in damages”. Despite concluding that damages would not be adequate, the Court acknowledged, though, that since the decision related to property interests rather than personal liberty or privacy interests, damages would provide at least some measure of protection.
3. Balance of convenience: The Court stated that whilst it had to balance private interests (i.e., FTDI Holding Limited’s rights) as against competing public interests (i.e., the national security risks identified by the Defendant in its NSIA review), the Claimant would “need to point to something very compelling to outweigh” the public interest. Where the public interest to be weighed is national security, the court acknowledged that it “must show great respect to the judgement of the executive” – in particular, the executive’s judgement on the existence and weight of the relevant risk. Indeed, the Court concluded that there was nothing in the evidence to suggest that the UK government’s propositions (i.e., that the Claimant’s control over FTDI presented a real and significant risk to national security and that granting interim relief would prolong the period of the risk) as irrational. The court went on to note that in many cases “it may be difficult to find interests sufficiently weighty to outweigh the public interest in national security”.
Significance
It is important to note that the judgment only addresses the request for interim relief and does not rule on the substantive grounds of the claim challenging the final order. This means that businesses can still challenge decisions under the NSIA. However, when it comes to seeking an interim injunction or stay to suspend the effect of the final order pending the determination of a judicial review claim, it will likely be difficult for businesses to succeed. This is because the court, as demonstrated in this case, will show significant deference to the UK government regarding national security matters. For a private interest to outweigh the public interest of national security and consequently succeed in an interim relief claim, the private interest would need to be "sufficiently weighty".
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We would like to thank Amanpreet Kaur for her contribution to this article.
