15 June 2020
On 2 June 2020, the Dutch Minister of Economic Affairs gave an update on his intention to present a bill introducing a national security screening mechanism to protect vital sectors. This will include mandatory preclosing notification requirements for transactions that pose a threat to national security. The bill is expected to be submitted to the Dutch Parliament for consultation by the end of 2020.
The screening will involve a substantive review based on assessing the following risks:
(i) adverse effect on the continuity of vital processes;
(ii) adverse effect on the integrity and exclusivity of data and knowhow-related vital processes and highly sensitive technology; and
(iii) the creation of strategic dependency on other countries.
In this context, 'vital processes' are processes that are so essential that their failure or disturbance would lead to serious social disruption or to a threat to the national economy and security. These include oil and gas supply and distribution, water supply, internet and data supply, access to internet and data traffic, voice services, money transfer, citizen identification and authentication, traffic handling at seaports and airports, and nuclear waste disposal (as already listed by the National Coordinator for Terrorism Prevention and Security). The scope of 'highly sensitive technology' must still be defined, but this will be done in line with definitions used in existing multilateral export control regimes for dual-use goods and strategic goods. Finally, 'strategic dependency' is the dependency on countries with a different geopolitical orientation. As an example, the Minister mentioned acquisitions that result in the Netherlands being politically pressured to the extent that the democratic order could be undermined or that a vital process could be disrupted.
The criteria for assessing whether there are objections to an investor will resemble those from the recent Act against Undesirable Influence in the Telecom Sector
(Wet ongewenste zeggenschap telecommunicatie
). A threat to the national interest may be considered to exist if the investor is a persona non grata or a state that can reasonably be expected to use its influence to the detriment of the public interest. Investors who do not cooperate with the assessment or whose identity cannot be established may also be considered a threat to the public interest.
If the acquisition or investment is considered to pose a threat to national security, the Minister may impose mitigating measures, such as appointing a trustee to work within the company, requiring the company to grant a license on knowhow to keep the knowledge or technology available for the national vital infrastructure or, where absolutely necessary, unwinding the acquisition or investment.
Retroactive application from 2 June 2020
Even if the bill is only presented in the last quarter of 2020, part of the screening will be applied retroactively as from 2 June 2020. This means that any acquisition or investment conducted on or after 2 June 2020 will be subject to the screening. However, this retroactive screening will only happen if this is justified based on national security, and will only apply to acquisitions of and investments in (i) providers of vital processes and vital infrastructure and (ii) companies that are active in the field of highly sensitive technol-ogy. The Minister considers the retroactive application justified due to the coronavirus pandemic and the need to avoid circumvention by unwelcome buyers that would quickly wrap up acquisitions of strategic assets before the law enters into force.
Certainly for EU investors, this bill will have limited consequences. For investments from countries with - what is euphemistically called - "a different geopolitical orientation" - the bill could pose at least time consuming red tape. However, we expect that the Dutch government will use this tool with moderation, as the Dutch economy is quite reliant on international commerce.
European Commission leaks white paper on foreign subsidies
Also on 2 June 2020, the European Commission leaked what seems to be the final draft of its White Paper on an Instrument on Foreign Subsidies to the Financial Times
. The White Paper should be published in June 2020, to be followed by a bill in 2021. It will propose a) that when a non-EU owned company uses non-EU subsidies to distort the internal market, the relevant Member States can take measures and b) that when a non-EU owned company uses non-EU subsidies to finance an acquisition in the EU, the European Commission can take measures.