Clifford Chance

On the 30th of June 2021, the Minister of Economic Affairs and Climate ("Minister") submitted a proposal for a cross-sector foreign direct investment screening act ("Act"). The proposed Act will serve as a review mechanism for investments that could pose a risk to the national security of the Netherlands. The proposed Act is still being discussed in parliament and is thus subject to change. It is currently unclear when the Act may enter into force, but our expectation is that this will not be before Q1 2022.

Importantly, the proposed Act will have retro-active effect and may thus capture investments made as from the 8th of September 2020.

Scope of the new Act

The proposed Act captures undertakings that are active in vital processes or sensitive technologies in the Netherlands. Vital processes can be described as services that are essential to Dutch society. Some sectors have already been classified as such in the proposed Act but more can be identified by ministerial decree. Current examples include: banking, gas storage, nuclear energy, designated activities at Schiphol airport and the port of Rotterdam, etc. Sensitive technologies are currently understood to include dual use goods that fall under EU export control regulations and other technology may be designated as such by ministerial decree. 

Nature of the review

The Minister will assess whether the investment could pose a threat to Dutch national security. To determine this, various factors will be taken into consideration, including:

• The ownership structure of the investor;
• Any restrictive sanction measures or obligations imposed on the investor; and,
• The level of security or safety in the country of origin of the investor. 

The investment may then either receive unconditional approval or conditional approval requiring the implementation of specified mitigating measures. Alternatively, the investment can also be prohibited if the national security risks cannot be remedied through mitigating measures. When comparing this with the already implemented telecoms specific FDI-regime, the Minister has recently shared that no notifications have led to the conclusion that they form a threat to national security in the first year of enforcement. 

Mandatory notification regime

If an investment is within the scope of the Act, notification is mandatory and suspensory. The thresholds differ for undertakings active in vital processes and undertakings working with sensitive technology. For undertakings providing vital services the threshold is a change of control, corresponding to the familiar concept as meant under EU merger control rules.  For undertakings dealing with sensitive technology, the threshold is lower and centers around so-called significant influence. The proposed Act stipulates that a buyer is deemed to have significant influence when it acquires 10%, 20% or 25% of the shareholders' meeting votes. However, the concept is somewhat fluid and may thus capture a broader range of transactions.  Further guidance (likely through a ministerial decree) on the application of the concept of significant influence is expected (but not available in any form just yet). 

Timetable

The Minister will initially have eight weeks after notification to take a decision, but that may be extended by six months. If further investigation is required, a second phase of another eight weeks will apply and another extension of six months is possible, although the first phase period will be deducted. Finally, if the EU FDI screening regulation applies, an additional three months’ extension is possible. So-called “stop the clock” questions may suspend the statutory review period at any time.