Overview of regime
In brief
Although often viewed as one of the most open economies in Europe, the broader European policy push for more foreign direct investment (FDI) screening has also given momentum to the Dutch legislator to design and implement the very first Dutch cross-sector FDI screening regime. On 1 June 2023, the Act on Security Screening of Investments, Mergers, and Acquisitions (“Vifo Act“) entered into force.
The first few months of active enforcement have shown that both the regime and the Dutch Investment Screening Bureau (BTI) are somewhat unpredictable but are nonetheless steadily evolving to greater maturity. That said, relatively ill-prepared notifications lead to extended transaction timelines and greater uncertainty can be avoided with timely, adequate, and serious preparation. If anything, it is strongly advised that FDI regimes are taken as seriously as the (albeit better known) merger control processes.
The Vifo Act covers a broad range of transaction activities in a number of sectors deemed vital to national security in the Netherlands as well as in relation to operators of business campuses and companies active in the field of sensitive technologies. If a particular transaction is within the scope of the Vifo Act, it will require mandatory and suspensory notification to the BTI, which is part of the Dutch Ministry of Economic Affairs and Climate, such that an ultimate decision on a particular notification can be taken by the Minister of Economic Affairs and Climate. The Vifo Act is investor-agnostic, meaning essentially that all triggering transactions require notification regardless of the origin of the investor (or investors).
A much-discussed feature of the Vifo Act is that the Minister could retroactively review transactions that took effect after 8 September 2020 and before the entry into force of the Vifo Act. This possibility applied until eight months after the Act entered into force. To date, it is publicly known that the Minister of Economic Affairs and Climate investigated whether it could, perhaps under its retroactive powers of investigation, review the acquisition of the Dutch semiconductor developer Nowi by Nexperia (owned by Wingtech Technology in China), which predated the entry into force of the Vifo Act. It was no great surprise when the Minister confirmed on 27 November 2023 that it is not possible for transactions relating to semiconductor technology to be reviewed retroactively. However, transactions involving semiconductor technology taking place after entry into force of the Vifo Act may well require a mandatory notification and be subject to significant scrutiny.
The Vifo Act complements sector-specific regimes in relation to the telecommunications, electricity, and gas sectors. These regimes are also enforced by the BTI on behalf of the Minister of Economic Affairs and Climate. Other activities and sectors that are currently not within the scope of these regimes may be added in the future through the normal parliamentary legislative process in relation to new or amended legislation and, in certain circumstances, also by ministerial decree under the Vifo Act.
A new sector-specific regime in relation to the defense industry is understood to be forthcoming, with the aim of replacing the existing limited regime covering certain defense contracts; however, as yet, very little detailed information about its scope and timing is publicly available. For the sake of completeness, although not strictly a foreign investment or national security screening regime, there is also a regime specific to Dutch healthcare, which allows the Dutch Healthcare Authority primarily to verify that proposed acquisitions involving healthcare providers do not threaten crucial care being provided in the Netherlands.
To access the full alert, please click here.
