Netherlands: The New Draft Dutch BIT: What Does It Mean For Investor Mailbox Companies?

The Netherlands has released a new draft investment treaty for public comment ("Draft BIT").  If adopted, the Draft BIT may raise questions about the Kingdom's attractiveness for foreign investors who have long taken advantage of Dutch treaty protections by structuring their investment via companies in the Netherlands.  The Netherlands proposes to use the new model as a basis for renegotiating its existing BITs with non-EU states, and, as such, the new draft's more restrictive provisions may be significant for existing investors with protection under existing BITs, as well as those considering future investments. Key features of the Draft BIT are considered below.


The Netherlands is currently signatory to over 100 BITs, many of which are based on its 2004 Model BIT.  Following the European Court of Justice's recent decision that international arbitration provisions in intra-EU BITs are incompatible with EU law, the Netherlands is understood to be looking to terminate such BITs.  However, it is believed still to be keen to negotiate BITs with non-EU countries, provided that such countries are not external trading parties with which the EU has an existing or prospective trade agreement, such as Canada, Singapore and Mexico.

While the Draft BIT contains many of the usual substantive and procedural protections (guarantees of Fair and Equitable Treatment (FET), National Treatment (NT), Most Favoured Nation Treatment (MFN), limitations on expropriation, and the right for an investor to bring arbitration proceedings against the government), there are potentially significant restrictions on these protections, as outlined below.

Key features of the new draft BIT

  • Definition of 'Investor' and 'Investment': The Draft BIT narrows its coverage of investors from that of the 2004 Model BIT, by providing that legal persons must have "substantial business activities" in their home territory to qualify for protection under the BIT (Article 1(b)(ii)). Further, the Draft BIT stipulates characteristics for a qualifying investment, namely "certain duration", "commitment of capital or other resources" and "the assumption of risk", as well as the more unusual requirement for an "expectation of gain or profit".
  • Scope: The Draft BIT permits state parties to pursue "legitimate policy objectives" via regulation, including the protection of public health and the environment (Article 2.2), known as a "right to regulate".  Accordingly, just because a state party may regulate in a manner which negatively affects an investment or interferes with an investor's expectations this may not necessarily equate to a breach of the BIT.  Additionally, state parties may introduce or maintain measures in respect of competition (Article 2.3) and may discontinue or recover subsidies, provided such measure(s) is necessary to comply with international obligations between the state parties, or where it has been ordered by a competent court or authority. These provisions may affect the degree of protection against regulatory change afforded by the BIT.
  • Rule of law, sustainable development and corporate social responsibility: The Draft BIT places significant emphasis on the protection of environmental and human rights. It contains an express provision in respect of the rule of law. Further, the Draft BIT contains a new set of provisions entitled "Sustainable Development", obliging the state parties to ensure "high levels of environment and labor protection" and not to lower levels of protection in these areas in order to encourage investment. State parties must also "reaffirm" their obligations under environmental, labour and human rights treaties. When awarding compensation, the Tribunal may take into account an investor's non-compliance with the UN Guiding Principles on Businesses and Human Rights, and the OECD Guidelines (Article 23).
  • MFN and other substantive protections: Limitations are imposed on the NT and MFN protections. In particular, the draft seeks to prevent investors from claiming the benefit of substantive obligations or more favourable dispute settlement mechanisms in other treaties (Article 8.3).
  • FET / Legitimate expectations: FET follows the CETA1 by listing measures which will constitute a breach of the obligation, including a denial of justice, a fundamental breach of due process and manifest arbitrariness (Article 8). In considering whether the FET provision has been breached, the Tribunal may also take into account any specific representation made to an investor to induce an investment that created a legitimate expectation, and upon which the investor relied, and which the representor party subsequently frustrated.
  • Umbrella: The Draft BIT's umbrella clause appears narrower than that of its predecessor. Article 9.5 prevents the government of a Contracting Party from breaching a "written commitment" it has made with investors of the other contracting party regarding a "specific investment" in such a way as to cause loss or damage to the investor or the investment.  This contrasts with the 2004 Model BIT which required parties to "observe any obligation it may have entered into with regard to investments of nationals of the other Contracting Party".
  • Expropriation: Both direct and indirect expropriation is expressly referenced, with the latter amounting to measures which have an effect on the investment equivalent to that of direct expropriation. Indirect expropriation will be determined on a case-by-case, fact-specific basis and considering the economic impact, the duration and the character of the measure(s) taken, and will require that "fundamental attributes of property" be taken to be eligible for compensation. The state may take non-discriminatory measures which are designed and applied in good faith to protect legitimate interests, provided such measures are not excessively severe.
  • Arbitrable claims and remedies: The draft seeks to restrict investors to bringing claims for breach of the Draft BIT's core protections only (MFN, NT, FET, free transfer of payments relating to an investment, and expropriation). In contrast, existing Dutch BITs often permit arbitration of any "legal dispute".  An investor may not bring a claim if the investment has been made through fraudulent representation, concealment, corruption or similar bad faith conduct. Tribunals may award compensation only, unless the disputing parties agree on restitution.
  • Appointment of arbitrators / no 'double-hatting': Significantly, the Draft BIT does away with party-appointed arbitrators. Tribunal members are to be appointed by either the Secretary-General of ICSID, if proceedings are brought pursuant to the ICSID or ICSID AF rules, or the Secretary-General of the Permanent Court of Arbitration, if proceedings are brought under the UNCITRAL rules. Arbitrators must possess the required qualifications in their respective countries for appointment to judicial office, or be jurists of "recognized competence".  'Double-hatting' is not permitted; arbitrators are precluded from acting as legal counsel and must not have acted as legal counsel for the last five years in investment disputes under this or any other international agreement.


If adopted, the Draft BIT has the potential to change the investment landscape in the Netherlands significantly, both for existing and future investors.  In addition, given the Dutch BIT has traditionally been an important reference point for what is seen as a relatively "investor friendly" standard, any retreat in this regard is a further telling indication of how States are adapting to developments in investment arbitration.

When relying on the protection of existing BITs, investors often take comfort in sunset provisions which provide that the treaty's protection continues to apply for a long period (10 years or more) after the treaty is terminated by one party.  However, if, as currently intended, the Draft BIT were used by the Netherlands to renegotiate existing BITs, then it is possible that such sunset clauses may be dis-applied by agreement between states, leaving existing investors to rely only on the new protections.

Further, if the removal of protection for shell companies and SPVs is retained in the final version, then the standard Dutch route for BIT protection could be affected for companies without a substantial presence in the Netherlands.  The consultation on the Draft BIT will close on 18 June 2018.


1 Latest CETA developments

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions