• The Dutch Investment Review Act gives the Dutch government significantly increased powers to review and intervene in certain acquisitions that may harm national security.

  • The law confers broad powers, in particular with regard to the acquisition of minority interests in certain entities and the acquisition of certain assets.

  • The law is also likely to have retroactive effect.

On April 19, 2022, the Dutch Investment Review Bill (Wet veiligheidstoets investingen, fusies and overnames) (Law) passed the Dutch House of Representatives (tweed bedroom) with 148 votes out of 150. The law aims to protect Dutch national security by introducing a criterion for acquisition activities resulting in a change of control (as defined in Dutch competition law) over vital suppliers or companies active in the field of sensitive technologies. In addition, the acquisition or increase of significant influence – which is below the level of control – may be affected by the Law. The law provides that such an acquisition or increase may occur in different ways, for example, where one person can cast 10% of the votes of the general meeting of a target company. Thus, the law targets certain minority interests that do not result in a change of control.

In this GT Alert, we highlight some key aspects of the law.

Note that apart from the Act, some other sector-specific investment review regimes (for exampleenergy and telecommunications) in the Netherlands are also in place.

Vital Suppliers and Sensitive Technology

The law defines vital suppliers, which include companies operating in heat transport, nuclear energy, air transport, banking, financial market infrastructure, recoverable energy, gas storage and in the area port. Corporate campus owners were also added due to a last minute amendment. Additional vital service providers may be added by ministerial order.

The law specifies the categories of sensitive technologies. These include dual-use items for which an export license is required (that is to say, goods, software and technologies that can be used for both civil and military applications). By ministerial order, dual-use and military goods may be excluded from sensitive technologies, and other technologies may be designated as such.

Notification requirement

The law provides that a notification obligation applies to both investors and target companies. However, an investor will be exempted from his obligation of notification if this investor cannot reasonably know that the investment is subject to an obligation of notification because the target company is subject to an obligation of confidentiality (for examplefor national security reasons applicable to the target company under a separate regime).

Selection procedure

The Dutch Minister for Economic Affairs and Climate must issue a review decision within eight weeks of receiving a notification. The Minister may extend the initial period by a reasonable period of up to six months if further investigation is required. If the Minister requires additional information, the time limit will be suspended until the requested information is provided.

In the case of foreign direct investments, as defined by Regulation (EU) 2019/452, the period will be extended by a maximum of three months.

If no review decision has been taken within the legal period, the transaction or investment will be authorized as of right.

The Act provides a long list of factors that the Minister may consider. After review, the Minister will decide whether the investment is permitted. In exceptional circumstances, the Minister may reassess an investment, even if it was approved in the first instance. These exceptional circumstances are applicable in the event of serious security risks or an increased threat to Dutch sovereignty.

The expected consequences of carrying out acquisition activities not authorized under the Act are: the nullity or cancellation of a transaction, and the imposition and execution of an order to nullify the effects of a transaction.

Conclusion: Implications for M&A Transactions and Next Steps

Once passed, the law could impose an additional burden on mergers and acquisitions transactions and lead to investments taking longer to complete. When a party intends to make an investment, it must determine whether that investment falls within the scope of the Act. A notification requirement under the law is in addition to any separate notification requirement under the EU or Dutch merger control regime.

Under the Act, the Minister should also have the power to retroactively review certain transactions that took effect after September 8, 2020. This retroactive application of the Act was proposed to deter opportunistic investors from quickly acquiring an interest before entry into force of the Act. in force. As such, the Act must already be considered in relation to the transactions currently proposed.

As a next step, the Dutch Senate (Eerste Kamer) will debate the law in a specialized committee. It will be followed by a plenary debate and a vote. In principle, the Dutch Senate can only vote or reject the law, but not modify it. The law could come into effect later in 2022.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 112

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