On 1 June 2023, the Dutch FDI Act (‘Wet Vifo’) entered into force, marking a significant milestone in the regulation of (foreign) direct investment in the Netherlands. With the FDI Act, proposed investments in several vital and/or technologically sensitive undertakings must be notified to the Minister of Economic Affairs before the intended transaction can take place. The Minister screens notified investments for risks to national security and may impose conditions or an outright ban on proposed investments. In this blog, we explore the key elements of the Dutch FDI Act.
Material Scope
The notification obligation of the FDI Act applies to target undertakings that fall within one of three categories. Firstly, the FDI Act contains a list of vital suppliers for which notification is mandatory. These include, among others, the operators of Schiphol Airport and the Port of Rotterdam. Although the list is presently rather brief, the FDI Act explicitly recognizes the possibility of designating additional undertakings as vital suppliers. Secondly, the FDI Act applies to operators of high-tech campuses. This category was added after the Dutch government found itself unable to prevent the acquisition of High Tech Campus Eindhoven by the Singaporean state. Thirdly, the FDI Act applies to target undertakings active in the field of sensitive technologies, which encompass military or dual-use products that are specifically enumerated in EU legislation.
The fact that a target undertaking is covered by Dutch FDI legislation does not automatically mean that all investments in the target must be notified. The acquisition of a single share would, in most cases, not trigger a notification obligation. The notification obligation is initially triggered by a change of control of the target undertaking. In other words, when a company acquires the ability to exercise decisive influence on the activities of the target company, an investment can become notifiable. However,regarding target undertakings active in the field of highly sensitive technologies, acquiring a 10%, 20%, and 25% stake in the target undertaking in question may already suffice to trigger the notification obligation.
Geographical Scope
The Dutch FDI Act applies not only to investments made from outside the EU/EEA or to investments from outside the Netherlands, but also to domestic investments. This is remarkable, given that the competence to put in place a national FDI screening regulation is derived from a European framework regulation for the screening of investments by third-country-parties into the EU. Nevertheless, even though Dutch investors must notify proposed investments that fall within the scope ot the Dutch FDI Act, the country of origin is important for the material review whether risks exist with regard to the intended investment for Dutch national security, as will be further explained below.
Temporal Scope
With the entry into force on the 1st of June 2023, all investments covered by the FDI Act must henceforth be notified. Additionally, the Dutch FDI Act grants the Minister of Economic Affairs the competence to retroactively apply the FDI Act to investments made after 8 September 2020. In such cases, the Minister may oblige the undertaking to submit a notification. The Minister has indicated it will exercise great restraint when applying the FDI Act retroactively. Nevertheless, the Minister has already ordered the submission of a notification regarding the acquisition of Dutch chipmaker Nowi by Chinese-owned investor Nexperia.
Screening Procedure
Proposed investments falling under the Dutch FDI Act must be notified to the Bureau Toetsing Investeringen (‘BTI’ – Investment Assessment Agency) of the Ministry of Economic Affairs and Climate and may not be implemented prior to the completion of the notification procedure. Upon receipt of the notification, the BTI will initiate a Phase 1 procedure. During Phase 1, the BTI will conduct a preliminary assessment to determine if the investment poses risks to national security. If the BTI determines that there are minimal or no risks to national security, it may decide to clear the proposed investment without an assessment decision. If the BTI deems an assessment necessary, it must proceed to a Phase 2 procedure. Phase 2 involves a detailed investigation that may result in either clearance of the proposed investment, clearance subject to certain remedies, or the prohibition of the proposed investment. Both phases are subject to an eight-week time limit, which may be extended by six months.
Assessment of risks to national security
During Phase I and Phase II, the BTI will assess the risks to national security based on the factors laid down in the Dutch FDI Act. Depending on whether the investment concerns a vital supplier or an undertaking active in (highly) sensitive technologies, the factors may vary. A common denominator is that these factors predominantly concern the acquiring undertaking, such as (i) its ownership structure and transparency, (ii) the security and reliability of its country of residence, (iii) its track record (for instance in safety and technical expertise) and criminal record, and (iv) any uncooperativeness displayed during the notification procedure.
Conclusion
Although it is yet to be seen how the Dutch FDI Act plays out in practice, with the entry into force of this regulation a new chapter for investors in the Netherlands has begun and a decisional and jurisprudential practice will undoubtedly develop. If you have any questions about the application of the Dutch FDI regime to your proposed investments in a Dutch company, please do not hesitate to contact AKD’s FDI specialists named below.
On 1 June 2023, the Dutch FDI Act (‘Wet Vifo’) entered into force, marking a significant milestone in the regulation of (foreign) direct investment in the Netherlands. With the FDI Act, proposed investments in several vital and/or technologically sensitive undertakings must be notified to the Minister of Economic Affairs before the intended transaction can take place. The Minister screens notified investments for risks to national security and may impose conditions or an outright ban on proposed investments. In this blog, we explore the key elements of the Dutch FDI Act.
Material Scope
The notification obligation of the FDI Act applies to target undertakings that fall within one of three categories. Firstly, the FDI Act contains a list of vital suppliers for which notification is mandatory. These include, among others, the operators of Schiphol Airport and the Port of Rotterdam. Although the list is presently rather brief, the FDI Act explicitly recognizes the possibility of designating additional undertakings as vital suppliers. Secondly, the FDI Act applies to operators of high-tech campuses. This category was added after the Dutch government found itself unable to prevent the acquisition of High Tech Campus Eindhoven by the Singaporean state. Thirdly, the FDI Act applies to target undertakings active in the field of sensitive technologies, which encompass military or dual-use products that are specifically enumerated in EU legislation.
The fact that a target undertaking is covered by Dutch FDI legislation does not automatically mean that all investments in the target must be notified. The acquisition of a single share would, in most cases, not trigger a notification obligation. The notification obligation is initially triggered by a change of control of the target undertaking. In other words, when a company acquires the ability to exercise decisive influence on the activities of the target company, an investment can become notifiable. However,regarding target undertakings active in the field of highly sensitive technologies, acquiring a 10%, 20%, and 25% stake in the target undertaking in question may already suffice to trigger the notification obligation.
Geographical Scope
The Dutch FDI Act applies not only to investments made from outside the EU/EEA or to investments from outside the Netherlands, but also to domestic investments. This is remarkable, given that the competence to put in place a national FDI screening regulation is derived from a European framework regulation for the screening of investments by third-country-parties into the EU. Nevertheless, even though Dutch investors must notify proposed investments that fall within the scope ot the Dutch FDI Act, the country of origin is important for the material review whether risks exist with regard to the intended investment for Dutch national security, as will be further explained below.
Temporal Scope
With the entry into force on the 1st of June 2023, all investments covered by the FDI Act must henceforth be notified. Additionally, the Dutch FDI Act grants the Minister of Economic Affairs the competence to retroactively apply the FDI Act to investments made after 8 September 2020. In such cases, the Minister may oblige the undertaking to submit a notification. The Minister has indicated it will exercise great restraint when applying the FDI Act retroactively. Nevertheless, the Minister has already ordered the submission of a notification regarding the acquisition of Dutch chipmaker Nowi by Chinese-owned investor Nexperia.
Screening Procedure
Proposed investments falling under the Dutch FDI Act must be notified to the Bureau Toetsing Investeringen (‘BTI’ – Investment Assessment Agency) of the Ministry of Economic Affairs and Climate and may not be implemented prior to the completion of the notification procedure. Upon receipt of the notification, the BTI will initiate a Phase 1 procedure. During Phase 1, the BTI will conduct a preliminary assessment to determine if the investment poses risks to national security. If the BTI determines that there are minimal or no risks to national security, it may decide to clear the proposed investment without an assessment decision. If the BTI deems an assessment necessary, it must proceed to a Phase 2 procedure. Phase 2 involves a detailed investigation that may result in either clearance of the proposed investment, clearance subject to certain remedies, or the prohibition of the proposed investment. Both phases are subject to an eight-week time limit, which may be extended by six months.
Assessment of risks to national security
During Phase I and Phase II, the BTI will assess the risks to national security based on the factors laid down in the Dutch FDI Act. Depending on whether the investment concerns a vital supplier or an undertaking active in (highly) sensitive technologies, the factors may vary. A common denominator is that these factors predominantly concern the acquiring undertaking, such as (i) its ownership structure and transparency, (ii) the security and reliability of its country of residence, (iii) its track record (for instance in safety and technical expertise) and criminal record, and (iv) any uncooperativeness displayed during the notification procedure.
Conclusion
Although it is yet to be seen how the Dutch FDI Act plays out in practice, with the entry into force of this regulation a new chapter for investors in the Netherlands has begun and a decisional and jurisprudential practice will undoubtedly develop. If you have any questions about the application of the Dutch FDI regime to your proposed investments in a Dutch company, please do not hesitate to contact AKD’s FDI specialists named below.