UK Court of Appeal rules no right to full compensation for forced sale on national security grounds

On 28 November 2025 the UK Court of Appeal handed down its first-ever judgment on a judicial review of a divestment order under the UK National Security and Investment Act (NSIA). The court rejected a claim for full compensation at fair market value for losses arising from the forced sale and confirmed the wide margin of discretion afforded to the Government in the context of the NSIA regime. 

Whilst the court’s conclusion is perhaps not surprising, the judgment confirms that investors bear the risk of significant losses in the event of a forced sale on national security grounds. It also reinforces the importance of carefully assessing the potential application of the NSIA at the outset of deal planning.

Background

On 19 December 2022 the Government ordered the divestment under the NSIA of Upp Corporation (Upp), a UK fibre broadband provider, by investment group LetterOne. The Government cited national security concerns relating to the ultimate beneficial ownership of LetterOne and alleged links to Russia, which it considered could only be remedied by full divestment. The acquisition of Upp had been completed on 21 January 2021, almost a year before the NSIA entered into force on 4 January 2022, but it was called in for review under retrospective call-in powers.

Final orders issued under the NSIA can only be challenged on judicial review grounds i.e. illegality, procedural unfairness, unreasonableness/irrationality, or breach of a right protected by the European Convention of Human Rights (ECHR). LetterOne applied for judicial review of the divestment order on a number of these grounds, but the challenge failed before the High Court on 20 November 2024 (see our previous briefing for further detail). LetterOne was however granted permission to appeal against the High Court judgment on one ground: whether the divestment order breached its right to peaceful enjoyment of possession under Article 1 of the First Protocol of the ECHR (A1P1) because the Government failed to provide compensation for the financial loss resulting from the forced sale at a price LetterOne considered to be far lower than fair market value.

The Court of Appeal’s conclusions

In the appeal proceedings the validity of the divestment order itself was no longer contested. The sole question for the Court of Appeal to determine was whether LetterOne was entitled to additional compensation from the Government beyond the proceeds of the sale of Upp to Virgin Media O2 in September 2023. The price paid by Virgin Media O2 was not publicly disclosed, but was reported to be “in the tens of millions of pounds”, and significantly less than the £143.7m that LetterOne had invested in Upp by the time of the sale.

In summary, the Court of Appeal held that:

• A1P1 does confer a right to compensation for the expropriation of property, which must be reasonably proportionate to its value.
• However, this does not necessarily mean that “full” compensation is required in every context, and in any event what amounts to full compensation will depend on the context.
• In the circumstances of this case, LetterOne had received proportionate compensation because it received the proceeds of the sale of Upp to a purchaser of its choice, on the open market – the fact that LetterOne was forced to sell, not at a time of its choosing, and likely received less than it might otherwise have done because it was a forced sale, did not undermine the proportionality of the compensation.
• There is no right to full compensation at fair market value for losses arising from an NSIA divestment order (which suggests the position would likely be the same even if, for example, the Government had mandated the identity of the purchaser rather than it being an open market sale).
• Parliament could have included a scheme for compensation in the NSIA but chose not to do so. Instead, section 30 NSIA gives the Government discretionary powers to give financial assistance in consequence of a final order.
• A “wide margin of judgement” must be afforded to both the legislature and the executive in this context, and this applies as much to the question of compensation as it does to the underlying question of whether property should be regulated or taken in the first place.
• The court – both at first instance and on appeal – must make its own assessment of proportionality, but it does not thereby become the primary decision-maker. It must attach “special weight” to the judgments and assessments of a primary decision-maker with special institutional competence, such as the Chancellor of the Duchy of Lancaster under the NSIA.

Practical implications for investors

This judgment confirms that investors bear the risk of significant financial losses in the event of a forced sale on national security grounds. Absent exceptional circumstances, it is unlikely that any additional compensation will be paid beyond the sale price. It also seems likely that the same approach would be followed where a prohibition order results in either immediate financial losses or loss of future anticipated profits.

Investors should always carefully assess the potential application of the NSIA to a transaction at the outset of deal planning, even where potential national security concerns are not immediately obvious or where the investment is from “friendly” countries (or indeed even the UK, as the NSIA regime applies equally to UK investors, albeit divestment or prohibition is less likely in practice). Even if a transaction does not trigger a mandatory notification, voluntary notification may still be advisable in the interests of deal certainty where there are potential concerns, given the Government’s wide call-in powers that can be used at any time within five years of completion.

Whilst it is possible to contest a decision issued under the NSIA, investors should bear in mind that the approach of the courts to date indicates that this will be difficult in practice. The High Court has previously shown a significant degree of deference to the Government in the two judicial reviews it has considered so far, both in respect of the substantive national security assessment and matters of procedure (see our previous briefings here and here). This latest judgment confirms that the Court of Appeal will follow a similar approach.

For more information, or to discuss the potential application of the NSIA to a particular transaction, please reach out to Jacqueline Vallat, Ruth Allen or your usual CMS contact.