Year in review: International trade law in Netherlands

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Year in review

In the past 18 months, the export control landscape in the Netherlands has been impacted by two high-profile matters that have placed national security and foreign policy at the core of the trade regulation field, especially with regard to rising international geopolitical tensions.

Following the United States’ October 2022 decision to impose export controls on advanced semiconductors and semiconductor manufacturing equipment and tools to China, the Netherlands implemented the Advanced Semiconductor Manufacturing Equipment Decree in June 2023. Adopted by Ministerial Order, the Dutch authorities aligned itself with the United States’ policy trajectory.

The US decision stems from and attests of the escalation occurring in the technology rivalry with China, underscoring the pivotal role of advanced technology in reshaping the global export control framework. However, issuing these measures unilaterally was a major diplomatic gamble for the United States. The need to rally other states to adopt such measures, most importantly major actors in the field such as Japan and the Netherlands, was the cornerstone of the success of the US export control policy as pertains to the advanced technology industry. For instance, the Netherlands produces the most advanced semiconductor manufacturing equipment currently on the market. As such, a deal was brokered between the three states to impose such measures in their respective jurisdictions. Notably, the Netherlands’ unilateral adoption of these export controls was implemented without the typical support and backing of the European Union.

As outlined above, since the 2021 recast of the EU Dual-use Regulation, EU Member States have been allowed to impose unilateral export control measures. Article 9 of the Dual-use Regulation allows Member States to establish such controls on goods not listed in Annex I for reasons of public security or human rights considerations, forming the legal basis for the Advanced Semiconductor Manufacturing Equipment Decree issued by the Netherlands on 23 June 2023. This Decree imposes national export control measures for advanced semiconductor manufacturing equipment, leading to a de facto export prohibition for certain pieces of advanced semiconductor manufacturing equipment to China without explicitly mentioning China. The absence of an explicit mention of China can be interpreted as a calculated effort by the Dutch government to prevent further geopolitical repercussions and tensions between the two states. This country-neutral regulatory framework reflects the difficult position of the Dutch government. On the one hand, the Netherlands faced pressure in respect of the US Foreign Direct Product Rule, resulting in the Netherlands entering into an agreement. On the other hand, the Dutch government did not want to antagonise China and preferred not to introduce controls that were not country-neutral without the usual backing of other EU Member States.⁷

Despite the Dutch government’s efforts to uphold neutrality, on 17 October 2023, the United States imposed an additional set of export controls on advanced computing semiconductors, semiconductor manufacturing equipment and items supporting supercomputing applications and end-uses, specifically targeting arms-embargoed countries including China. The official rationale behind these new controls was to maintain the effectiveness of semiconductor-related controls, close loopholes and ensure the controls’ durability. Part of the rationale may also stem from the perceived slow response of the European Union in this situation and the dissatisfaction with the Dutch approach, which still permits the sale of older DUV models to China.⁸

Another significant development in Dutch export controls was the ruling by the Court of Appeals of The Hague on 12 February 2024.⁹ The Court determined that delivering F-35 fighter jet parts to Israel poses a risk of the aircraft being used to commit grave violations of international humanitarian law, necessitating the cessation of any such deliveries. The proceedings were initiated by three non-governmental organisations against the Dutch state, alleging that allowing such shipments of fighter aircraft parts to Israel would indeed constitute a breach of humanitarian law.

The Netherlands is part of the F-35 programme with the Dutch industry significantly contributing to the production and ongoing maintenance of the aircraft. The Dutch industry produces crucial parts such as wing components, landing gear, cabling and the auxiliary engine. The F-35 programme was developed and produced by the United States in cooperation with eight international partners, including the Netherlands. The United States maintains multiple sites for storing and exporting F-35 parts to various recipients. One such regional warehouse is located in Woensdrecht in the Netherlands. From this warehouse, parts are exported to various countries, Israel among them. In 2016, General Licence NL009 was issued for the export, transit or transfer of F-35 parts. Covered by an agreement under the F-35 Lightning II programme, this originally included export to Israel.

On the basis of Article 6a, paragraph 3 and Article 13, paragraph 3 of the Strategic Goods Decree, as well as Article 8 of General Licence NL009, the Court of Appeal found that there was a significant risk that Israel would deploy F-35 jets as part of its operations in Gaza, including committing violations of humanitarian law ‘in a considerate number of cases’. The Court placed emphasis on the fact that Israel is not taking sufficient account of the consequences of its attacks on Gaza on the civilian population, pursuant to which the Court ordered the Dutch state to cease all exports and transit of F-35 parts with Israel as its end-destination within a week of rendering its judgement. The applicable articles in the Strategic Goods Decree stipulate that the Minister can exclude a person authorised to make a decision from using a general transit or export permit to protect essential security interests, public order or public safety. Article 8 of General Licence NL009, on the other hand, allows the Minister to notify the registered user or person that integrated foreign policy or security considerations preclude continued use. Such notification based on these reasons can be made at any time.

Although it could be argued that these Articles provide a right to the Dutch state rather than an obligation, the Court of Appeals concluded otherwise. The Court argued that despite the provisions being framed as rights, they can still be interpreted as obligating the Minister to utilise these powers in accordance with international humanitarian law and arms trade treaties. Consequently, the Minister was required to cease the export of F-35 parts.

The Dutch government raised the argument that halting all exports of F-35 parts would negatively impact Israel’s general ability to defend itself in a possible war against neighbouring countries or groups other than Hamas. The Court of Appeals ruling held that the Dutch state has the ability to amend General Licence NL009 to allow the export of F-35 parts to Israel on the condition that Israel does not deploy these parts during its operations in Gaza. Nonetheless, it is notable that the Licence was instead amended to include a broadly worded prohibition on all transit or export of goods within the framework of the F-35 Lightning II programme with Israel as its end-destination, effectively prohibiting the export of F-35 parts to Israel irrespective of their intended end-use.

The broad wording of the amendment to General Licence NL009 leaves Dutch industries in the F-35 programme uncertain about the exact legal parameters that they must follow. As noted, the programme involves exporting F-35 parts not just to Israel but to all participating states. While it is clear that the amended General Licence NL009 prohibits exports if Israel is the end destination, the ruling creates ambiguity about whether the Dutch industry can still export F-35 parts to other states within the programme. This can be explained by the fact that other participating states are evidently not bound by the Dutch Court of Appeals and could potentially forward any parts received from the Netherlands to Israel as an end-user. This has prompted concern by the Dutch state that the ban might harm the Netherlands’ reputation as a reliable international cooperation partner. In a public statement, the government emphasised its commitment to the F-35 programme as well as to the security of allies and partners of the Netherlands in the context of international and European defence cooperation.¹⁰