Netherlands

On May 18, 2022, the Dutch Parliament adopted a law that introduces a generally applicable foreign direct investment screening regime (the Act). The purpose is to complement the existing sectoral screening regimes in electricity, gas and telecommunication sectors. On December 23, 2022, the Council of Ministers approved a Decree that provides the technical details of the Act, such as the provision of information and data retention periods. 

On 1 June 2023, the regime entered into force, following the adoption of a Royal Decree on 4 May 2023 defining the scope of application of the Act in relation to sensitive technologies. In addition to the mandatory notification of investments occurring after 1 June 2023, the Act has a retroactive effect allowing the Authority to order the parties to an acquisition that may pose a risk to national security and that occurred after 8 September 2020, to submit a notification within 8 months following the entry into force of the Act, i.e., 1 June 2023.

Notification Requirements

Mandatory notification will be required for investments by investors in or acquisitions of target companies that are vital providers, companies active in the field of sensitive technologies or managers of a corporate campus.

• Vital provider: A vital provider is a provider of services or products in the following sectors: heat, nuclear energy, air transport, port infrastructure, banking, financial market infrastructure, recoverable energy, and gas storage.
• Sensitive technologies: Sensitive technologies are defined as dual-use items, the export of which is subject to a specific authorisation, and military goods.
• Target company and investors: The target company needs to be a company established in the Netherlands. In contrast to other FDI regimes within the EU, the acquirer does not need to be a non-EU company to be covered by the mandatory notification.
• Acquisitions or investments: Acquisitions or investments concern investments leading to an acquisition of control, mergers, full-function joint ventures, demergers, acquisition of certain assets, acquisition of goods, and other legal acts which result in one or more persons/companies acquiring control in a target company. Furthermore, if the target is active in the field of sensitive technology, the acquisitions or investments concern also investments to obtain or increase significant influence and other legal acts aiming at gaining or increasing significant influence over a target enterprise.
• Significant influence: A gain or increase of significant influence concerns situations where a person can cast or cause to be cast 10 percent, 20 percent or 25 percent of the votes of the general meeting in a target company. The applicable percentage depends on the type of company concerned. Significant influence may also be acquired where the undertaking has committed itself to promote the appointment or dismissal of one or more directors in the target undertaking on the orders or instruction of such third party.

Review process

An acquisition activity that falls within the scope of the Act cannot take place before the Authority notifies the notifying person that no review decision is required, or before a review decision has been made, as the case may be. The review procedure consists of two phases: an assessment phase and a review phase.

1. In the assessment phase, the Authority has eight weeks following receipt of a notification to inform the notifying party whether or not a review decision is required (potentially extended reasonably if more time is required to make a decision, but no later than six months). During the assessment phase the potential risks to national security of the acquisition activity will be examined.¹ In this context, the Authority will take into account several factors, including the transparency of the ownership structure and relationships of the acquirer, the security situation in the country of residence of an acquirer, any criminal offences committed by the acquirer, etc. 
2. During the review phase, the Authority has to issue a review decision within eight weeks following the receipt of the notification by the notifying party. It can be reasonably extended, but no later than six months, less the time that has elapsed between the receipt of a notification and the statement that a review decision is required. It shall be extended by an additional maximum of three months if it appears that the FDI falls within the scope of the Regulation (EU) 2019/452. Furthermore the review phase is suspended if the Authority requests for additional information to take a decision. If the acquisition activity leads to risks to national security, the decision can impose various remedies to prevent or reduce these risks. 

Enforcement and Consequences in the Event of a Breach 

Non-compliance with a prohibition decision results in the acquisition being null and void, and may result in actions to prevent or reverse its adverse effects. Furthermore, if the Authority has imposed that control or significant influence in the target be reduced or terminated, the Authority can dispose of the shares if need be. There is also a possibility to suspend the exercise of any acquired rights by the acquirer. In addition, the Authority may designate one or more persons to replace the board or management of a target company that is a vital provider if there is a suspension of rights and a risk of misuse or failure of the target company. 

In cases of gun-jumping, the Authority may impose an administrative fine of up to €870.000 (reviewed annually), or up to 10 percent of the turnover of the acquirer’s group if the maximum amount was not considered as an appropriate punishment. Where an acquisition has taken place prior to the adoption of a decision, or where an acquisition activity has not been notified, an ex officio review decision (or a decision not to review) can be taken by the Authority within eight weeks after it became aware of the closing of the acquisition activity, or after the expiry of the three-month term given to the acquirer to notify the acquisition. Where incorrect or misleading information was provided by the notifying party, and after the expiry of the three-month term given to the acquirer to notify again the acquisition, a new review decision (supplementing or replacing the original decision) may be taken by the Authority. 

The author wishes to thank Julien Haverals, International Trainee, Norton Rose Fulbright LLP Brussels for his contribution.