With its FDI screening, the BTI aims to safeguard three pillars: (i) continuity and integrity of vital processes; (ii) prevention of unwanted strategical dependencies on other countries; and (iii) exclusivity and integrity of strategic knowledge and information that is important for the Netherlands. The BTI’s first annual report describes the first six months of the application of the Vifo Act. It also covers the application sector-specific investment screenings in the telecommunications, gas and electricity sectors. Additionally, it covers recent developments regarding foreign direct investment screening in the Netherlands and a glance at what is to come.
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#1. 2023 in numbers: many notifications, no prohibitions
To interpret the numbers accurately, it is important to consider that the notification obligation of the Vifo Act is irrespective of the investor’s nationality. The Vifo Act treats investors from outside the EU the same as investors. The obligation to notify is triggered solely by the target company’s activities and the acquired stake.
Notifications - In 2023, the BTI received 55 notifications, up from 8 in 2022. This increase was expected due to the mid-year entry into force of the Vifo Act.
Completed investigations - In 2023, the BTI completed 44 investigations: 34 under the Vifo act, 3 in the electricity sector, 1 in the gas sector and 6 in telecommunications. Of these, 93% identified no national security risks and were approved without remedies or in depth (second phase) investigation. No transactions were prohibited. One notification was withdrawn, and one fell outside the scope of the Vifo Act. Remedies were imposed once. These numbers align with the EU average, as detailed in the European Commission’s Fourth Annual Report on the screening of foreign direct investments into the Union , showing 1% of transactions prohibited, 4% of notifications withdrawn, 10% authorised with remedies and 85% approved unconditionally.
Processing times - On average, Vifo Act assessments took 40 days, not accounting for 12 investigations that continued into 2024. Electricity sector assessments took 55 days, and telecommunications sector assessments took 40 days. The duration of individual investigations varied. Most Vifo investigations were processed between 27 and 53 days. The longest took 83 days and the shortest took 13 days. We have observed that thorough preparation and anticipating potential questions can expedite the approval of transactions, particularly those that pose no national security risks. Preparing for discussions regarding remedies is also important in maintaining an efficient notification process. Additionally, the BTI is generally open to informal inquiries and willing to discuss notified transactions pragmatically.
Origin of investors - Europe remained the predominant origin of investors in cases decided by the BTI in 2023. Out of a total of 44 cases, 40 originated from Europe, while 4 were from the United States. Statistics from the EU FDI Report regarding cases decided in 2023 reflect a similar pattern across the EU: the most common origin of foreign investors was the United States accounting for 33% of foreign investments in the EU.
This demonstrates that neither the FDI regime nor the BTI inherently aims to prohibit transactions or deter foreign investors. Only transactions that pose a threat to national security are subject to an in-depth (second phase) review, which may result in remedies or a prohibition. The processing time of notifications also reflects that the Netherlands remains receptive to international business. Despite the uncertainty associated with the implementation of the Vifo Act and 40% decline in foreign investments into the Netherlands between 2022 and 2023, the EU FDI Report ranks the Netherlands as the sixth most favored EU member state for foreign investments resulting in the acquisition of 10% equity stake or above in an EU-business by number of transactions.
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#2. Enhanced scrutiny on sensitive technologies
Effective 1 January 2024, parties bidding for a permit to operate in an offshore wind energy area are assessed by the BTI under the Offshore Wind Energy Act (Wet Windenergie op zee) and the Implementation Scheme for Offshore Wind Energy (Uitvoeringsregeling windenergie op zee). Additionally, the BTI assesses changes of (control over) permit holders of wind farms that are not yet operational.
The Minister of Economic Affairs has announced that the screening of investments under the Vifo Act will be expanded to other technologies, including artificial intelligence, biotech, advanced materials, nanotechnology, sensor technology, navigation technology and medical isotopes. A general administrative order is expected to be published for consultation later this year. We believe this reflects broader regulatory efforts of the Dutch Government to exert more control over foreign influence within technology sectors.
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#3. Legislative proposal aims to strengthen defense industry resilience
On 1 July 2024, the Minister of Minister of Economic Affairs, together with the Ministers of Defense and Justice and Security, published for internet consultation a bill aimed at enhancing the resilience of the Dutch defense and security-related industry (Wet weerbaarheid defensie en veiligheid gerelateerde industrie). The bill, which has recently concluded the online consultation phase, inter alia proposes sector-specific investment screening. The primary focus of this proposed screening includes investments, mergers, acquisitions and other means of gaining control over target companies involved in military goods or designated essential armed forces suppliers. The bill is designed to complement existing regulations, including the Vifo Act. It is expected to undergo changes as it progresses through governmental review stages before being presented to Parliament.
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#4. New policy rule for reporting corporate campus management transactions
On 19 June 2024, the BTI published a policy rule concerning transactions involving managers of corporate campuses that must be reported under the Vifo Act (as described in our previous update). It contains three cumulative criteria the BTI uses to assess whether a company qualifies as a manager of a corporate campus for the purposes of the Vifo Act. One of these criteria is the company’s influence on the safety of the campus. To assess whether this criterion is plausibly, the BTI uses a risk matrix and a risk-based scoring chart provided with the policy rule. The policy rule offers useful guidance on the application of open norms in the Vifo Act, providing more legal certainty as to whether a proposed transaction should be notified with the BTI.
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#5. EU FDI screening overhaul: aiming for a more level playing field
Notable changes are expected at the EU level with the European Commission’s proposal to revise the EU FDI Screening Regulation. This aims to level the playing field by requiring all member states to have a national FDI screening mechanism and further harmonisation of national legislation. The proposed harmonisation includes enforceable minimum requirements covering assessment criteria for foreign investments (including the effects on freedom and pluralism of the media), procedural standards and a minimum sectoral scope, while allowing member states them to screen additional sectors depending on their own national security interests. It also proposes a more efficient risk-based cooperation mechanism among member states with clearer deadlines. The proposal may evolve during the legislative process involving the European Commission, the Council, and the European Parliament.
At NautaDutilh, we understand the importance of swiftly navigating the complex FDI landscape. We regularly assist in securing approval for complex, multi-jurisdictional FDI filings. Our experienced team stays on top of (geo)political developments and has in-depth knowledge of both national and international FDI regimes to provide hands-on service.