Sarah Beeston, Pim Jansen and Maurits Terlouw (Van Doorne) authored this publication.

The Dutch investment screening regime consists of a general investment screening act (Vifo Act) and sector-specific regulation in energy and telecommunications. The Vifo Act serves as a safety net for investments not covered by sector-specific rules. The regime applies to both non-Dutch and Dutch investors, requiring pre-closing filings to the Dutch Investment Screening Bureau (BTI).

Summary of major changes in 2024

• Policy rules now clarify the definition of a "business campus operator"’ which is one of the targets of the Vifo Act. An online tool is in the works for practical use of the policy rules.
• A parliamentary motion proposes the inclusion of the vegetable and seed improvement sector under the Vifo Act. This has now been included in a proposal to extend the scope of sensitive technologies, including biotechnology.
• The Energy Act (Energiewet) has been adopted. The Act, which will replace the current sector-specific legislation, provides for a lower notification threshold for transactions concerning electricity installations. The date of entry into force has yet to be determined.
• A proposal for a Defense and Security Related Industry Resilience Act (Wet weerbaarheid defensie en veiligheid gerelateerde industrie), providing for specific rules for the defense and security sector, is pending.
• As of 2024, parties participating in a tender to obtain a permit to operate in a wind energy area will also be tested under the Offshore Wind Energy Act (Wet Windenergie op zee). The BTI will also test changes of control over permit holders of wind farms that are not yet operational.
• The Minister of Economic Affairs and BTI can no longer order the notification of acquisition activities that took place before the date of entry into force of the Vifo Act (June 1, 2023).

Who files?

Under the Vifo Act, both the investor and the target are responsible for filing. It is common practice for the investor to bear the primary responsibility for any applicable filings. However, the investor cannot be held responsible for a failure to notify if it could not have known that a filing was required, specifically where the target cannot provide relevant information because it is bound by a confidentiality obligation. In such cases, the target bears the responsibility for filing.

The Gas Act (Gaswet) and the Electricity Act (Elektriciteitswet 1998) require a notification by one of the parties involved. The Telecommunications Act (Telecommunicatiewet) places the notification obligation solely on the acquiring party.

Types of deals reviewed

The Vifo Act applies to investments in companies in the Netherlands that are involved in vital processes, are active in the field of sensitive technology or operate a business campus.

Parties involved in vital processes include, among others, Schiphol Airport, the Port of Rotterdam, operators of heating networks, nuclear or renewable energy providers and certain providers in the field of banking, and the financial markets infrastructure.

Sensitive technologies include dual-use products and military goods that are subject to European export control. Some technologies are considered highly sensitive, including certain dual-use products and military goods, as well as semiconductor technology, quantum technology, photonic technology and high-assurance products.

A business campus is defined as an area hosting public-private partnerships and at least one company active in sensitive technologies. Whether a company qualifies as an operator is determined based on its influence on the safety of the business campus, such as the power to decide on access to facilities and knowledge.

Any transaction leading to a change of control in such undertakings must be notified to the BTI under the Vifo Act. The concept of change of control is the same as under the EU Merger Regulation.

A lower threshold applies for investments in companies in the field of highly sensitive technologies. Acquiring or increasing significant influence occurs where a party obtains the right to cast at least 10 percent, 20 percent or 25 percent of the votes in the target’s shareholder meeting, or obtains the power to appoint or dismiss one or more of the board members of the target.

The Vifo Act only applies if no sector-specific regulation is applicable.

Under the Electricity Act and Gas Act, notification is required for transactions involving power production facilities with a nominal capacity exceeding 250 MWs (to be lowered to 100 MWs under the Energy Act), and LNG installations and LNG companies.

Under the Telecommunications Act, notification is required if an acquisition results in "predominant control" leading to "relevant influence in the telecommunications sector."

Predominant control covers holding at least 30 percent of the voting rights, the right to appoint or dismiss a majority of the board or supervisory board, certain statutory rights regarding control, or ownership of a telecoms branch office, acting as a guarantor or owning a sole proprietorship.

Relevant influence in the telecommunications sector exists when abuse or deliberate failure of a telecommunications party could lead to issues with the availability, reliability or confidentiality of internet and telephone networks and services, including products and services related to national security, defense and upholding the rule of law.

Scope of the review

Following a notification, the BTI assesses whether the investment, merger or acquisition poses a risk to national security, or the security of supply—in other words, resilience. National security refers to security interests that are essential to the democratic legal order, security or other important interests of the Dutch state or social stability interests.

The Vifo Act explicitly notes the interests of safeguarding the continuity of critical processes, maintaining the integrity and exclusivity of knowledge and information of critical or strategic importance to the Netherlands, and preventing unwanted strategic dependence of the Netherlands on other countries.

Key factors in the assessment include: transparency of the identity and ownership structure of the investor; the investor’s criminal record and possible restrictions under national or international law; the security situation in the investor’s country or region of residence; ties to governments having geopolitical agendas other than the Netherlands and its allies; the investor’s financial stability and (past) compliance; and cooperation in the review procedure and any incorrectly submitted information.

Review process timeline

The review procedure under the Vifo Act consists of two phases. Phase I can take up to eight weeks, with a possible extension of up to six months. The BTI ends phase I with an announcement of whether further review is required.

Phase II can take up to eight weeks, with a possible extension of six months. However, the extension time used by the BTI in phase I will be deducted from this additional time. Consequently, the total extension cannot exceed six months.

If the BTI fails to make an announcement within the phase I deadline—including extension—clearance is deemed granted. A "stop the clock principle" applies during the review procedure, with the consequence that the review period is suspended if the BTI requests additional information. The decision period can also be extended by an additional three months if the EU FDI mechanism is triggered.

A standstill-obligation applies, meaning that the parties cannot complete the transaction before the BTI has granted clearance. The BTI can grant an exemption from the standstill-obligation for reasons of general interest.

Under the Electricity Act and the Gas Act, the notification must be made ultimately four months prior to the expected change of control. According to the explanatory memoranda to both acts, if the BTI fails to respond within four months, clearance is deemed granted.

No standstill obligation applies, meaning that closing can take place while the BTI is still reviewing the transaction.

Under the Telecommunications Act, acquisitions should be notified at least eight weeks before the intended implementation date. In case of a public bid, notification is required at the latest simultaneously with the announcement of such public bid.

The review period consists of two phases: phase I, which can take up to eight weeks. At the end of this period, the BTI can approve, prohibit or refer the transaction for an in-depth investigation. Phase II can take up to six months.

The review period is suspended if the BTI requests additional information. It is also suspended in case of an intended prohibition to allow the telecommunications party to submit its opinion. No standstill obligation applies, meaning that closing can take place while the BTI is still reviewing the transaction.

How investors can protect themselves

Investors should make timely notifications to the BTI if required under the Vifo Act or sector-specific regulations.

As concerns the Vifo Act, investors should bear in mind that a standstill obligation applies. Investors must wait for the BTI’s clearance before completing the transaction. Failure to notify, premature implementation, "gun jumping," or providing wrongful or misleading information may result in the imposition of a fine of up to €1,030,000 or 10 per cent of worldwide turnover.

Under the Telecommunications Act, failure to notify (in time) can result in fines of up to €900,000.

Under the Electricity Act, failure to notify (in time) can result in fines of up to €900,000 or 10 percent of the worldwide turnover and annulment of the transaction in court, while the Gas Act merely provides for a possible annulment of the transaction in court. Under the Energy Act, any failure to notify (in time) will be subject to fines of up to €1,030,000 or 10 percent of the worldwide turnover and possible annulment of the transaction in court.

Although the sector-specific regulations do not contain a standstill obligation, completing a transaction before clearance entails risks. Indeed, if the BTI prohibits the transaction or imposes conditions on completion, the investment may have to be partially or fully reversed.

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