A Dutch draft bill1 introduces a new framework pursuant to which the relevant minister can, if deemed necessary for national security, review investments in or acquisitions of certain companies. The Dutch government intends to introduce the bill in early 2021, with retroactive effect as of June 2, 2020.
The draft Bill introduces a specific screening mechanism for companies operating in ‘vital sectors’2 or in the field of cutting edge, sensitive technology, involving a broad analysis of potential national security risks. It also creates the obligation to notify the competent authority, before the transaction takes place, of any investments in or acquisitions of companies that fall within the scope of the Bill.
Acquisitions of and investments in critical infrastructures or companies that develop cutting edge, sensitive technology, are deemed to pose a potential risk to Dutch national security. To mitigate such risks, the Bill will specifically monitor the following:
- damage to the continuity of vital processes;
- damage to the integrity and exclusivity of knowledge and information associated with vital processes and high-end, sensitive technology; and
- the emergence of strategic dependencies.
The Dutch government announced that the reference date of the review mechanism will be set – retroactively – at June 2, 2020. Transactions made as of June 2, 2020, that meet the criteria of the Bill can be reviewed ex post by the relevant minister, even though the Bill is not expected to enter into force before 2021. If there is a risk to national security, as a result of certain investments or acquisitions, the relevant minister may take mitigating measures and/or may impose (additional) conditions to the transaction. In the most extreme cases, the transaction could be reversed.
Amid the COVID-19 pandemic and the economic consequences thereof, certain companies may be particularly vulnerable to the national security risks contemplated by the Bill. The Dutch government has indicated that retrospective review of acquisitions and investments is a powerful, proportionate tool. The government anticipates the Bill will have a deterrent effect, preventing unwanted transactions and averting evasive behavior of companies or investors.
As the next step, the draft Bill will be published online for consultation and presented to the Council of State (Raad van State) for review and input. The draft Bill may be offered to the House of Representatives (Tweede Kamer) in the fourth quarter of 2020.
1 Draft Bill on the investment risk assessment for national security in acquisitions and investments (Wetsvoorstel investeringstoetsing op risico’s voor de nationale veiligheid).
2 Certain processes are so essential to Dutch society that failure or disruption leads to serious social upheaval and threatens national security. Companies that carry out these processes are active in the so-called ‘vital sector’.
* Special thanks to Sera Hendrix for her valuable assistance in preparing this GT blog post.