The British government has proposed a new law that would give it more leeway to investigate and intervene in cases of “hostile foreign direct investment.”

The National Security and Investment Bill, unveiled Wednesday, could mean extra scrutiny for takeovers of U.K. companies in sectors such as artificial intelligence, autonomous robotics, and quantum technologies, if there are potential national security implications.

Crucially, the new law would—if passed in its proposed form—cover not only full M&A, but also deals around the transfer of assets and intellectual property. This would close what some lawyers see as a loophole in the U.K.’s existing regime for scrutinizing foreign direct investment, or FDI.

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That law, the Enterprise Act, is almost two decades old now, and the government is touting its new bill as a much-needed modernization of the rules.

‘No back door’

“The U.K. remains one of the most attractive investment destinations in the world, and we want to keep it that way,” said Business Secretary Alok Sharma in a statement. “But hostile actors should be in no doubt—there is no back door into the U.K.”

The government’s move echoes those made in recent years by key intelligence-sharing partners such as the U.S. (2018’s Foreign Investment Risk Review Modernization Act) and Australia (where reforms to the 1975 Foreign Acquisitions and Takeovers Act were proposed in June.)

European countries including Germany, France, and Italy also tightened their FDI scrutiny rules this year, expanding their scope to include more sectors outside the traditional areas of concern, such as defense, and lowering thresholds for the levels of investment that could trigger a review.

These changes largely implemented guidelines put forward by the European Commission, following demands by EU lawmakers to protect vulnerable European companies during the pandemic’s economic chaos.

The U.K. proposals had been in the works since before the pandemic and may have been delayed by it. Former Prime Minister Theresa May supported reforms as far back as 2016, though it took a few years for her government to officially signal new legislation in October 2019.

The current government of May’s successor, Boris Johnson, did tighten FDI controls earlier this year, but that was specifically aimed at countering potential threats to the U.K.’s pandemic response, such as activity around vaccine research.

According to Barri Mendelsohn, a corporate and securities partner at the London office of law firm King & Wood Mallesons, Wednesday’s proposals are “along the lines” of what was expected.

“Although the new bill may not be helpful for some investors, we’re interested to see how the government intends to apply it in practice,” Mendelsohn told Fortune Wednesday. He added that the addition of asset and IP transfers as possible triggers for scrutiny would close a “potential loophole” in the existing rules.

Retrospective reviews

In terms of sanctions for noncompliance, the bill would allow fines of up to 5% of global revenues and jail terms of up to five years. If companies try to execute covered transactions without notifying the authorities, those transactions would be legally voided.

Notably, the law would allow the government to retrospectively examine transactions that took place over the preceding five years—but this would not apply to transactions that took place before the bill was introduced to Parliament.

Relevant transactions would have to be reported to a new Investment Security Unit, just as those in the U.S. need approval from the Committee on Foreign Investment in the United States (CFIUS).

CFIUS gained prominence during the Trump administration as its cudgel against Chinese companies that were starting to make inroads into the U.S. market, such as Huawei and TikTok. Similarly, much of the EU’s drive to step up FDI scrutiny was triggered by concerns over Chinese companies buying up key European tech players (the 2017 takeover of German industrial-robotics firm Kuka by China’s Midea Group was widely seen as a wake-up call.)

The British government noted in its Wednesday statement that “the new regime will apply to investors from any country,” and Mendelsohn warned against seeing the bill as a defensive move against China in particular. “It’s dangerous to use a broad brush,” he said.