Widening the net: The Dutch government proposes to broaden the scope of the Vifo Act

The Vifo Act has been in force since 1 June 2023. It introduced a mandatory screening regime for investments, mergers and acquisitions that could pose risks to national security. Among other things, the Act applies to target companies that are active in the field of sensitive technology or highly sensitive technology. 

The Proposal seeks to designate six additional technologies as ‘highly sensitive’. This designation is associated with lower notification thresholds, where a notification may be required even where the acquirer acquires as little as 10% of the voting rights at the target’s general meeting. 

If adopted, the Proposal will expand the screening regime under the Vifo Act to include six additional technologies: 

• biotechnology

• artificial intelligence

• advanced materials

• nanotechnology

• sensor and navigation technology

• nuclear technology for medical use 

In addition, several technologies that were already categorised as sensitive under the Vifo Act have now been designated as highly sensitive under the Proposal, including technologies in the fields of information security and laser satellite communications.

Specifying the technologies

The Proposal aims to strike a balance between adequately addressing national security risks and minimising the (administrative) impact on the investment climate as a result of widening the scope. 

The designated technologies:

• Biotechnology: Four sub-technologies are designated in the Proposal, including (stem) cell and gene-editing technologies. As anticipated (see our June 2024 Newsletter),  this amendment brings R&D activities in the vegetable and seed breeding industries under the scope of the Vifo Act.

• Artificial Intelligence (AI): To avoid an administrative strain on the BTI, given the widespread use of AI and a corresponding influx of AI-related investments, a demarcation of AI was made based on the specific tasks that a system or software performs with AI: AI for identification or impersonation of persons or groups, and AI for services or products supporting military deployment or security organisations. 

• Advanced Materials: Three sub-technologies are designated under the Proposal: (i) technologies for producing materials that enable the storage, transport or conversion of energy forms or carriers; (ii) technologies for the purpose of two-dimensional (2D) materials that allow the modification and production of optical, electronic, magnetic or acoustic properties; and (iii) high-entropy alloys (HEA). Each sub-technology is defined in further detail.

• Nanotechnology: Nanotechnology is defined in the Proposal as the deliberate manipulation and control of matter at the scale of 1 to 100 nanometres, where two sub-technologies are covered: ‘smart materials’ and ‘micro/nanoreactor technology’.

• Sensor and Navigation Technology: The Proposal designates four sub-technologies that allow, separately or in combination with other technologies, the detection of characteristics of an external environment or objects, where this is converted into electrical signals and this data is collected, stored or processed. 

• Nuclear Technology for Medical Applications: Only the technologies used for the development, production and application of medical isotopes are covered by the scope of the Vifo Act. 

The Proposal reflects efforts to maintain the narrow definitions characteristic of the Vifo Act.

Outlook 

The amended Vifo Act is expected to take effect in the second half of 2025.

In 2025, several other Dutch FDI developments are also expected to take effect. The Vifo Act will likely be accompanied by a separate screening regime for the defence sector, for which a consultation for a new proposal was already held in 2024. In addition, the Electricity Act 1998 and the Gas Act, which also provide for investment screening, will be replaced by the new Energy Act, which will reduce the current notification thresholds.  This Act will enter into force in several phases, with the first part expected to come into force later this year

An interim evaluation of the Vifo Act is planned for May 2025 (at the two-year mark since its entry into force), where the Act will be evaluated in terms of effectiveness. 

Key takeaway

The expanded scope of investment screening in the technology sector implies that a larger number of investments in the Dutch tech sector will require regulatory clearance in the future