Clifford Chance

The scope of the Dutch foreign direct investment ("FDI") regime is envisaged to be expanded to add further technologies to the 'highly sensitive' classification list included in the Decree on the Scope of Application of Sensitive Technologies (Besluit toepassingsbereik sensitieve technologie, the "Decree"). This is expected to result in more M&A transactions being subject to suspensory notification requirements with the Investment Screening Office (Bureau toetsing investering, "BTI"). In addition, the sector-specific investment screening for the energy sector will be updated, the notification threshold will be lowered, and the capacity of plants managed by the same company will be aggregated. As a result, this is also anticipated to capture more investments.

On 1 June 2023, the Netherlands Foreign Direct Investment Screening Act (Wet veiligheidstoets investeringen fusies en overnames, the "Screening Act") entered into force, introducing a mandatory notification requirement that aims to mitigate risks to national security in the Netherlands, including those related to strategic autonomy, the disruption and resilience of vital processes, as well as the integrity and exclusivity of knowledge and information (see an earlier blog post on the Screening Act here).

Proposed expansion of the scope

In December 2024, the Dutch government announced that, in light of the current geopolitical challenges, it intends to expand the scope of the Screening Act to include new sectors and technologies, by amending the Decree and designating additional technologies. The new proposed Decree brings the following activities within the scope of the Screening Act.

• Advanced materials technology involves the development of materials exhibiting new enhanced properties compared to conventional materials, such as improvements in weight, size, strength, or flexibility, or properties related to energy generation, conversion, storage, or transfer.
• Artificial intelligence refers to machines based on systems designed to operate with varying levels of autonomy and capable of demonstrating adaptability post-implementation. 
• Biotechnology includes the application of science and technology to living organisms, aiming to characterise or alter living or non-living materials for the production of knowledge, goods, and services. 
• Nanotechnology encompasses the deliberate manipulation and control of materials size and shape at atomic, molecular, and macromolecular scales. 
• Sensor and navigation technology pertains to technology that can measure quantities and convert them into readable signals, as well as technology to further process these signals or present them to a human user through various methods and techniques.
• Nuclear technology for medical use includes nuclear applications for patient diagnosis and treatment, including therapeutic and diagnostic nuclides.

The additional technologies will be designated as highly sensitive technologies within the meaning of the Screening Act. This means that a notification requirement will be triggered when there is an attainment or increase of 'significant influence' over a company involved in the research, development, or production of these technologies. Significant influence is deemed to arise upon an acquisition of 10% of the voting rights, or rights regarding the appointment or dismissal of directors, as well as the increase of an existing interest that reaches or exceeds a threshold of 20% or 25% of voting rights.

Outlook and expected implications

The proposed expansion, which is expected to enter into force this summer 2025, is considered to lead to numerous M&A transactions across multiple sectors becoming subject to national security assessments. Consequently, this will lead to an increase in the number of notifications to the BTI. The Minister indicates that it is difficult to determine how many companies will fall under the Screening Act investment requirements post-expansion, but the expectation is that approximately 1,015 to 1,730 companies have activities within the scope of the proposed amendment. By reference, according to the most recent annual report from the BTI in 2023, it received 44 transaction filings, which is thus expected to increase.

This proposed expansion aligns with wider international trends, which have subjected a growing number of global investments to investment screening scrutiny. In several jurisdictions, including various EU Member States, investment screening requirements already apply to companies involved in artificial intelligence, advanced materials, nanotechnology, sensor and navigation technology, biotechnologies, and nuclear technology for medical purposes. As part of a package of initiatives aimed at strengthening the EU's economic security in a time of increasing geopolitical tensions and significant technological shifts, the European Commission has proposed a revision of Regulation (EU) 2019/452 concerning the screening of foreign direct investments. 

Sector-specific screening in the energy sector

Alongside the Screening Act, the Dutch FDI regime also encompasses sector-specific screening instruments for the energy and telecom sector. The sector-specific investment assessment for the energy sector has been updated in the proposed Energy Act (Energiewet), and this assessment extends beyond merely national security to also cover supply and provision security in the Dutch energy market.

The Energy Act stipulates that any intended change of control over LNG operators or companies that manage an LNG system, or a company that manages one or more production plants with a total nominal electrical capacity of more than 100 MW should be notified to the BTI. The threshold for triggering mandatory notification with regard to electricity production plants has also been lowered, from 250 MW to 100 MW and the draft legislation equally implies that the capacity of the various production plants managed by a single company must be aggregated, which was previously not the case.

The Energy Act bill was adopted by the Dutch Parliament on 4 June 2024 and by the Dutch Senate on 10 December 2024 and is expected to come into effect on 1 April 2025.