In September 2024, the Dutch FDI authority Bureau Toezicht Investeringen ("BTI") published its annual report for 2023. BTI has been given a crucial role in the in the review process of certain mergers and acquisitions with the entry into force of the so-called Vifo Act (Wet veiligheidstoets investeringen, fusies en overnames) in 2023. Mergers and acquisitions in a number of strategic sectors, such as electricity, gas and telecommunications already had to be notified to the BTI and assessed for their risks to national security. The entry into force of the Vifo Act in 2023 further expanded BTI's powers. Mergers and acquisitions and other acquisitions of control must be reported to BTI under the Act if the transactions involve target companies that are established in the Netherlands and if those companies can be classified as a: i) supplier of (highly) sensitive technology; ii) vital provider; or iii) manager of a corporate campus. In addition, there is a notification requirement for the acquisition of so-called significant influence in companies supplying highly sensitive technology. Such an influence is already present if a person can cast 10% of the votes in the general meeting of a target company (and in a common corporate structure such voting rights are held if someone has 10% of the shares in a company).
Total number of notifications
The annual report provides an insight into developments at BTI in the first six months after the Vifo Act came into force. BTI received 46 notifications in 2023 that fell within the scope of the Vifo Act, which also forms the bulk of the total number of notifications in 2023 (55). The 8 remaining notifications were made under the reporting obligations applicable under the Electricity Act, Gas Act and Telecommunications Act. BTI completed 44 investigations in 2023 and concluded in 93% of the notifications that there were no risks to national security. Only 1 investigation resulted in a decision imposing measures on the parties involved, 1 notification was withdrawn and 1 notification was found not to fall within the scope of a duty to report.
Average handling time
The average handling time of an investigation under the Vifo Act was between 27 and 53 days according to BTI. This seems relatively short considering the maximum formal time limit BTI has (twice 8 weeks plus a 6-month extension plus a 3-month extension if the investor is from outside the EU). However, BTI has excluded all notifications of investigations which were not yet completed in 2023 (and thus continued into 2024) when calculating the average handling time. BTI also did not take into account the time companies took to answer questions from BTI. This is because of a stop-the-clock principle: if BTI asks questions, the formal handling time is suspended until those questions are answered. In our own practice, we see transactions where the processing time of the BTI procedure is considerably longer than the 53 days mentioned above.
Origin of investors
The annual report further shows the origin of investors in the Vifo Act: 40 investors were located in Europe and 4 in America. Not a single investors hailed from Asia in 2023. A noteworthy fact, considering that the Vifo Act was created mainly to prevent control or influence over Dutch companies being acquired by state actors from Russia or China. It is possible that the Vifo Act has already functioned as a deterrent to such actors. Also, sellers might prematurely abandon a transaction if an investor originates from Asia and BTI raises informal concerns prematurely. In any case, it is already virtually impossible for Russian parties to do business in Europe because of the international sanctions that are in place against Russia, but that does not explain the complete absence of Asian investors in the overall figures. The most logical explanation still seems to be that there is simply less interest in Asia to invest in Dutch companies. Indeed, the origin of investors from previous years (when the Vifo Act had not yet entered into force) shows a similar picture compared to 2023. Only in 2020 and 2022 there were transactions with investors from Asia: in both years only one investor.
BTI and Act vifo in 2024 and beyond
BTI's annual report is one of the few public sources with information on the handling of cases under the Vifo Act. As far as we are concerned, that picture is dated and distorted: a good number of cases started in 2023 and are not included in the figures. Regarding the 12 investigations that were still pending at the end of 2023, we consider it safe to assume that those investigations will take considerably longer because BTI sees risks to national security or at least wants to better identify possible risks. Our expectation is therefore that the annual report for 2024 will already show a very different picture of the Vifo Act investigations: the average handling time will greatly increase as well as the number of cases where BTI identifies risks to national security. The specific nature of the risks in those individual cases remains unclear, as BTI decisions are not published. As we already experienced in our own practice those reasons also remain (partially) unclear to the parties involved, since BTI does not share the motivation of its decisions, at least not in full with the parties involved, because of national security interests.
Busy times for BTI and it seems this will be no different for the years to come. In 2024, BTI will also be granted additional competences: parties competing for licences to operate offshore wind farms will also be screened by BTI. Furthermore, the Dutch legislator has submitted new legislation for consultation that introduces a sectoral investment test for the defense industry. That test is expected to come into force in 2026. We will continue to update you on legislative developments and experiences from our own practice.
