The Netherlands government wants to introduce a security test for investments, mergers and takeovers that may pose a risk to national security. The Cabinet has approved the Investment, Mergers and Acquisitions (Security Test) Act (vifo) by Minister Blok of Economic Affairs and Climate Policy and Minister Grapperhaus of Justice and Security.

The security test applies to two types of companies in the Netherlands: vital providers and companies that possess sensitive technology. Investments, mergers, and takeovers in these types of companies can in some cases lead to risks for national security. If the House of Representatives and the Senate pass the bill, the security test will be introduced for investments from all countries.

Vital providers are companies that carry out vital processes. These are so important to Dutch society that their failure or disruption could lead to major social disruption. Companies with sensitive technology have certain knowledge or information about this technology that could affect national security if it were to leak. For example, a malicious party could acquire control, through an investment, of a Dutch company that develops high-quality technology with military applications. If an undesirable party takes over such a company, that technology could fall into the wrong hands and be used against Dutch security interests.

Both investors in vital providers and companies with sensitive technology, and these companies themselves must report changes of control to the Investment Assessment Agency (BTI) of the Ministry of Economic Affairs and Climate Change. This agency assesses whether there is a risk to national security. If there is a risk, the BTI can impose conditions on the investment and, in extreme cases, prohibit it.

Currently, legal sector-specific investment tests already exist in the electricity, gas, and telecommunications sectors. The vifo law will apply to companies for which there is not yet a sector-specific test and where hostile interests may pose a risk to national security.

The proposal will become public after submission to the House of Representatives. The Ministry of Economic Affairs and Climate Policy and the Ministry of Defense are also cooperating on similar legislation for the defense -industry.

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