The Netherlands
Executive Summary
The Netherlands consistently ranks among the world’s most competitive industrialized economies. It offers an attractive business and investment climate and remains a welcoming location for business investment from the United States and elsewhere.
Strengths of the Dutch economy include the Netherlands’ stable political and macroeconomic climate, a highly developed financial sector, strategic location, well-educated and productive labor force, and high-quality physical and communications infrastructure. Investors in the Netherlands take advantage of its highly competitive logistics, anchored by the largest seaport and fourth-largest airport in Europe. In telecommunications, the Netherlands has one of the highest levels of internet penetration in the European Union (EU) at 96 percent and hosts one of the largest data transport hubs in the world, the Amsterdam Internet Exchange.
The Netherlands is among the largest recipients and sources of foreign direct investment (FDI) in the world and one of the largest historical recipients of direct investment from the United States. This can be attributed to the Netherlands’ competitive economy, historically business-friendly tax climate, and many investment treaties containing investor protections. The Dutch economy has significant foreign direct investment in a wide range of sectors including logistics, information technology, and manufacturing. Dutch tax policy continues to evolve in response to EU attempts to harmonize tax policy across member states.
Until the COVID-19 crisis, economic growth had placed the Dutch economy in a very healthy position, with successive years of a budget surplus, public debt that was well under 50 percent of GDP, and record-low unemployment of 3.5 percent. This allowed the Dutch government significant fiscal space to implement coronavirus relief measures. In response to COVID, the Dutch government implemented wide-ranging support for businesses affected by the COVID crisis, including support to cover employee wages, benefits to self-employed professions to bridge a loss of income, and compensation for fixed costs other than wages. The financial support measures added up to about $70.5 billion (€60 billion) in the first year of the crisis. These programs prevented a wave of bankruptcies – bankruptcy filings in 2020 and 2021 were the lowest in two decades.
The new coalition government announced in early 2022 plans to be climate neutral by 2050. The government said it would adjust domestic climate goals to at least 55 percent CO2 reduction by 2030 compared to 1990, with ambitions to aim higher for a 60 percent reduction. The government has named a Minister for Climate and Energy Policy to work on domestic issues in addition to a Climate Envoy focused on international efforts. The Netherlands joined the U.S.-EU Global Methane Pledge and promised to end all investment in new coal power generation domestically and internationally. In April 2022, the government joined the AIM for Climate initiative.
The 2019 National Climate Agreement contains policy and measures to achieve climate goals through agreements with various economic sectors on specific actions. The participating sectors include electricity, industry, “built environment,” traffic and transport, and agriculture.
The Netherlands business community suffered a two-pronged loss in the planned departure of two of its major national corporate champions. Energy leader Shell and food and household products conglomerate Unilever announced in 2021 a relocation of their corporate headquarters from The Hague and Rotterdam, respectively, to London. The companies cited concerns with Dutch tax law relative to dividend taxation and need for consolidated management structure. (Note: Both companies previously split their corporate governance between the Netherlands and the UK. End Note.)
In March 2022, the Dutch Central Planning Bureau (CPB) published its 2022 economic projections. Due to the Russian invasion of Ukraine, the outlook was marked by uncertainty and flagged “even higher” energy prices as the most important economic consequence. Because of increased energy prices and high inflation from the COVID pandemic, CPB estimates a 5.2% inflation rate for 2022 with a range of 6.0% and 3.0% depending on how long energy prices remain high. CPB estimated economic growth of 3.6% in 2022 and 1.7% in 2023. CPB predicted unemployment at 4 percent in 2022, down from 4.2% in 2021. The low unemployment rate reflects a similar challenge also faced by the United States – businesses are finding it difficult to recruit qualified staff. Government debt is expected to rise to 61 percent of GDP by 2025 due to increased spending under the new coalition government, including on defense, outlays to support an aging population, and support to low-income families to offset inflation in energy and food prices.
According to the U.S. Bureau of Economic Analysis (BEA), when measured by country of foreign parent, the Netherlands is the second largest destination for U.S. FDI abroad in 2020 after the UK, holding $844 billion out of a total of $6.1 trillion total outbound U.S. investment – about 14 percent. Investment from the Netherlands contributed $484 billion FDI to the United States, making it the fourth largest investor at the end of 2020 of about $4.6 trillion total inbound FDI to the United States– about 10.5 percent. Measured by ultimate beneficial owner (UBO), the Netherlands was the seventh largest investor at $236 billion. For the Netherlands, outbound FDI to the United States represented 14 percent of all direct investment abroad.
| Measure | Year | Index/Rank | Website Address |
|---|---|---|---|
| TI Corruption Perceptions Index | 2021 | 8 of 180 | https://www.transparency.org/en/cpi/2021 |
| Global Innovation Index | 2021 | 6 of 132 | https://www.globalinnovationindex.org/analysisindicator |
| U.S. FDI in partner country ($M USD, historical stock positions) | 2020 | $844 million | Bea: Netherlands – International Trade and Investment Country Facts |
| World Bank GNI per capita | 2020 | $ 51,060 | https://data.worldbank.org/indicator/NY.GNP.PCAP.CD |
3. Legal Regime
Dutch commercial laws and regulations accord with international legal practices and standards; they apply equally to foreign and Dutch companies. The rules on acquisition, mergers, takeovers, and reinvestment are nondiscriminatory. The Social Economic Council (SER)–an official advisory body consisting of employers’ representatives, labor representatives, and government appointed independent experts–administers Dutch mergers and acquisitions rules. The SER’s rules serve to protect the interests of stakeholders and employees. They include requirements for the timely announcement of mergers and acquisitions (M&A) and for discussions with trade unions.
As an EU member and Eurozone country, the Netherlands is firmly integrated in the European regulatory system, with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.
Financial markets are regulated in an interconnected EU and national system of prudential and behavioral oversight. The domestic regulators are the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Market (AFM). Their EU counterparts are the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA).
The Dutch Civil Code requires boards’ statements of large companies to include non-financial performance indicators in their annual report. EU law is relevant in the Netherlands. Companies often voluntarily disclose ESG-related issues and refer to the GRI Sustainability Reporting Guidelines and the Task Force on Climate-related Financial Disclosures recommendations on its website. Some sectors such as the pension sector have committed to the 2018 Covenant on International Socially Responsible Investing (IMVB). In December 2021, the Netherlands became the latest European government to announce plans to introduce mandatory human rights and environmental due diligence (HREDD) legislation at a national level should the EU continue to delay an introduction of mandatory HREDD legislation.
Traditionally, public consultation in drafting new laws is achieved by invitation of various civil society bodies, trade associations, and organizations of stakeholders. In addition, the SER has a formal mandate to provide the government with advice, both solicited and of its own accord. Recently, the SER has provided the government with advice on emissions reduction of greenhouse gases, energy transition, and pension reforms. New laws and regulations are subject to legal review by the Council of State and must be approved by the Second and First Chambers of Parliament. The World Bank scores the Netherlands at 4.75 out of 5 on its Global Indicators of Regulatory Governance which assesses transparency around proposed regulations and access to enacted laws. All proposed regulations are published publicly including on a unified website and on the website of the relevant ministry or regulator.
The Netherlands is a member of the WTO and does not maintain any measures that are inconsistent with obligations under Trade Related Investment Measures (TRIMs).
Dutch contract law is based on the principle of party autonomy and full freedom of contract. Signing parties are free to draft an agreement in any form and any language, based on the legal system of their choice. Dutch corporate law provides for a legal and fiscal framework that is designed to be flexible. This element of the investment climate makes the Netherlands especially attractive to foreign investors.
The Dutch civil court system has a chamber dedicated to business disputes, called the Enterprise Chamber. The Enterprise Chamber includes judges who are experts in various commercial fields. They resolve a wide range of corporate disputes, from corporate governance disputes to high-profile shareholder conflicts over mergers or hostile take-overs.
Since 2019, the Enterprise Chamber houses an English-language commercial court. The Netherlands Commercial Court (NCC) and its appellate chamber (NCCA) offer parties the opportunity to litigate in English and will provide judgments in English. Both the NCC and NCCA will focus primarily on major international commercial cases. See also: https://www.rechtspraak.nl/English/NCC/Pages/default.aspx
The Dutch government has demonstrated a growing concern with the protection of its open, market-based economy against foreign state malign activity. The Netherlands is in the process of establishing a formal domestic investment screening mechanism as per EU directive. In May 2020, the long-awaited investment screening law in the telecommunications sector came into force. In December 2020, the law on establishing a framework for investment screening for all critical sectors came into force, aimed at protecting Dutch national security.
In concert with the European Union, the Dutch government is considering how to best protect its economic security and also continue as one of the world’s most open economies. The Netherlands has foreign investment and procurement screening mechanisms in place for certain vital sectors that could present national security vulnerabilities. The first such laws (one on investment screening per EU directive and one on unwanted outside influence in the telecommunications sector) passed in 2020. The government is in the process of expanding screening measures to cover sensitive technologies more broadly, and a new law, which will apply retroactively from September 2020, is expected to be passed by Parliament in 2022. Among policymakers, foreign investment and procurement screening is considered a non-partisan issue with support across the political spectrum. There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.
Structural and regulatory reforms are an integral part of Dutch economic policy. Laws are routinely developed for stimulating market forces, liberalization, deregulation, and tightening competition policy.
As an EU and Eurozone member, the Netherlands is firmly integrated in the European regulatory system with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.
The Authority for Consumers and Markets (ACM) provides regulatory oversight in three key areas: consumer protection, post and telecommunications, and market competition.
The Netherlands maintains strong protection on all types of property, including private and intellectual property rights, and the right of citizens to own and use property. Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament, as demonstrated in the nationalization of ABN AMRO during the 2008 financial crisis (the government returned it to public shareholding through a 2016 IPO). In the event of expropriation, the Dutch government follows customary international law, providing prompt, adequate, and effective compensation, as well as ample process for legal recourse.
The U.S. Mission to the Netherlands is unaware of any recent expropriation claims involving the Dutch government and a U.S. or other foreign-owned company.
Dutch bankruptcy law is governed by the Dutch Bankruptcy Code, which applies both to individuals and to companies. The code covers three separate legal proceedings: 1) bankruptcy, which has a goal of liquidating the company’s assets; 2) receivership, aimed at reaching an agreement between the creditors and the company; and 3) debt restructuring, which is only available to individuals.