The 'Snippet' series from our New York office regularly offers insights on a range of EU tax and legal topics. This is our snippet on the impact of the Dutch Foreign Direct Investment ("FDI") regime on the energy and infrastructure sector.
With changing geopolitics accelerating the desire for a legal regime that mitigates the risk of strategic dependence and potential disruption to the continuity of vital processes to Dutch society, the Investment, Mergers and Acquisitions Screening Act (Wet Veiligheidstoets investeringen, fusies en overnames) ("FDI Act") entered into force on June 1, 2023 in the Netherlands.
The FDI Act introduced a general screening mechanism for FDI screening in the Netherlands, thereby subjecting certain investments in target companies in a variety of sectors, including the energy and infrastructure sector, to a mandatory notification requirement.
The FDI Act focuses, among others, on target companies that operate, manage or provide a service, (the continuity of) which can be deemed to be of vital importance to Dutch society. Since this could include companies active in the energy and infrastructure sector (such as providers of transport of heat networks, vital providers in the port area and companies operating in the fields of nuclear energy, natural gas and extractable energy), the FDI Act could prove to be relevant for investors considering these sectors in the Netherlands.
As a result of the FDI Act, investments leading to a change of control in such vital providers are subjected to a suspensory notification obligation to the Dutch Investment Screening Agency (Burea Toesting Investeringen) which operates under the responsibility of the Dutch Minister of Economic Affairs and Climate (the "Minister"). This means that to complete the envisaged transaction, the parties require the Minister's (conditional) approval or confirmation that no detailed screening is necessary.
Apart from the FDI Act, yet equally important for investors in the Dutch energy sector, the Dutch Gas Act (Gaswet) and Electricity Act (Elektriciteitswet 1998) include a somewhat similar notification obligation in the event of a change of control. While the Gas Act focuses on LNG installations (i.e. installations used to liquify gas or used for the import, shipping or regasification of liquid gas), the Electricity Act 1998 focuses on (companies managing) electricity production installations with an electric potential exceeding 250MW.
As the legal framework for the FDI Act, Gas Act and Electricity Act differs from each other, any investment potentially triggering a notification obligation requires early attention in the due diligence investigation, as often conditions precedent are subsequently required in the transaction documentation.
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