The law that is intended to prevent companies that are crucial for Dutch vital processes and national security from falling into foreign hands is being expanded. Companies involved in biotechnology, artificial intelligence, advanced materials and nanotechnology, sensor and navigation technology and nuclear technology with medical use will also be covered by the law. Minister Beljaarts (Economic Affairs, PVV) announced this on Thursday.
The government’s intention to expand the Investment, Mergers and Acquisitions Safety Test Act (Vifo Act) was already in the government programme, but it was not yet known which new sectors were involved. The law, which has been in force since July 1, 2023, already applied to semiconductors, photonics, quantum, high assuranceproducts and so-called dual use and military goods. After parliamentary approval, the expansion should take effect in six months. From that moment on, approximately 1,700 companies must report additional investments to the Investment Assessment Bureau (BTI), part of Economic Affairs, which then investigates possible risks to national security. In total, approximately three thousand companies will be subject to the law.
“The international security situation has deteriorated rapidly in recent years. We already see that the Netherlands is the target of hybrid attacks, such as cyber operations, espionage and sabotage. That is why we as a government must protect the business community where necessary,” Beljaarts says on his ministry’s website.
Acquisition of chip company
The law played a role last year in the takeover of the Delft chip company Nowi by the Nijmegen chip manufacturer Nexperia, which has a Chinese owner. This acquisition, announced in November 2022, was in principle also covered by this law, because it applies retroactively from 2020. Then minister Micky Adriaansens (Economic Affairs and Climate, VVD) ultimately saw no objection, because Nowi’s relatively simple technology is not covered by the law. Nowi produces chips that extract energy from ambient light.
It is exceptional that the minister informed the House of Representatives about this takeover at the time. Due to business-sensitive information, the BTI does not disclose which companies have had security tests performed. The 2023 BTI annual report does state that 46 tests have been carried out. A measure has been imposed once, so an investment may be prohibited. The BTI has been assessing companies that fall under the Gas Act, the Electricity Act and the Telecommunications Act for some time.
Especially China and Russia
Although the law does not specifically target investments from certain countries, it mainly concerns China and Russia. According to Frans-Paul van der Putten, China expert at the Clingendael Institute, the preventive effect of this law is the most important. “If parties know that a takeover will ultimately be reversed, they will not start it,” he says.
But therein also lies a danger: that potentially successful start-ups will find it difficult to obtain financing. “Until 2017, the Dutch government still assumed that there should be as few obstacles as possible to foreign financing and acquisitions. Now we’re going the other way. There is something to be said for both sides. It is especially important for companies that criteria are clear.”
The protection of crucial companies and high technology is important in all countries of the European Union. For example, the Polish Prime Minister announced on Wednesday that a number of media and telecom companies will be placed on a list of companies that may not be sold without government permission. At the beginning of this year, the European Commission presented a proposal to further harmonize and tighten the screening of foreign investments.
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