Get ready for more action! Dutch investment screening continues to evolve
Developments in Dutch investment screening are following each other rapidly since the one-year anniversary of the Dutch Investments, Mergers and Acquisitions Security Screening Act (Wet Veiligheidstoets fusies, investeringen en overnames - Vifo Act) in June. The proposal for a separate regime for the defence industry was published and with the first annual report for 2023, the Minister of Economic Affairs announced that he intends to bring AI and biotechnology within the scope of the Vifo Act.
Publication proposal for defence screening regime
In July 2024, the Dutch government launched a public consultation for its new proposal to regulate the defence and security industry in the Netherlands. The Defence and Security-Related Industry Resilience Act (Wet weerbaarheid defensie en veiligheid gerelateerde industrie - Defence Resilience Act) introduces a new sector-specific investment screening mechanism. In its current form, the regime would apply to investments resulting in the acquisition of control over or ‘significant influence’ (see our July 2023 newsletter) in:
- a target active in military goods listed on the EU Common Military list; or
- a target with an agreement with the Dutch government of at least three years to supply and transport goods suitable for immediate deployment by the armed forces; or
- a target designated by the Dutch Minister of Defence as an ‘essential armed forces supplier’, meaning that it is either active in sensitive technologies, which are considered of decisive importance for the operational relevance and operational readiness of the armed forces, or designated to maintain a strategic stock of essential goods and products for the armed forces (a ‘stockholding company’).
Similar to the regime under the Vifo Act, the Defence Resilience Act will apply regardless of the investor’s nationality (i.e. also if the investor is Dutch).
The period of public consultation ended on 1 September 2024. It is now up to the Council of Ministers and the Council of State to review the bill. Both houses of parliament will then have to pass the bill before it can enter into force. It is therefore unlikely that the bill will be adopted, let alone enter into force, this year. The current proposal does not foresee that the Defence Resilience Act will apply retroactively to investments implemented before its entry into force.
Intended broadening of Vifo scope and publication of annual report
a. AI and biotechnology
On 4 September 2024, the Investment Screening Bureau (Bureau Toetsing Investeringen - BTI) published its annual report for 2023. Apart from the statistics (which we will briefly address below), the most interesting part of the publication of the annual report may be the announcement by the Minister of Economic Affairs (the Minister) of the intention to broaden the scope of the Vifo Act by means of a Governmental Decree (see the cover letter and related memorandum) to include artificial intelligence and biotechnology. It is not excluded that the new Governmental Decree will immediately cover more sectors. Although no mention is made of it, the Minister could, for instance, use this opportunity to implement the motion that was passed in parliament in February to also bring the vegetable and seed breeding industry within the scope of the Vifo Act.
The Minister intends to publish the Decree for internet consultation before the end of the year.
b. BTI statistics 2023
In 2023, a total of 55 filings were made to the BTI:
- 3 filings under the Electricity Act 1998;
- 1 filing under the Gas Act;
- 5 filings under the Telecommunications Act; and
- 46 filings under the Vifo Act (between 1 June and 31 December 2023).
In the explanatory memorandum to the Vifo Act, the legislator stated that it expects approximately 30 notifications under the Vifo Act yearly. This figure was already substantially surpassed in just seven months. The same applies to the Telecommunication regime, for which the expectation was at adoption that just one-two notifications would be made yearly.
By the end of 2023, the BTI finished the review of 44 filings (some of which had been notified in 2022 already). Twelve notifications under the Vifo Act were still under review at the start of 2024. In one instance, the BTI decided to impose remedies on the notifying undertakings. One filing was withdrawn by the notifying parties, and one notification was outside the scope of the investment screening regimes. In all other cases, the BTI concluded that the notified investment could proceed unconditionally.
The average review period is 40 days for notifications under the Vifo Act and the Telecommunications Act, while the review under the Electricity Act is slightly longer on average, namely 55 days. The average review periods are neatly within the statutory deadlines, especially when considering that in many cases, the statutory review period will have been suspended at least once due to a request for information being sent to the parties. The BTI also notes that it has extended the review period for (only) six cases under the Vifo Act and for none of the cases under the sector-specific regimes.
The BTI has furthermore provided informal guidance in ten different cases on the applicability of the various Dutch investment screening regimes, mostly related to the Vifo Act. In our experience, the BTI provides such informal guidance within short timeframes.
Conclusion
The three developments addressed in this article, all of which occurred over the course of a mere three months, underscore that there is no reason to assume that the process of establishing a Dutch investment screening regime is anywhere close to being finished. Companies are well-advised to keep a close eye on any further developments that will undoubtedly follow in the next few months. We will keep you updated!
