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Reporting obligation for acquisitions in the Dutch telecom sector: some (liability) issues

Providers of telephone, internet or data centers can be seen as companies of vital importance because of their national importance. This comes as no surprise. In the Netherlands, additional legislation was deemed necessary to protect national security and a legislative proposal was presented in April 2018. This proposal is called: ‘Unwanted Control Telecommunication Act’.

The legislative proposal aims to safeguard public interests in the telecommunications sector and has recently been discussed by the committee for Economic Affairs and Climate Policy. The proposal is a response to the attempt by América Móvil in September 2013 to take over KPN (a former state-owned Telecom company).

Amending the Telecommunications Act
The main feature of the bill is the creation of the competence for the Minister of Economic Affairs and Climate to prohibit the acquisition or retention of control in a telecommunications party when, in his opinion, acquiring such control leads to a threat to the public interest (national security). The proposed amendment of the Telecommunications Act includes the introduction of a new chapter 14A in the Telecommunications Act, titled: "Unwanted control in telecommunications parties". See also the previous blog on this proposal.

Round table meeting
In May 2019, The Committee for Economic Affairs and Climate Policy of the House of Representatives of the Netherlands organised a round table meeting to discuss this bill on the Unwanted Control Telecommunication Act. The members of the committee entered into discussions with academics, the business community, and industry organizations. BLRN member Jelle Nijland was interviewed together with Rob de Wijk (The Hague Center for Strategic Studies), and Arnoud Boot (professor of Corporate Finance and Financial Markets, UvA) during a public session in the Thorbeckezaal of the House of Representatives. Concerns relating to this bill have been expressed and discussed with members of parliament. Although in general the idea of safeguarding the Dutch interests was supported by all attending parties, many issues were raised, for instance whether the new proposal invokes legal uncertainty.

Broad scope and liability issues
Existing telecom companies are concerned because they feel that virtually all outsourcing of network and services management or parts thereof – including to group companies – fall within the scope of this proposal. As VodafoneZiggo stated in its position paper: ‘This essentially would require that such major, internal business decisions by market parties would need to be approved by the minister. This could have a negative effect on the introduction and speed of mobile and fixed gigabit network roll-out and sector innovation.’

Another issue relates to the possible appointment of a temporary director by the minister, who would be in charge of a large/ listed telecommunications company. According the bill, this director would be able to act without any form of liability towards his/her actions. This limited liability was considered ‘unnecessary and undesirable’ according to a telecommunications company present.

The complete meeting (Dutch) is recorded and available here.

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