18-03-2024

BTI Guideline for Security Test Act - Being active in sensitive technology

The Bureau for Investment Screening (Bureau Toetsing Investeringen, “BTI”) recently published guidelines to provide clarification regarding the scope of the Investments, Mergers and Acquisitions Security Test Act (Wet veiligheidstoets, investeringen, fusies en overnames, also referred to as “Vifo Act”). The Vifo Act applies to Corporate M&A activities of companies that are active as vital providers of (highly) sensitive technology, operators of corporate campuses, or vital infrastructure providers in The Netherlands. The BTI is responsible for the substantive screening of these investment activities.

The BTI guidelines relate to the following topics:

The BTI guideline ‘Being active in sensitive technology’ focuses on when a company is considered as being active in the field of sensitive technology.

Definition of being active in sensitive technology
A company is considered being active in the field of sensitive technology if it conducts research operations or develops, process and manufactures products for commercial use. Production of semifinished products that do not qualify as a dual-use or military goods will not be considered as being active in the field of sensitive technology and falls outside the scope of the Vifo Act.

The activities of the sensitive technology company must occur in The Netherlands. A company is not considered of being active in the sensitive technology if it has a Dutch subsidiary that focuses on trade. The same applies for Dutch letterbox holding companies.

Suppliers
Suppliers whose products, know-how or services do not independently qualify as 'technology' are not considered as being active in the field of sensitive technology.

Suppliers providing products, machinery, know-how or services specific to research, development, production, processing or exploitation of technologies are deemed to be independently active in the field of sensitive technology. Although these parties may only consider themselves as sole suppliers, they are in principle deeply involved in the production process pursuant to which they fall within the scope of the Vifo Act.

Transportation or packaging services provided by a company after the production process will not be considered as being active in sensitive technology.

Testing and measurement activities aimed at optimizing production of highly sensitive technology will fall within the scope of the Vifo Act, provided that they are carried out by businesses prior to the completion of the production process. In contrast, companies that carry out testing and certification activities after production is fully executed will fall also outside the scope of the Vifo Act.

End-user, wholesale, brokering, retail trade
In principle, a company as an end-user or wholesale retailer will not be considered as active in the field of (highly) sensitive technology. This is due to the fact that these companies frequently lack the necessary facilities, expertise or legal rights. However, end-users of High Assurance products are exempted from this, since relevant data will be utilized to create an unique end-product.

Companies engaged in brokering, importing and/or exporting of sensitive technology products do generally not fall within the scope of Vifo Act. However, it could be the case that licenses for such services need to be applied for with the Dutch Customs.

Universities, university hospitals, institutes of applied research and knowledge institutions
Universities, university hospitals and research institutes in the Netherlands covered by the Higher Education and Scientific Research Act (Wet op het hoger onderwijs en wetenschappelijk onderzoek) are not being considered as being active in sensitive technology. The activities of these institutions are focused on performing fundamental scientific research, industrial research or experimental development, with education purposes and there is no intention of commercial use. The same applies for TNO (Nederlandse organisatie voor toegepast-natuurwetenschappelijk onderzoek) and institutes subsidized by the Subsidy scheme for applied research (Subsidieregeling instituten voor toegepast onderzoek).

In the event that the above organizations transfer sensitive technology related knowledge, intellectual property rights and production facilities to multiple subsidiaries for the purpose of commercial exploitation, spin-off or sales, these subsidiaries may be deemed as being active in the field of (highly) sensitive technology and notification with BTI is required. This is particularly the case if technology can be independently researched, developed or incorporated into semi- or finished products for market use.

Conclusion
The guideline provides M&A practice with valuable practical insights on the definition of ‘Being active in sensitive technology’. Please note that the guideline may be amended and updated by BTI from time to time based on changing insights, developments in the market / technology or as a result of amended regulations.

If you have any questions regarding the Vifo Act or require assistance with filling in the BTI notification form, please contact Friederike Henke, Susanna Tang or any of the other BUREN specialists of our Corporate department.