Competition Litigation

News Update Competition

Upcoming FDI screening mechanism in the Netherlands applies to all acquiring parties
16 October 2020
16 October 2020

Earlier this year, we published a news update that discussed the Minister of Economic Affairs' plans to implement a new ex-ante screening mechanism for investments in companies involved in vital processes or working with sensitive technologies in the Netherlands. On 8 September 2020, the bill setting up this ex-ante screening mechanism, the Economy and National Security Bill (the "ENSB"), was published for consultation.

In this update, we provide an overview of the new rules, which are expected to enter into force in early 2021. The timing of the ENSB coincides with the momentum created by the EU FDI Screening Regulation, which entered into force on 11 October 2020 (see our update on the EU FDI Screening regulation here).


The ENSB applies to all investments in companies established in the Netherlands when (i) the company is particularly important for the continuity and resilience of critical processes, or (ii) the company is active in the area of sensitive technologies. This bill will complement the existing sectoral regulations, as it applies to any transaction that is not caught by the specific sectoral review mechanisms regarding, for example, Telecoms, Energy and Defence (see below).

The ENSB catches all acquisitions and investments, whether by foreign or domestic investors, that result in (a) a change of control over a relevant company, (b) the acquisition of a relevant company or (c) an increase in a significant influence over a relevant company. Change of control means the definition used in EU and Dutch competition law. How the concept of significant influence will be applied has yet to be defined. The introduction of the concept of significant influence is a legal novelty and is very different from Dutch and EU merger control.

It has not yet been decided which vital processes and sensitive technologies will fall within the ENSB's scope. Vital processes could include 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. The scope of ‘sensitive technology’ is defined in line with definitions used in existing multilateral export control regimes for dual-use goods and strategic goods. The legislator has already indicated that the category of sensitive technology will include only a select number of technology companies.


Notification to the Dutch Investment Review Agency (Bureau Toetsing Investeringen, "BTI") will be mandatory, and its approval must be obtained before closing. Both the investor and the target company will be responsible for notifying the investment to the BTI. However, the investor may be exempt from this obligation if the target company has confidentiality obligations (e.g. when the target company cannot disclose its business to parties from such vital or sensitive sectors). The target company will then become solely responsible for notification.

The Minister will clarify which information must be included in the notification in a governmental decree. We expect that a notification will need to include, amongst other things, information on the ownership structure, the business operations and any ties that the acquirer has to foreign governments.

The BTI may take up to eight weeks to review a notified investment. This period may be extended by a maximum of six months when further investigation is necessary and by three extra months if the transaction falls within the scope of the EU FDI Screening Regulation. If no decision is taken before the established deadline, the approval is deemed granted.

A decision under the ENSB is a decision under the Dutch General Administrative Law Act and is open to reconsideration by the BTI (administrative objection), subsequent appeal to the Rotterdam District Court and a final appeal to the Industry Appeal Tribunal.


The following criteria will be considered in evaluating whether an investment poses a potential risk to national security:
  • the acquirer's ownership structure;
  • the degree of transparency of the acquirer;
  • restrictions under national and international law; and
  • the security situation in the acquirer's country or region of residence.

Companies are expected to cooperate with the authorities and provide sufficient information to enable the BTI to carry out its assessment. The degree to which the investor cooperates with the authorities will in itself be a factor in the assessment. Additional case-specific criteria may be considered if the investment may affect the continuity and resilience of vital processes or companies working with sensitive technologies.

Following the BTI's assessment, the investment may be cleared either unconditionally or subject to implementing measures to resolve apparent risks to national security. An investment will only be prohibited as a last resort when conditional clearance is deemed impossible. Measures to resolve a risk to national security may include appointing a trustee to work within the company and requiring the company to grant a license on knowhow to keep the knowledge or technology available for national vital infrastructure. If an investment is executed despite a prohibition, this transaction will be void.

In exceptional situations where a serious risk to national security occurs, an activity which has been previously been reviewed may be reassessed based on the same criteria. Reassessment may take place within six months of the risk becoming known.


The Minister may impose penalties if there is a failure to comply with the rules and obligations set out by the ENSB or a lack of cooperation with the authorities.

First, failing to notify, or providing incorrect or incomplete information, may result in the annulment of an activity and fines of up to EUR 870,000 or 10% of the turnover of the company and the group to which the company belongs in the preceding year whichever is greater.

Notably, the ENSB will also grant the Minister the power to order the parties to submit an additional filing within three months when this is deemed necessary in light of the potential risks to national security associated with the activity, following which measures may be imposed or the transaction may have to be unwound. In this regard, the new screening mechanism will differ from the review of concentrations under competition law: the Dutch and EU competition rules do not allow a retroactive review of a transaction.

Retroactive application as of 2 June 2020

Following its enactment, the ENSB will apply retroactively as from 2 June 2020. The Minister will be empowered to order parties to submit a notification for any acquisition or investment that took place after 2 June 2020 when there are reasonable grounds to suspect a potential risk to national security. This retroactive application has been included in the ENSB in light of the vulnerable state of the economy caused by the COVID-19 outbreak and the need to avoid circumvention of the new review mechanism by potential unwelcome buyers.

More sector-specific rules are expected

In addition to the ENSB, another bill is currently being prepared. It will introduce a sector-specific regime for incoming FDI in the defence industry to complement the general ex-ante screening mechanism. This bill is expected to be published for public consultation in the first quarter of 2021.

Practical consequences

Companies are advised to keep the date of 2 June 2020 in mind when investing in sensitive technologies or processes that are vital to the Dutch economy. We advise potential investors considering investing in the Netherlands to verify – in addition to the general merger control notification analysis – whether a transaction should be notified to the BTI.
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Key Contact

Advocaat | Partner