On 14 October 2025, the European Commission (EC) published its fifth annual report on the screening of Foreign Direct Investment (FDI) in the European Union (EU). The report shows that the cooperation mechanism established under Regulation (EU) 2019/452 (the EU FDI Regulation) has proven successful. The number of notifications submitted by Member States has increased by 15% since 2021. There is growing attention to the potential risks that certain investments from third (non-EU) countries may pose to security or public order.
In 2024, EU Member States reported 477 investments, which in approximately 10% of the cases triggered inquiries from other Member States. The majority of the 477 cases (92%) were closed within two weeks, while only 8% required an in-depth security assessment. About half of those detailed assessments concerned the manufacturing sector, in particular critical technologies in the defence, semiconductor, and aerospace industries, often due to concerns about potential technology or knowledge leakage and the continuity of supply. By the end of 2024, 24 EU Member States had implemented national legislation on FDI screening.
This blog focuses on FDI screening in the Netherlands. We address practical questions such as the applicable laws and regulations, the scope of the rules, the notification obligation and notification process, the assessment procedure, and finally the potential consequences of non-compliance.
European Regulation or Dutch legislation?
The relevant legal framework for FDI screening in the Netherlands consists of the EU FDI Regulation and the Dutch Investment, Mergers and Acquisitions Security Screening Act (Wet veiligheidstoets investeringen, fusies en overnames – ‘Vifo Act’). The EU FDI Regulation entered into force on the 11th of October 2020 and establishes the EU cooperation mechanism for information sharing between Member States, who enforce their own national FDI regimes. This enables information relating to foreign investments that may affect the EU internal market in one Member State, to be shared with other Member States, and with the European Commission.
According to the fifth annual report, 84% of all notifications of such investment activities originate from seven Member States, including the Netherlands. This indicates that a relatively small group of countries with well-developed screening mechanisms, accounts for the majority of EU notifications. The goal is that while all Member States enforce their own regimes, through cooperation, harmonisation will be achieved.
The EU FDI Regulation also facilitates the exchange of best practices and sets minimum requirements for national screening processes, such as:
- transparency of rules and procedures,
- non-discrimination between foreign investors,
- confidentiality of shared information,
- the possibility of judicial review of screening decisions, and
- measures to detect and prevent circumvention by foreign investors.
This allows Member States that wish to establish a national screening mechanism to learn from those already applying such regimes in practice. The EU FDI Regulation is expected to be revised following a legislative proposal submitted by the European Commission on the 24th of January 2024 to strengthen the EU’s economic security. The proposal includes tightening the screening process for foreign investments.
Under the current EU FDI Regulation, the EC may only issue advice; the final decision remains with the Member State where the investment takes place, due to its link to national security and public order. The revision therefore aims to further harmonise national regimes, define a minimum set of sectors in which all Member States must screen foreign investments, and expand screening to EU-based investors who are ultimately controlled by non-EU persons or entities.
The report also advocates increased oversight of outbound investments in three strategically important technological areas (semiconductors, artificial intelligence and quantum technologies), to prevent leakage of technology or know-how that could be used for military or intelligence purposes against the EU or its Member States. This recommendation may return in the revised EU FDI Regulation.
The EU FDI Regulation does not impose substantive rules on the screening process that companies must follow when investing in Dutch entities. These substantive requirements are, however, set out in the Dutch Vifo Act, explained below.
The Vifo Act
The Vifo Act entered into force on the 1st of June 2023. It introduces a security screening mechanism for investments, mergers, and acquisitions that may pose risks to national security. The aim is to mitigate these risks by preventing strategic dependencies, protecting vital processes, and safeguarding the security and confidentiality of sensitive knowledge and technologies. To prevent vital infrastructure or sensitive technologies from falling into the hands of parties that could pose such risks, the Vifo Act introduces a notification obligation (for both acquirer and target entities) and a security assessment requirement for acquisitions, investments, joint ventures, and similar transactions in certain vital sectors (such as gas, electricity, and telecommunications). A notable feature is that the Vifo Act applies retroactively to certain investments completed on or after the 9th of September 2020. This means that transactions completed before the Act entered into force could still be reviewed and, in exceptional cases, annulled if deemed to pose an unacceptable risk to national security. In short, the Vifo Act aims to safeguard national security by monitoring investments in vital processes.
Which target undertakings fall within scope?
The notification obligation applies to acquisition activities relating to three categories of target undertakings: vital providers, undertakings active in (highly) sensitive technologies, and operators of corporate campuses.
Vital providers
Vital providers include operators in the following areas: a) heat transport, b) nuclear energy, c) air transport (including ground handling services), d) port operations, e) banking, f) financial market infrastructure, g) extractable energy, and h) gas storage, i) as well as any additional categories that may be designated by governmental decree.
A notification is required if the acquisition leads to obtaining control in the target undertaking.
Sensitive technology
Undertakings active in sensitive technologies include those involved in:
- dual-use items subject to export licensing,
- military goods,
- quantum technology,
- photonics technology,
- semiconductor technology, and
- high-assurance technology,
- as well as any additional technologies designated by law as ‘sensitive’ in the future.
A notification is required if the acquisition leads to control, unless the target qualifies as a very sensitive technology undertaking, in which case the stricter rules below apply.
Very sensitive technology
Certain technologies are designated as ‘very sensitive’, such as certain types of dual-use items or specific military goods under ML19d of the EU Common Military List. The full list can be found in Annex 3 of the relevant regulation in this link.
A notification is required if the acquisition results in obtaining or increasing ‘significant influence’, as defined in art 4 of the Vifo Act. This includes situations where:
- a person is able to exercise at least 10%, 20% or 25% of voting rights;
- the undertaking has committed to supporting the appointment or removal of one or more directors nominated by a third-party (e.g., via a shareholders’ agreement or, for listed companies, via a relationship agreement); or
- arrangements between shareholders effectively granting such significant influence in (a) of (b).
Operators of business campuses
The investment by a Singaporean state-owned company in the High Tech Campus Eindhoven led to inclusion of this category in the Vifo Act. Other examples of such business campuses include the TU Delft Campus, Kennispark Twente, and Amsterdam Science Park.
The Ministry of Economic Affairs clarified in a policy that to be classified as an operator of a business campus, three cumulative criteria must be met:
- The operator must play a role in the campus’s security, considering they are responsible for overseeing activities that may pose security risks;
- Companies active in sensitive technologies are located on the campus; and
- Public-private collaboration takes place on technological development relevant to the Netherlands’ strategic and economic interests.
A notification is required if the investment activity leads to a stake with control in the target undertaking.
Certain sectors (such as gas, electricity, telecommunications) already have their own security screening regimes under sector-specific legislation. In those cases, the Vifo Act does not apply.
Who is tasked with enforcement?
The competent authority is the Bureau for Investment Screening (BTI), part of the Ministry of Economic Affairs. If a notification obligation applies, either the acquirer or the target undertaking must notify the BTI using the designated form. Information requested includes details on the target, the nature of the change in control, potential national security risks linked to the acquirer (e.g., ties to foreign states, criminal offences, sanctions), and additional information for vital providers or sensitive technology undertakings. Anti-money laundering information, such as Ultimate Beneficial Owner (UBO) details, must also be provided in line with the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act (‘Wet ter voorkoming van witwassen en financieren van terrorisme’ (Wwft)).
Figure 1: The Assessment Period
Once a notification is submitted, a standstill obligation applies: the deal may not be closed until the BTI confirms that no full screening decision is required or has issued such a decision. The BTI’s initial decision period is eight weeks, which may be suspended for information requests and extended by up to six months for further investigation. If the BTI fails to issue a decision within the appropriate timeframe, the transaction is automatically approval. If a full screening decision is required, a new eight-week period starts, again extendable by up to six months (minus time already used), and in case of EU FDI cooperation, by an additional three months. Again, inaction leads to automatic approval. Providing incorrect or incomplete information may lead to retrospective intervention and fines.
How does the BTI assessment procedure work?
Figure 2: The Assessment Procedure
The Vifo Act provides separate rules for listed companies due to dispersed shareholdings and securities-market protections. Investors seeking to acquire influence in listed sensitive-tech companies must notify the BTI in advance. In public takeover bids, BTI approval is generally a condition, except in mandatory bids – although even mandatory bids may only be settled after BTI approval.
Consequences of non-compliance
The Vifo Act provides clear consequences for acquisition activities carried out in breach of the law.
- Annulment of the prohibited investment
An investment carried out in violation of a prohibition is null and void. Exceptions apply to transactions cleared through a securities settlement system or certain other acquisition types (such as mergers), in which case, a court decision is required to declare the transaction void.
- Orders to unwind the transaction
The BTI may impose measures to undo the effects of a prohibited transaction, including selling shares at the parties’ expense.
- Suspension of acquired rights
Certain rights of the acquirer, such as voting rights, are suspended when a transaction violates the law. Financial rights, such as dividends, remain intact. The target undertaking must ensure the suspended votes are disregarded.
- Additional measures to enforce suspension
If suspension is ineffective or risks persist, the BTI may appoint an instruction officer who may issue binding instructions to the target undertaking. In cases where there is a risk of misuse or failure of a vital provider, the BTI may even replace the board entirely.
- Administrative fines
The BTI may impose fines of up to 10% of the undertaking’s turnover for violations such as the failure to notify the BTI about an investment.
- Prohibition of the acquisition (ultimum remedium)
Where national security risks cannot be mitigated, the BTI may prohibit the acquisition. This applies only to the newly acquired investments, and not to existing shareholdings/investments. This is the case, for example, when a shareholder with an existing 25% stake intends to make an additional investment of 15%, and that additional investment is prohibited. In that situation, only the additional 15% investment is prohibited, while the existing 25% stake remains permitted.
Conclusion
The Vifo Act has quickly become an integral element of the Dutch investment landscape. According to the BTI’s annual report, the number of notifications and investigations increased significantly again in 2024: 83 investigations were conducted, 61 of which under the Vifo Act. The number of informal assessments on the applicability of the Act also doubled.
This increased activity comes with greater complexity. Although all investigations were completed within statutory deadlines, the average processing time has risen to between 35 and 72 days, with extensions often required. For companies in urgent need of capital – such as start-ups and scale-ups – this may create significant practical challenges.
In 2024, the BTI issued four formal screening decisions: three transactions were approved subject to conditions, and one was fully prohibited. Screening is therefore no longer a mere formality but a substantive assessment with real transactional consequences.
The scope of the Vifo Act continues to expand to new sectors. New technology-driven sectors including biotechnology, artificial intelligence and nuclear technology with medical applications, will soon fall under the notification obligation. The BTI will also take on additional responsibilities relating to wind energy parks at sea, and the forthcoming Defence and Security Industries Resilience Act. As a result, the application of the Act is growing to an even broader range of industries, from strategic sectors to innovative start-ups with international capital flows.
For M&A transactions and investments, Vifo Act-screening is now a standard component of the transaction process. Early assessment of the notification obligation and thorough preparation are essential to avoid delays, conditions, or even prohibitions.
Given the BTI’s increasingly active enforcement, seeking timely legal advice is crucial. Our lawyers are ready to assist you in assessing potential notification obligations, preparing filings and navigating the strategic dialogue with the BTI – ensuring that your transaction proceeds smoothly, compliantly and without unnecessary delay.