The Netherlands has several sector-specific regimes in place to restrict investments on national security or public order grounds, namely for the electricity, gas, mining and telecommunications sectors. In addition, the Investment Screening Bill ("ISB") has been passed by both the Dutch Parliament (April 19, 2022) as well as the Senate (May 17, 2022). The ISB introduces a general investment screening regime, expected to come into force in early 2023. The ISB covers investments in companies involved in vital processes or active in the area of sensitive technologies and allows the government to prohibit these types of investments or to make them subject to remedies. Remedies under the ISB include (but are not limited to):

• Restricting access to sensitive information from;
• Imposing security and integrity policies regarding the appointment of employees in key positions
• Appointing a security officer or committee with the independent authority to block access by the company to sensitive data, comment on the appointment of key employees and report to the Minister;
• Transferring all relevant sensitive activities to one Dutch entity;
• Prohibiting the supply of relevant products and services to specific customers or countries;
• Excluding specific assets or activities from the transaction;
• Appointing a separate supervisory board for the Dutch entity;
• Limiting the number of shares that may be acquired or the obligation to certify the shares.

The ISB will be applied retroactively to transactions implemented from 8 September 2020 onwards. Transactions implemented prior to the entry into force of the ISB can only be called in for review in case they pose an actual risk to national security. The government body that is set up to perform the review under the ISB is the Dutch Investment Review Agency (Bureau Toetsing Investeringen or BTI), under the responsibility of the Minister of Economic Affairs and Climate Policy.

The regimes in place are focused on safeguarding national security. The conditions under which an investment can be prohibited or made subject to remedies are based on public safety, the security of supply of vital services and national security including the prevention of strategic dependency.

The term 'foreign investor' is not defined in Dutch law. The investment control regimes apply equally to domestic and foreign investors. However, the foreign nature of the investor may play a role during the substantive assessment of the investment or transaction.

The Vifo Act introduces a general screening regime for all investments in companies that have material activities in the Netherlands with vital processes or sensitive technologies or as managers of business campuses. Vital processes under the Vifo Act are water management, city heating transport networks, activities in relation to nuclear materials, Schiphol Airport, the Rotterdam Port Authority, banks, financial market infrastructure, and companies active with natural gas exploration, transport and storage. Sensitive technologies are military and dual-use technologies as well as quantum technologies; semi-conductor technologies (including production, and design software); high-assurance technologies; and photonics. A business campus is defined as an area in which multiple companies are located that are active (through public-private partnerships) with technologies and applications that are of economic and strategic importance to the Netherlands.

Sectoral screening mechanisms exist for the telecommunications, gas, electricity, and mining sectors.

The Vifo Act applies to all mergers, demergers, acquisitions or other investment that results in (a) a change of control over a relevant company, (b) the acquisition of a relevant company or (c) an increase or acquisition of significant influence over a relevant company. The last limb – significant influence – only applies to investments in companies that are active with highly sensitive technologies and start already at 10% of the shares in the relevant company.

In sector-specific regimes, the threshold is that of a change of control or acquisition of controlling interest in companies in the relevant sector. For example, under the Electricity Act, all transactions that result in a change of control over an electricity production plant with a capacity of at least 250 Megawatts must be notified. The same type of notification is envisaged in the Gas Act in relation to the change of control over Liquefied Natural Gas ("LNG") plants.

Notifications are mandatory.

A transaction that has not been notified under the Gas Act or the Electricity Act is subject to the annulment of the deal. Under the Telecommunications Act, the Minister of Economic Affairs and Climate Policy may impose a fine of up to EUR 900,000 where there is late notification or a failure to give notice of the deal. If the transaction is executed despite a prohibition of the Minister the transaction is considered to be void.

If a transaction is within the scope of the Vifo Act but has not been notified, the Minister may impose a fine of up to EUR 900,000 or 10% of the turnover of the companies involved in the year preceding the infringement.

The Minister may also undertake an assessment ex officio. The Minister shall have the right to order the parties to submit a (new) filing within three months after it has become aware that (i) notice of a transaction should have been given, or (ii) incomplete or incorrect information has been provided in the notification. A transaction executed despite the Minister’s decision to prohibit is void. In the event that the prohibited transaction took place through a stock exchange, it is subject to annulment.

Under the sectoral regulations as well as the Vifo Act, approval must be obtained prior to closing.

Under the Gas Act and Electricity Act, a notification must be made no later than four months before the intended change of control. Under the Telecommunications Act, a notification must be made no later than eight weeks before the intended date of closing.

Although the legislation intensifying FDI review was already in the making, notably in reaction to the rise in investments by state-owned entities from China and Russia, the COVID-19 pandemic has led to an acceleration of the legislative process. Nevertheless, healthcare is not in the scope of the Vifo Act so far.

During the first few months, we have dealt with several instances of retroactive application of the Vifo Act.  We are not aware of any blocked transactions.

For the thresholds for review, please refer to our response to "What are the relevant thresholds?".

Under the Vifo Act, the BTI will evaluate whether an investment poses a risk to national security. National security is defined with reference to the concept of national security under the Treaty on the European Union. This concept regards the continuity of critical processes, the maintenance of the integrity and exclusivity of knowledge and information that is of critical or strategic importance for the Netherlands, and the prevention of unwanted strategic dependence of the Netherlands on other countries. If a transaction poses a risk to these parameters, it may be subject to conditions or prohibited.

Under the Gas and Electricity Act, the Minister may prohibit an envisaged transaction or attach certain conditions to it on grounds of public safety or security of supply.

Under the Telecommunications Act, the Minister can prohibit an envisaged transaction if it poses a threat to the public interest, notably, if willful termination of the relevant services by the acquirer would cause a breach of the confidentiality of communications or an unacceptable interruption of online services to the public in general or to defense and security services in particular.

The BTI has been actively reviewing cases over the past 6 months but has (as far as we are aware) not blocked any transactions.

We do not expect any regulatory developments over the next 6 months.