In brief: key legal issues for project finance transactions in Netherlands

Government authorities

16What are the relevant government agencies or departments with authority over projects in the typical project sectors? What is the nature and extent of their authority? What is the history of state ownership in these sectors?

The Dutch national gas transport network and high voltage grid are exclusively owned by the Dutch state. The Dutch government designated Gasunie Transport Services as the national gas transport network operator and TenneT as the national high-voltage grid operator, which are both fully governmental owned legal entities. Regional gas transport networks and electricity grids are in private hands.

The gas and electricity sectors are governed by an independent national regulatory authority, the Authority for Consumers and Market (ACM). The ACM is also designated as the national competition authority and therefore, also oversees mergers within these sectors. In addition, gas transport network operators or grid operators can impose obligations on the gas or electricity distributors, producers and suppliers. These operators are also responsible for providing connection to the grid and setting the conditions for access to the grid.

The Dutch Secretary of Economic Affairs and Climate issues various extraction permits and environmental permits to extract minerals, geothermal heat or store C02. The State Supervision of Mines is the designated supervising and enforcement authority. Furthermore, concerning the construction of mining installations or CO2 storage complexes, local authorities such as municipalities are generally the competent authorities to issue the relevant permits.

The competent and supervisory authority in the chemical refining sector is the relevant Provincial Executive or a mandated (local) environmental service acting on its behalf. Additionally, especially designated large chemical companies are thereby observed by the Human Environment and Transport Inspectorate (ILT). An important other actor in the chemical refining sector is the Association of the Dutch Chemical Industry (VNCI), which plays an important role in the chemical refining sector as a branch organisation. The VNCI attempts to strengthen the position of companies within the chemical refining sector by connecting companies to society (ie, potential investors), to the government and to other businesses.

Regarding the processing of nuclear materials, the Authority for Nuclear Safety and Radiation Protection (ANVS) is active in the area of nuclear safety and radiation protection, transport of radioactive substances and radioactive waste, radiation incidents, and security and safeguards. ANVS, inter alia, undertakes the granting of licences, (advising on the) development of policy and legislation, and supervision and enforcement.

Furthermore, the ILT is the supervisory Dutch authority of the ports sector and is responsible for supervision within the ports sector in the broadest sense of the word. Furthermore, the ILT ensures compliance with the applicable laws and regulations through licensing, enforcement and by conducting research.

Finally, with regard to the economic activities of the telecom sector as a whole, the ACM is the competent market authority to ensure fair prices, ensure a level of fair competition, and monitor and enforce certain provisions of the Dutch Telecom Act. However, frequency-based matters concerning electronic communication and information exchange fall under the scrutiny of the Radiocommunications Agency Netherlands, which is an agency of the Ministry of Economic Affairs and Climate. Traditionally, the Dutch telecom sector was state-owned. However, over decades, the telecom sector has been liberalised.

General legal issues

What government approvals are required for typical project finance transactions? What fees and other charges apply?

In principle, most project finance transactions do not require government approval. Note, however, that the supply of electricity and the exploitation of offshore wind farms are subjected to a permit obligation, which, in addition, requires that the permittee proves the financial feasibility of the project. This also applies to exploration and exploitation permits under the Dutch Mining Act and certain permits that are required under the Nuclear Energy Act. Moreover, most permits or notifications are not subjected to fees. However, permits required under the Environmental and Planning Act are subject to fees.

Furthermore, foreign investments in vital processes and vital infrastructure of the Netherlands that result in (1) a change of control over a relevant company, (2) the acquisition of a relevant company or (3) an increase in a significant influence over a relevant company, must be notified to the Minister of Economic Affairs and Climate. Furthermore, it also includes transactions acquiring a portion of the assets of a target company that are essential to the functioning of a vital provider. The transaction is subjected to a standstill obligation until the Minister has either issued a statement of non-objections or has taken an administrative decision.

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

There is no general requirement in the Netherlands pursuant to which the financing documents or the project documents require to be registered or filed with any government authority. However, the following registration requirements and formalities apply in respect of creating Dutch law security rights:

• deeds of pledge of shares and deeds of mortgage are created pursuant to notarial deeds. The notary generally executes such deeds pursuant to powers of attorney granted by the parties to the notary (the alternative is that the parties appear in front of the notary). Such powers of attorney need to be legalised and, in the case of non-Dutch parties, apostilled. The power of attorney by the mortgagor should be notarised (ie, executed by a notary);
• an undisclosed right of pledge over receivables and a non-possessory right of pledge over movable assets that are not executed as a notarial deed must be registered with the Dutch tax authorities;
• a right of pledge over shares should be registered in the share register of the company whose shares are being pledged. Such registration is, however, not a perfection requirement;
• a mortgage must be registered with the Dutch land registry; and
• a mortgage should be executed in the Dutch language (translations are generally made available by the notary to the parties).

Furthermore, project documents creating a right of superficies or a right of leasehold in respect of the plot of land on which the project is constructed are created pursuant to a notarial deed, which in each case, requires to be registered with the Dutch land registry.

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

For the enforcement in the Netherlands of foreign arbitral awards, a distinction must be made between (1) arbitral awards to which an enforcement treaty applies to which the country where the arbitral award was made and the Netherlands are parties (article 1075 Dutch Code of Civil Procedure (DCCP)), and (2) arbitral awards for which that is not the case (article 1076 DCCP).

An arbitral award from a state party to the New York Convention may be enforced in the Netherlands after an exequatur by the Court of Appeal (article 1075 DCCP), provided that an arbitral award is only enforceable when it has become final.

The court will grant exequatur unless one of the grounds for refusal mentioned in article V (1) of the New York Convention applies, or if the case is not arbitrable or the arbitral award is contrary to public order (article V (2) (a) and (b) of the New York Convention).

Article III New York Convention provides, however, that the exequatur procedure for a foreign arbitral award under the Convention (article 1075 DCCP) may not be more onerous for the applicant than the exequatur procedure for a Dutch arbitral award (article 1062 DCCP).

An arbitral award from a state that is not party to the New York Convention may be enforced in the Netherlands after an exequatur by the Court of Appeal (article 1076 DCCP). The procedure differs little from that of article 1075 DCCPand the New York Convention. However, there are some differences.

While no cassation is possible against the grant of exequatur pursuant to article 1075 DCCP and the New York Convention, cassation is possible against the grant of exequatur pursuant to article 1076 DCCP. In general, it is more favourable for the applicant to obtain an exequatur against which no cassation can take place. Therefore, in practice, a request for exequatur is often based primarily on article 1075 DCCP and the New York Convention and secondly on article 1076 DCCP.

An exequatur pursuant to article 1075 DCCP and the New York Convention requires that the judgment is enforceable in the country of origin and that documents are submitted as proof thereof. All this is not required for an exequatur pursuant to article 1076 DCCP. This may be a reason to base an exequatur request primarily or only on article 1076 DCCP.

Matters of public order cannot be the subject of arbitration. Whether a case concerns public order is decided on a case-by-case basis (eg, matters relating to bankruptcy). Furthermore, only the state courts are competent to grant a request for seizure (and to decide on its release).

There are no types of disputes subject to automatic domestic arbitration. Parties must come to an agreement before dispute resolution through arbitration takes place.

Finally, the Netherlands is a party to the ICSID Convention and – as follows from above – to the New York Convention.

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

Project agreements are typically governed by Dutch law or, if there is an international angle, by English law. Although other (EU) jurisdictions may apply to a project agreement this is less common and might raise questions in the legal due diligence process.

Financing agreements are governed by Dutch law or English law.

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable? Do local courts enforce judgments of foreign courts without re-examination of the merits of the case?

The submission to a foreign jurisdiction in the project documents and financing agreements is generally enforceable in the Netherlands. For the enforcement in the Netherlands of judgments of foreign courts, a distinction must be made between (1) judgments to which an enforcement treaty applies, (2) judgments to which no treaty applies but that meet the conditions for an exequatur under ex article 985 DCCP and (3) other judgments.

1. Under Dutch law, enforcement of a foreign judgment is in principle not possible, unless there is a basis for it in law or treaty. The most important treaties for judgments of EU member states are the 'recast’ EEX Regulation (Brussels I-bis or EEX-II) and the Lugano Convention (EVEX II). Pursuant to Brussels I-bis, an exequatur is not required for the recognition or enforcement of titles in civil and commercial matters from other EU member states. This means that there is no re-examination of the merits of the case. Enforcement under the Lugano Convention requires leave of the court (a simplified exequatur) but does not involve a re-examination of the merits of the case.
2. If the law or treaty concerned does not provide any other way, enforcement will be sought by means of obtaining exequatur via the procedure of article 985 DCCP. For this procedure, the merits of the case are not subject to review. If certain requirements for recognition have been met, new proceedings in the Netherlands may have a summary character and the foreign judgment will be copied as to its contents. These requirements are:
   • that the foreign court was competent to take cognisance of the dispute;
   • that due process was observed; and
   • that the judgment is not contrary to public policy.
3. If there is no legal or contractual basis for enforcement, and the conditions for the granting of an exequatur as mentioned under (2) are not fulfilled, the case can be brought before the Dutch court again, with re-examination of the merits of the case.

Parties to the project documents and financing agreements are generally not entitled to immunity from any legal proceedings.

Environmental, social and governance

What environmental, social and governance (ESG) issues are relevant in typical project sectors? Are project companies in your jurisdiction subject to any ESG reporting requirements or other ESG laws or regulations?

ESG topics of relevance in typical project sectors in the Netherlands vary, but include environmental issues, greenhouse gas emissions, supply chain due diligence, diversity and inclusivity, health and safety considerations, and external climate impacts. The Equator Principles constitute a voluntary set of material ESG standards in the form of a risk management framework. The principles are relevant for determining, assessing and managing these different ESG risks. Most Dutch banks require project companies to comply with the Equator principles. Other relevant frameworks include the Green, Social and Sustainability-Linked Loan Principles.

Project companies in the Netherlands are subject to European regulations such as the Non-Financial Reporting Directive (NFRD), which is implemented in the Netherlands. Large companies are required to disclose information on non-financial ESG matters in their board reports and corporate governance reports.

New legislation is also expected in the form of the Corporate Sustainability Reporting Directive, whose scope will be much wider than that of the NFRD. Furthermore, relevant (voluntary) ESG disclosure standards include the recommendations of the Task Force on Climate Related Disclosure, the standards of the Global Reporting Initiative and the Sustainability Accounting Standards Board.