Clifford Chance

On 18 July 2022, two proposed ministerial decrees that will supplement the cross-sector foreign direct investment screening act ("Act", Wet veiligheidstoets investeringen, fusies en overnames) have been published for consultation. Importantly, the scope of 'sensitive technology' captured in the Act is clarified. Stakeholders had the chance to share their opinion on the proposals until 22 August 2022. The Act itself has already been discussed in detail here and its latest amendments here.

Short recap: The Act will provide a review mechanism for investments that could pose a risk to the national security of the Netherlands. The Act captures companies that are active in vital processes or sensitive technologies and high-tech campuses in the Netherlands.

There are two proposed ministerial decrees in consultation: the first clarifies the scope of sensitive technology and the second introduces rules mostly of a technical and administrative nature.

Proposed scope of sensitive technology

The first decree (in Dutch: Besluit toepassingsbereik sensitieve technology) clarifies the scope of application of what the Act considers 'sensitive technology' and excludes a limited number of technologies that, although falling under the referenced EU export control regulations, are considered not to form a risk to Dutch national security.

However, the Minister proposes to include technologies that are not (yet) regulated by EU export control, in particular: (i) quantum technology, (ii) photonic technology, (iii) semiconductor technology, including know how regarding production, industrial production machines and design software, and (iv) so-called 'High Assurance' products. The retroactive effect of the Act (as discussed in the previous post) is not applicable to these newly designated categories.

Moreover, the draft decree stipulates certain 'highly sensitive technologies' (i.e. a subset of the wider category of 'sensitive technologies') for which obtaining 'significant influence' over a company active in those sensitive technologies already requires mandatory notification. Significant influence is presumed as of the acquisition of (or increase to or beyond) 10% of the voting rights. Successive increases to 20% and 25% (or equivalent influence) also require additional mandatory notifications.

The proposed decree considers 'highly sensitive technology' to be, inter alia, the four newly-added sensitive technologies (see above) as well as certain dual-use items such as nuclear technology, systems with cryptanalytic (hacking) functions, and guidance and navigation systems for weapons.

For transactions involving non-'highly sensitive technology', the mandatory notification regime applies when acquiring control (i.e. decisive influence).

Further technical/administrative rules

The decree on the review for investments, mergers and takeovers (in Dutch: Besluit veiligheidstoets investeringen, fusies en overnames) specifies and elaborates on a number of administrative and technical aspects that are necessary for the implementation of the FDI Act. For example: information requirements as part of the notification; the possibility of inter-agency information sharing (e.g. with the Dutch competition authority); complementing details about how the Minister can reverse a transaction if it is prohibited; and, the retention policy for data obtained.

Going forward

It remains to be seen what input will follow from this consultation round, but the Minister will take that feedback in due account and subsequently proceed to formalising these ministerial decrees so that they can enter into force together with the Act. The Minister informed parliament that the Act will most likely enter into force at the beginning of 2023.

Finally, the government is also planning on a specific FDI-regime for the defence industry for which it is expected that proposed legislation will be circulated for consultation by the end of 2022 or beginning of 2023.