Foreign Investments and Energy Transition in the Netherlands

Affordability, competitiveness, security of supply, and sustainability are among the goals set for the field of the energy transition for 2030 through 2050. In order to meet these goals, the energy sector of the European Union (EU) will require a continuous inflow of capital, particularly Foreign Direct Investment (FDI). Unfortunately, FDI has raised severe national security concerns in EU Member States, leading to the need to adopt and subsequently revisit the FDI screening framework on the EU level. On a domestic level, several EU Member States, such as the Netherlands, have either strengthened or are considering strengthening their screening mechanisms. States have been screening FDI on national security grounds for decades, but the scope of new mechanisms has dramatically expanded to cover more sectors, transactions, and types of investors. In particular, FDIs that affect energy infrastructure, supply of energy, raw materials, dual-use items, and critical technologies necessary for the energy transition should be subjected to more rigid scrutiny. These regulatory and policy developments might hinder the flow of investments into the energy sector and the advancement of new technologies and thus have implications for the prospects and speed of the energy transition in Europe. This Article will discuss the overarching question of how states can organize their investment screening mechanisms in a way that balances their national security interests against the need for free flow of FDI to stimulate development of technologies that accelerate the energy transition. This includes a case study of the FDI policy of the Netherlands, one of the major destinations of global FDI. This Article initially distills the principles necessary to balancing competing security and economic interests of host states in the investment law context. Based on such principles, it further examines the extent to which existing regulatory mechanisms in the Netherlands are adequate in addressing security concerns posed by FDI while continuing to attract investments in the energy sector and related technologies. Specifically, this Article aims to identify trends in investment screening in the Netherlands, reflect on their coherence with overarching EU investment policy objectives and the multilateral guidance on a good policy design, and discuss the potential implications of recent regulatory developments for the future of the energy transition in Europe. More broadly, this Article contextualizes the case of the Netherlands within the global movement of tightening control over FDI and explores the relationship between the investment policy of a State, on the one hand, and its objectives to combat climate change and safeguard energy security, on the other.