The Dutch Minister of Economic Affairs (the “Minister”) wishes to expand the scope of the Wet veiligheidstoets investeringen, fusies en overnames (The Investments, Mergers and Acquisitions Security Screening Act; the “Vifo Act”) to include six additional sectors: (i) biotechnology; (ii) artificial intelligence (AI); (iii) advanced materials; (iv) nanotechnology; (v) sensor and navigation technology; and (vi) nuclear technology for medical applications.
To this end, the Minister has published a proposed amendment decree, designating the companies that operate in these sectors as being active in the field of highly sensitive technology (by means of an amendment to the Besluit toepassingsbereik sensitieve technologie (Sensitive Technology Decree)).
The Minister believes this expansion will result in some 125 additional notifications under the Vifo Act being made per year to the Bureau for Verification of Investments (Bureau Toetsing Investeringen; the “BTI”). That is more than double the current number of notifications, which is estimated at approximately 90 per year. The expansion means that up to 1730 additional companies will fall under the scope of the Vifo Act. The public consultation on the amendment decree has recently closed, and the expanded scope may become applicable as early as this calendar year (2025). Parliamentary debate may lead to changes in the proposed sectors, but this is not considered likely, given the preparatory procedure.
In this blog we address the consequences that this expansion will have for companies. We also consider the various sectors that are expected to fall within the scope of the Vifo Act.
What is the Vifo Act?
The Vifo Act provides for foreign direct investment screening on the basis of which the acquisition of or investment in certain Dutch companies must first be reported to the BTI and must be approved by the Minister before it can be implemented. The Vifo Act applies to companies that are (i) vital providers; (ii) active in the field of sensitive or highly sensitive technology; or (iii) managers of specific business campuses. The underlying idea of the Vifo Act is to check whether parties that may be less reliable – from a national security perspective – will gain access to sensitive information.
An investment in or the acquisition of a company that falls within the scope of the Vifo Act must be notified to the BTI. The transaction may not be closed until the BTI grants its approval. A reporting obligation already applies under the Vifo Act on the acquisition of 10% of the voting rights in a company that is active in the field of highly sensitive technology. More information on this point can be found in this blog.
In light of sectors such as biotechnology and AI, the proposed expansion of the scope is expected to be directly relevant to venture capital and private equity transactions in which minority shareholdings are acquired and which in the past could often be closed without any screening under the Vifo Act. The expansion of the scope may furthermore lead to a greater workload at the BTI, resulting in longer processing times for other Vifo notifications.
More information on the scope of application and the notification process can be found in our information portal www.wetvifo.nl or in our blogs about the practical experiences after the first year of the Vifo Act and the definition of manager of a business campus.
Which companies will likely be subject to the notification requirement?
Companies active in the sectors listed below – as well as potential investors – should be aware that an investment test may soon apply, giving rise to a notification requirement in the case of an M&A transaction. It is also important that the sectors in question will immediately be classified as ‘highly sensitive’. This means that a notification requirement will already apply as soon as 10% of the voting rights in the target company are obtained if that company is active in the field of highly sensitive technology. Below, we address the sectors that will fall within the scope of the Vifo Act under the draft decree.
(i) Biotechnology
According to the Explanatory Memorandum to the draft decree, seed breeding companies will be among the companies active in the field of biotechnology. The Netherlands has several seed breeding companies that are among the largest players in the world and are market leaders. Specifically, the following subcategories of biotechnology will fall within the scope of the Vifo Act:
- synthetic cell technology for the artificial development of living cells;
- stem cell technology for the cultivation and manipulation of stem cells;
- gene editing: the deliberate introduction of very specific changes to the DNA sequence of living organisms, thereby altering their genetic composition; and
- genomics to gain insight into the way in which hereditary characteristics translate into the functioning of a cell and ultimately an entire organism.
(ii) Artificial intelligence (AI)
AI has applications in a wide range of sectors. The amendment decree focuses on, among other things, companies that develop technology to detect security risks. Specifically, companies that are active in the field of AI systems used or designed for the following applications will fall within the scope of the Vifo Act:
- identification or impersonation and analysis of persons, groups and objects via image, speech or biometric applications that are used:
- as a means of identifying persons or objects from images;
- as a means of evaluating speech communication or of identifying persons remotely and biometrically; or
- to create or recognise deepfakes;
- identification of persons, groups or objects based on the analysis of geography and sensors linked to a network (information from GPS, Wi-Fi, cameras, 4G networks, etc.), which are used:
- to analyse data on movements, location, traffic or events relating to the tracking of persons, groups or objects; or
- to assess persons in terms of essential security aspects, such as screening persons for security risks;
- Support of military deployments or security organisations in general for the purpose of:
- observation and information gathering;
- information and intelligence processing and decision-making;
- combating of service support; or
- autonomous navigation and patrolling.
(iii) Advanced materials
Advanced materials are materials with improved characteristics in terms of weight, strength or flexibility, for instance, and materials with special characteristics relating to energy (generation, storage, conversion, etc.). Advanced materials can be applied in various sectors, such as in the development of batteries or the use of nanotechnology in the pharmaceutical industry. Specifically, the following categories of advanced materials will fall within the scope of the Vifo Act:
- technologies for the production of materials that make it possible to store, transport or convert energy from an energy form/carrier with a higher or greater reliability, energy storage capacity or temperature range than commercial standards;
- technologies for two-dimensional materials with which the optical, electronic, magnetic or acoustic properties can be deliberately modified and produced. The 2D materials are one or two atoms thick, but wider in every other direction; and
- high-entropy alloys (HEA): alloys with at least five chemical elements in almost equal atomic concentrations.
(iv) Nanotechnology
Nanotechnology concerns the processing of matter on a scale of 1 to 100 nanometres. According to the Minister, nanomaterials will play an important role in the new generation of electronics, including quantum computers and solar cells. Specifically, the following categories of advanced materials will fall within the scope of the Vifo Act:
- the technology by means of which artificial materials based on nanoparticles/nanostructures can be developed and made that are programmable for one or more desired properties; and
- micro/nano reactor technology.
(v) Sensor and navigation technology
Sensor technology is used in robotics, among other things. Sensor technology allows robots to move independently and perform tasks. The navigation technology that will be added to the Vifo Act by the amendment decree includes self-driving vehicles. Specifically, the following categories of technologies will fall within the scope of the Vifo Act:
- SLAM (Simultaneous Localisation and Mapping) technology;
- sensor fusion and array technologies;
- sensor network and ambient technologies; and
- signature management and pattern recognition technology.
(vi) Nuclear technology for medical applications
A great deal of this technology already falls within the scope of the Vifo Act. The proposed amendment aims to bring the development, production and application of medical isotopes within the scope of the Vifo Act. Well-known Dutch producers of medical isotopes that may fall within the scope are based in Petten, the Netherlands.
Information security and satellite communications
Information security and laser satellite communications were already categorised as sensitive technology, but the amendment decree classifies them as highly sensitive technology, meaning that the acquisition of 10% of the voting rights in these target companies will also be notifiable.
More information on the Vifo Act and FDI-related questions can be found on the wetvifo.nl information portal.
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