Foreign direct investment in the Netherlands: Implementation Act for Regulation 2019/452/EU on the screening of foreign direct investments and the general investment test

Implementation Act for Regulation 2019/452/EU on the screening of foreign direct investments
On June 22, 2020, the implementation act for Regulation 2019/452/EU on the screening of foreign direct investments was submitted into Dutch Parliament. The purpose of this act is to implement all necessary legislative measures required by Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investment.

The above-mentioned Regulation will enter into force on 11 October 2020, and requires in particular the designation and establishment of a contact point from which confidential information sharing on potentially high-risk direct investments from third countries can be facilitated between EU Member States. The Regulation requires that each EU Member State shares information on such investments with other Member States in the event of a possible adverse effect on the safety and public order of those other Member States due to a direct investment in the EU Member State concerned.

The implementation act does not introduce any new Dutch investment tests or screening mechanisms. After all, this is not an obligation arising from the Regulation, but any investment test or screening mechanism may be introduced by the Member States as they see fit.

General investment test
In addition to the above-mentioned implementation act, a bill introducing an investment test for risks to national security during takeovers and investments is being prepared. In the letter "Tegengaan Statelijke Dreigingen" (Countering State Threats) dated 18 April 2019, the Minister of Justice and Security announced that the Dutch government is working on an investment test to assess and mitigate the risks arising from acquisitions of and investments in (i) vital infrastructure or (ii) companies developing high-grade technology that affects national security. The Dutch government is concerned to prevent risks relating to the impairment of the continuity of the vital processes, the impairment of the integrity and exclusivity of knowledge and information associated with vital processes and highly sensitive technology and the emergence of strategic dependencies. In order to achieve the above, the Dutch government has initiated legislation, consisting of the following two main parts:

  1. the introduction of new investment tests and the use of existing investment tests embedded in sectoral legislation, such as in the energy and telecoms sectors; and
  2. introducing a broad investment test that provides a safety net for investments that cannot be covered by sector-specific legislation.

Part of the proposed legislation is a notification obligation for companies that fall within the scope of the investment test. The notification obligation applies before the investment or acquisition takes place. After the notification, a risk analysis will be carried out. The purpose hereof is to gain more insight into the possible national security risks of investments and acquisitions. It also provides a legal framework to assess and mitigate the risks and, in extreme cases, to block the investment or acquisition. In a letter dated 2 June 2020, the Minister of Economic Affairs and Climate stated that the Dutch government intends to introduce the investment test with retroactive effect from 2 June 2020. As a result, acquisitions and investments that have taken place after 2 June 2020 can be reviewed retrospectively if there is reason to do so after the act has entered into force.

On 8 September 2020, the draft bill “Wet toetsing economie en nationale veiligheid” was submitted for consultation. It is expected that the bill will be submitted before the end of 2020. We will keep you informed of any developments.