Sensitive technologies: The Netherlands proposes an expansion of its investment screening regime

The Dutch government has published a draft decree to expand the scope of its existing investment screening regime, to address additional technologies deemed sensitive for national security purposes. The decree is expected to take effect in the second half of 2025 - when acquisitions of target businesses active in these newly designated “sensitive” technologies will need to be notified for investment screening (and assessment of the risk to national security).

Given that the regime applies to a broad range of investments by both foreign and Dutch parties, and additional sensitive technologies – which include certain applications of AI – are broadly defined, this expansion of the screening regime could have an impact on investment in the Dutch market. Parties should be ready to address more complexity in deals involving Dutch targets active in sensitive technologies.

Context – Existing Dutch investment screening regime

The existing Dutch investment screening regime, which has been in force since June 2023, introduced a mandatory screening regime for investments transactions involving Dutch companies in sectors considered critical to national security. The regime applies to investments, mergers and acquisitions involving any of the following types of companies which carry out activities and have their effective management in the Netherlands:

1. Suppliers which operate, manage or make available a service, the continuity of which is vital to Dutch society, e.g. energy suppliers.
    
2. Companies that manage a site on which companies are active and where public-private cooperation takes place in technologies and applications that are of economic and strategic importance to the Netherlands, e.g. business and research science parks such as the Amsterdam Science Park. 
    
3. Companies active in sensitive technologies, e.g. dual-use products (see below), military goods, and semiconductor technology.

The decree proposes to include six additional types of technologies as “highly sensitive” in category three (see below). The requirement to request clearance for an investment in this type of company is triggered if the acquirer will obtain significant influence over such company (10% of the voting rights or rights to appoint and dismiss directors) or will increase its interest to 20% (another notification must be made if its interest is again increased above 25%). The bar is therefore set low, and it is not necessary to obtain a controlling interest in the target for the clearance requirement to be triggered.

The mandatory notification must be made to the Bureau Toetsing Investeringen (BTI) and can take up to eight weeks (subject to extensions through requests for additional information). The regime is suspensory, meaning that clearance must be obtained prior to closing.

Read more: Foreign investment control in the Benelux … Part 2 – The Netherlands initiates a general investment screening regime | ForeignInvestmentLinks 

Additional sensitive technologies listed in the decree

The decree proposes to extend the existing screening regime to the following additional sensitive technologies:

• Artificial Intelligence (AI) systems used to identify or impersonate persons, groups and objects, or which are used for military purposes. 
   
• Nanotechnology used to produce programmable materials based on nano parts and structures, and nanoreactors.
   
• Advanced materials, specifically, advanced materials used to store, transport or convert energy, advanced materials used to alter two dimensional materials, and high-entropy alloys (HEA) are also captured.
   
• Several forms of biotechnology, including technology used to artificially create living cells, gene editing and technology used to manipulate stem cells.
   
• Sensor and navigational technologies, including Simultaneous Localisation and Mapping (SLAM) technology, sensor fusion and array technologies and sensor network and ambient technologies.
   
• Nuclear technology used for medical diagnosis and treatment.

Impact on M&A transactions

The wording describing the additional sensitive technologies in the decree is broad.

With respect to AI, the Dutch government has explained that specification based on technological features is difficult because AI can often have dual-use capabilities – e.g. be used for civilian and military purposes, meaning AI has the potential to be used for purposes which are non-sensitive as well as sensitive to national security. For this reason, the decree specifies AI technology based on its applications which could pose a national security risk if used in ways that compromise security (such as AI for identification of persons or objects and for military purposes).

Given the broad formulation of all the additional sensitive technologies, and the fact that the target company is only required to be “active” in the relevant technology - any company so involved, even to a minor extent, risks being captured by the extended clearance regime. 

Failure to notify can result in punitive measures (up to 10% of annual global turnover of the entire enterprise) and the risk that the underlying transaction is reversed. Parties to transactions relating target companies potentially caught by the extended regime may prefer to err on the side of caution and submit a notification. This is especially the case because the BTI review process can be unpredictable and opaque, as it relies on classified information in its review and its filings are not published. 

Guidance by BTI

While there is some uncertainty around the precise scope of the extended regime, BTI does provide some help in the form of general and case-by-case guidance. 

It has recently published guidelines on what is meant by being “active” in the field of sensitive technology and provide further clarity on certain targets (e.g. a Dutch holding acting merely as a mailbox company for a foreign business) and products (e.g. certain semi-finished products) which are not subject to screening.

In addition, BTI is generally willing to give (informal) guidance to investors at an early stage about whether a specific investment falls within the scope of the regime. This may give parties more comfort at the outset of a transaction. 

Read more: Foreign investment control in the Netherlands – Lessons learnt from one year of practice | ForeignInvestmentLinks  

Looking ahead

The decree is part of a wider legislative development in the Netherlands to regulate sensitive industries, including defence and energy, by way of investment screening. 

This move also aligns with broader EU efforts to enhance economic security. In its decree, the Dutch government acknowledges the pending amendment of the EU FI screening regulation – to require member states to include a minimum scope for their national FI screening mechanism for technologies which are considered critical. The fact that the Dutch government has effectively addressed this amendment ahead of time, shows the level of concern around protecting the national interest with respect to the increasing range of critical technologies.

Given the general trend in geopolitics towards greater national interest, combined with the constant and rapid developments in technologies, it seems likely that we could see further expansion of the investment screening landscape in the future.

Read more: The European Commission's Recommendation on outbound investment in technology areas: what does it cover, and how does it differ from the US approach?