An inside look at the Netherlands’ new general investment screening mechanism

Introduces the newly adopted Vifo Act of the Netherlands which establishes the Dutch investment screening system and is expected to come into effect early 2023. The Dutch investment screening is unique from other European systems in several aspects. The Vifo Act applies to both domestic and foreign investors investing in the Netherlands in the covered activities. Moreover, the Vifo Act does not cover all types of transactions or sectors, but only investments made in a Dutch undertaking in vital processes and sensitive technology, or of a high-tech campus. In addition, the Vifo Act introduces a retrospective application, which will subject covered investment made between 8 September 2020 and the date of entry into force of the Vifo Act to the purview of the screening. Lastly, the Vifo Act will operate in parallel with already existing sectoral screening mechanisms in the energy including electricity and gas, telecommunications and defence sectors. If an investment is subject to the purview of the Vifo Act, either the acquirer or the target has the obligation to notify the Ministry of Economic Affairs and Climate Policy, which will then conduct a two-phase review of maximum of six months, but subject to suspension when supplementary information is needed or when notification to the European Commission or other Member States is required. The Vifo Act represents the Dutch government’s initiative to balance national security and economic development by introducing a legalized tool, and is expected to significantly impact the M&A practice on the structure, outcome and duration of future business transactions.