The legislative proposal for the Dutch national security FDI regime (Wet veiligheidstoets investeringen, fusies en overnames, Vifo) introduces a notification obligation concerning investment activities related to vital providers and companies active in sensitive technology that are seated in the Netherlands. This proposal incorporates the input received following a public consultation and the advice from the Council of State (Raad van State) with a few amendments.
As explained in our October 2020 Newsletter, the proposed regime serves to complement the existing sectoral investment screening regimes for the electricity, gas and telecommunication sectors. The proposal concerns various issues such as the standstill obligation, failure to notify, failure to provide complete and correct information, failure to comply with measures imposed, the review period, possible mitigating measures and prohibitions.
Scope and substantial test
The proposal predefines vital providers in certain sectors, including heat transport, nuclear power, air transport, the port area, banking, financial market infrastructure, extractable energy and gas storage. Sensitive technologies include military and dual use products. The government can identify additional categories by separate order.
Qualifying investments include many types of investment activities that lead to a change of control (e.g. takeovers, mergers, joint ventures, demergers and asset deals). For companies active in sensitive technology, acquisitions of minority shareholdings of 10%, 20% and 25%, or the right to appoint one or more board members, may already trigger a notification obligation. The rules apply equally to EU and non-EU investors, including Dutch investors.
The Minister (or the Bureau for Investment Screening ("BTI")) will conduct a vulnerabilities and threats assessment. Vulnerabilities may relate to (i) the continuity of critical processes, (ii) the integrity and exclusivity of knowledge and information associated with vital processes and sensitive technology and (iii) the creation of strategic dependencies. When assessing threats, the Minister will assess several factors including the acquirer’s ownership structure and relations, criminal record, any international sanctions imposed and the security situation in the country of residence.
Advice for companies contemplating M&A deals
Once entered into force, which we do not expect before the year-end, the regime will have retroactive effect until 8 September 2020 (instead of the previously announced 2 June 2020). Accordingly, the Minister may, within eight months after the entry into force, call in all activities carried out between this date and the entry into force of the regime if there is a reasonable suspicion that they pose a threat to national security.
Given that the regime is coming closer, and its retroactive effect, we advise companies to add the assessment of whether the future regime may have an impact on pending M&A deals to their M&A checklist.
For a detailed explanation of the proposal, please see our Corporate Update of 12 July 2021 (in Dutch).
This article was published in the Competition Newsletter of August 2021. Other articles in this newsletter:
Are your distribution contracts ready for the revised VBER?
Horizontal cooperation: from the dark side to the light?
ACM issues first excessive pricing fine in pharma
Court rules ACM can use accidental evidence found in dawn raids
CJEU clarifies jurisdiction for follow-on damage claims
Amsterdam Court of Appeal rules on the applicable law to air freight
Court assesses threshold for substantiating cartel damage plausibility