Super Info Holland

Doing Business in the Netherlands

Amsterdam

2008

Doing Business inthe Netherlands

This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Sylvia ArendsJeroen BedauxMisha lutje BeerenbroekMounia ben AbdallahRobert BoekhorstKoert BruinsHélène de Bruijn-JonkerRuben de WitHerman HuidinkAlim JallohCees KerstenEva KraanEdwin LiemElwin Makkus

Jean-Clement MeignenMaaike MuitMarie Louise NuijenJohn PaansWouter PaardekooperDanielle PinedoLaura RietveldFlorian RuijtenRemke ScheepstraAlexandra SchreuderJan SnelJudith SteenvoordenFedor TankeMartijn van Bemmel

Marc Rijkaart van CappellenChristiaan van der MeerJudith van GasterenMonique van HerksenChristiaan van HogendorpElla van KranenburgGeert-Jan van RijthovenGooike van SlootenSebastiaan van TriestEdwin van WechemWibren VeldhuizenIrene Vermeeren - KeijzersReina WeeningRicardo Wolf

Editorial Contributions

Cover photo: © L.J.A.D. Creyghton / Holland Album _ Sint Maartensbrug / www.creyghton.com

Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .viiBaker & McKenzie Amsterdam N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ixI The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1. The Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. Cities and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23. The Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34. The Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45. Culture and the Arts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

II. International Distribution Centres / Customs Facilities . . . . . . . . .81. Customs value and applicable customs rate. . . . . . . . . . . . . . . . . . . 92. Customs Warehouses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104. Other International Customs Facilities. . . . . . . . . . . . . . . . . . . . . . . 115. Authorized Economic Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136. VAT and excises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

III. Regional Headquarters / Coordination Centers . . . . . . . . . . . . . .151. General Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152. Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163. Holding of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174. Group Financing and Group Licensing. . . . . . . . . . . . . . . . . . . . . . . 18

IV. Sales Support, Distribution and Production . . . . . . . . . . . . . . . . .211. Liaison Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212. Sales Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213. Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

V. Legal forms of doing business . . . . . . . . . . . . . . . . . . . . . . . . . . . .231. Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232. Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243. Societas Europaea (SE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244. Branch v. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255. Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266. Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278. Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

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VI. The Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .291. Incorporation of Dutch NV and BV . . . . . . . . . . . . . . . . . . . . . . . . . . 292. Incorporation cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304. Transfer of shares and membership interest . . . . . . . . . . . . . . . . . 305. Shareholders’ register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316. Issuance of new shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328. Supervisory directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329. Large Companies Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3210. Single-member companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

VII. Reporting, Auditing, and Publication Requirements . . . . . . . . . .341. Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342. Director’s report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353. Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354. Other information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355. Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366. Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367. Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368. Exemption for group companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379. Consolidated accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3710. Auditing requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3811. Act on Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 39

VIII. Corporate Governance Code (Code Tabaksblat) . . . . . . . . . . . . . .401. Principles and Best Practice Provisions. . . . . . . . . . . . . . . . . . . . . . 402. Five Chapters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413. Compliance and Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414. Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415. Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426. Shareholders and General Meeting of Shareholders . . . . . . . . . . . 447. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448. Monitoring of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

IX. Personal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .461. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462. 2001 Personal Income Tax Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463. Income from Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474. Income Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485. Levy of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496. Income Tax Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507. Substantial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

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X. Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .531. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532. Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563. Branch v. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584. Participation Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585. Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636. Limitations on Deductions of Interest . . . . . . . . . . . . . . . . . . . . . . . 647. Flow-Through Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678. Dividend Stripping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689. Tax Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6910. Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7011. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7112. Mergers and Demergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7213. Fiscal Unity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7414. Investment Companies (FBI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7515. Exempt Investment Fund (VBI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7716. Transfer pricing regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7917. European Economic Interest Grouping and Societas Europaea . . 7918. EU Interest and Royalty Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . 8119. EU Savings Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8120. EU Parent-Subsidiary Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8121. EU Merger Directive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8222. Summary of the Netherlands’ Bilateral Tax Treaties . . . . . . . . . . . 82

XI. Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .871. Value-added Tax (VAT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872. Real Estate Transfer Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903. Withholding Tax Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

XII. Financial Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .921. Exchange Control Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922. Capital/Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 923. Regulated financial activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

XIII. Visa, Residence Permit, and Work Permit for Non-EU Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1021. Visit to the Netherlands Not Exceeding . . . . . . . . . . . . . . . . . . . . . 1022. Visit to the Netherlands Exceeding Three Months . . . . . . . . . . . . 1023. Residence permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034. Work permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035. Knowledge Migrant Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

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XIV. Labor Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1051. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1052. Non-Competition Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1063. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

XV. Social Security and Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . .1131. National Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1132. Employees’ Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143. Sickness and Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1164. Dutch Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

XVI. Competition Rules and Free Movement of Goods . . . . . . . . . . .1241. Competition Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1242. Dutch Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1253. Public Procurement Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1284. Import and Export: Free Movement of Goods . . . . . . . . . . . . . . . 1345. The European Economic Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1356. Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

XVII. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1361. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1362. Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1373. Neighbouring Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1384. Protection of Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1385. Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1386. Designs and Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1417. Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1428. IP Enforcement Directive 2004/48/EC . . . . . . . . . . . . . . . . . . . . . 1429. Anti-counterfeit Measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14210. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14311. Advertising and freedom of expression . . . . . . . . . . . . . . . . . . . . . 14512. Unfair Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14613. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14614. Assignment, Licensing, and Pledge . . . . . . . . . . . . . . . . . . . . . . . . 14715. Treaties and General European Legislation. . . . . . . . . . . . . . . . . . 147

XVIII.Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1481. Market Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482. Basic Legislation and Regulatory Authorities . . . . . . . . . . . . . . . . 1483. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1484. Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1495. Rights of Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1506. Significant Market Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

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7. Interoperability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1518. Universal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1529. Privacy and Legal Interception . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

XIX. Information and Communication Technology (ICT) . . . . . . . . . .1541. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1542. Computer Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1543. Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1554. Topographies of Semiconductors. . . . . . . . . . . . . . . . . . . . . . . . . . 1555. Technology Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1556. ICT Agreements and Standard Terms . . . . . . . . . . . . . . . . . . . . . . 1567. Shrink-Wrap License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1578. Source Code Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1579. The Internet and E-business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15710. Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15911. Data Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15912. Computer Crime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15913. Online Gambling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15914. Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

XX. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1611. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1612. Pre-contractual liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1613. Contractual liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1614. Noncontractual Liability (Wrongful Act) . . . . . . . . . . . . . . . . . . . . . 1635. Compensation of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

XXI. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1671. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1672. Course of the Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1683. Summary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1684. Prejudgment Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1695. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1706. Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1717. International Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1718. European enforcement order for uncontested claims . . . . . . . . . 1719. International payment orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17210. Collective action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17311. Class actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17312. Inspection or taking copies of certain identifiable documents

instead of full discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

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XXII. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1761. Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1762. Land Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1763. Other Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1774. Construction and Renovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1775. Environmental Permits and Soil Pollution . . . . . . . . . . . . . . . . . . . 1786. Modernization of regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1787. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1808. Public Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Appendix I - Procedure for Incorporating a Dutch NV, a BV, or a Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .190Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

Appendix II - Overview of Tax Rates Inbound Income Under Dutch Tax Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .192Qualifying companies column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Interest column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Royalty column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Appendix VI - Contact Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .196

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IntroductionDoing Business in the Netherlands – Your Legal and Fiscal Guide 2008

‘Doing Business in The Netherlands’ is a highly popular guide published byBaker & McKenzie Amsterdam. It describes the legal and fiscal environment ofthe Netherlands and the rules and regulations that companies must consider whendoing business here.

The Netherlands is an attractive country in which to do business. It has a favorabletax regime and has concluded more tax treaties with other countries around theglobe than any other country. It has an excellent logistics and technologicalinfrastructure, a highly skilled workforce and a stable economy. The Netherlandsis also famous for its culture and arts. Chapter one presents key facts and figureson these subjects.

Baker & McKenzie has spent more than 50 years assisting international companieslooking for business opportunities in the Netherlands and advising Dutch andinternational companies doing business here. Our firm has had a presence in theNetherlands since 1945, and it was the first with a fully integrated civil law, taxlaw and civil-law notary practice.

Our more than 180 attorneys, tax consultants and civil-law notaries in Amsterdamall have the expertise and experience for a successful national and internationallegal practice. They are sincere and intellectual professionals who understand andserve clients with a shared set of values and high quality standards, providinginnovative solutions wherever our clients are and whatever their needs. Also,participation in pro bono and community service is one of our core values,which is clearly visible in various activities.

Baker & McKenzie Amsterdam sends its Doing Business guide to more thana thousand clients and business associates, including chambers of commerce,embassies, ministries and other governmental organizations.

We hope this guide is helpful to you and your organization. Please contact ouroffice if you have any questions or if you too would like help in doing businessin the Netherlands.

Mike JansenManaging Partner

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Baker & McKenzie Amsterdam is a leading Dutch law firm consisting of attorneys,tax consultants and civil-law notaries, focusing on providing innovative legal servicesto clients in the business community. The office was established in 1945 and joinedthe Baker & McKenzie global network in 1957. We were the first law firm in theNetherlands to join a multinational network and are now regarded as one of the country’sleading providers of legal services. Baker & McKenzie provides high-quality adviceand legal services to a large number of the world’s most dynamic and successfulorganizations.

Baker & McKenzie Amsterdam has more than 50 years of experience in internationaland national legal practice and was the first firm in the Netherlands to set up a fullyintegrated civil law, tax law and civil-law notary practice. With more than 180 attorneys,tax consultants and civil-law notaries, Baker & McKenzie Amsterdam has the specialistexpertise and experience required for the successful national and international legalpractice we offer our clients. Our sincere and intellectual professionals understandand serve clients with a shared set of values and high quality standards, providinginnovative solutions wherever our clients are and whatever their needs.

Participation in pro bono and community service is one of Baker & McKenzie’score values. In this respect we acknowledge the importance of cultural heritageby sponsoring and providing legal services to the Rijksmuseum in Amsterdam.We provide pro bono and community service including raising funds for theRonald McDonald Centre Only Friends, which stimulates the practice of sportsby handicapped children.

Baker & McKenzie is known for having a deep understanding of the language andculture of business, an uncompromising commitment to excellence, and world-classfluency in the way we think, work and behave.

I. The NetherlandsThe latest global business environment rankings published by the EconomistIntelligence Unit (EIU) put the Netherlands among the top five, making it oneof the best places in Europe to do business in from 2006 to 2010.

Why do companies prefer the Netherlands? One of the most important reasonsis its highly educated, flexible, and motivated workforce. Dutch professionals areinternationally oriented and are among the most multilingual in the world, enablingthem to operate successfully in companies in any industry, serving customers acrossthe globe. This is why more than 400 of the 500 largest companies in the worldhave offices in the Netherlands.

The country’s central geographical position, combined with its accessibility andexcellent infrastructure and logistic services are other reasons why numerousEuropean, American, and a growing number of Asian companies have establishedtheir European head offices in the Netherlands. Consider for example, the Port ofRotterdam, one of the world’s largest seaports, and Schiphol Airport, recognized asone of the major aviation hubs in Europe. As the gateway to Western and EasternEurope, the Netherlands enables companies to serve markets in the current andfuture Member States of the European Union, the Middle East, and Africa.

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OverviewHead of state Queen BeatrixHead of government Prime Minister Jan Peter BalkenendeSystem of government Constitutional monarchyNational language DutchCurrency Euro (€)Total population 16,410,046Capital city AmsterdamSeat of government Den HaagTotal area 41,500 km²Land 33,800 km²Water 7,700 km²Land below sea level 26%

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The Dutch themselves are a surprising people. They live, all 16 million of them,on 41,500 square kilometers, little more than half the size of Scotland. TheNetherlands is thus one of the world’s most densely populated countries.

1. The CountryThe Netherlands is a kingdom, officially known as the Kingdom of the Netherlands.It consists of the Netherlands itself and six islands in the Caribbean Sea: Aruba andthe Netherlands Antilles.

The Netherlands is also sometimes called “Holland”. The word is featured in thenames of the two western coastal provinces, North and South Holland, which haveplayed a dominant role in the country’s history. The Netherlands lies on the deltaof three major rivers—the Rhine, Meuse, and Scheldt. It owes its existence to featsof hydraulic engineering.

A quarter of the Netherlands’ land area lies below sea level. The low-lying areasconsist mainly of “polders”, flat stretches of land, surrounded by dikes, where thewater table is controlled artificially. From the 16th century, windmills were usednot just to keep the land dry, but even to drain entire inland lakes.

The Dutch are proud of their management skills. Their struggle to keep the landdry has helped them develop a can-do attitude. And since controlling water requiresmany parties to meet and plan together, it has forced them to learn how to work asa team. That is why their European partners and the broader international communityregard the Dutch as bridge builders and often ask them to serve as such.

2. Cities and InfrastructureThe Netherlands is an important gateway to Europe because of Rotterdam, the biggestseaport in Europe, and Amsterdam Schiphol Airport, one of the largest airports inthe continent. The Netherlands has excellent infrastructure and logistics services,with good roads and world-class public transport services, thanks to its close-knitnetwork of trains and buses. The Dutch themselves like to get around by bike.

Due to its excellent logistics and technological infrastructure, the Netherlands is alsoclassified as one of the most “wired” countries in the world, taking part as a dynamicforce in electronic commerce, communications, and outsourcing. The Amsterdam

Internet Exchange is the largest internet hub in Europe. After New York and London,Amsterdam is the next most connected city in terms of broadband capacity.

Each of its major cities has a distinctive character, even though they are all closeto each other. Amsterdam,The Hague, Rotterdam, and Utrecht all belong to theRandstad conurbation, with a population of 7 million. Amsterdam attracts manytourists, with its historic center, majestic buildings, museums and a unique ring ofcanals. However,The Hague, Delft, Haarlem, Utrecht, Groningen, and Maastrichtalso have their share of historic sites, museums, traditions, and attractions.

3. The GovernmentThe Netherlands is a constitutional monarchy with a parliamentary system, inwhich the government consists of the queen and the ministers. For historicalreasons,The Hague is the seat of government, but Amsterdam is the capital. Thecurrent government is a coalition between the Christian democrats (CDA) and thesocialists (PvdA) with the help of a small Christian socialist party (ChristenUnie).Jan Peter Balkenende (CDA) is the Prime Minister, while Queen Beatrix is theHead of state.

The basic principle of the current coalition agreement is ‘working together, livingtogether’ (samen werken, samen leven) and builds on cornerstones such as economicgrowth, sustainability, respect, and solidarity.

The highlights of the 2008 Budget Memorandum focus on six cornerstones:(1) Encouraging an active and constructive role of the Netherlands in Europe

Traffic and TransportMain airport Amsterdam Schiphol AirportNumber of passengers 45,987,000Freight tonnage 1,526,500 tonnes

Main seaport RotterdamFreight tonnage 377,000,000 tonnes

Main internet hub Amsterdam Internet ExchangeCapacity Largest hub of the European continent.

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and in the world; (2) Encouraging an innovative, competitive, and enterprisingeconomy; (3) Reinforcement of a sustainable environment; (4) Reinforcementof social cohesion; (5) Investing in safety, stability and respect; and (6) Improvingpublic services and strengthening the cultural sector.

4. The EconomyThe Dutch economy has a strong international focus, the country being one of theEuropean Union’s most dynamic centers of trade and industry. Due to its favourablelocation by the North Sea, it plays an important role as a main port and distributioncentre for companies operating worldwide. The port of Rotterdam handles some377 million tones of goods every year, and is one of the biggest ports in the world,while the Amsterdam Schiphol international airport is one of the biggest airportsin Europe. That is why the Netherlands is often called the “Gateway to Europe”.

Things are looking good in the Netherlands. Its global competitiveness position hasstrengthened, with a place in the top ten. According to the 2006-2007 report recentlyreleased by the World Economic Forum (WEF), the Netherlands moved up to 9thposition in the Global Competitiveness Index (GCI), up from its 11th position in 2005.

In the decision on whether to locate in the Netherlands, high labour costs are notthe decisive factor. Although the strict legal protection against dismissal is anobstacle, there are numerous compensating factors. These include the fact thatemployment contracts are becoming more flexible, rules to admitting knowledgeworkers to the Netherlands are becoming more relaxed, and, last but not least, thegovernment’s customized approach to tax facilities is a major advantage. Anotherdistinctive fact is the attractive cultural climate. Dutch people are anti-authoritarian,innovative, and open-minded.

The Netherlands is a multicultural country, with a large diversity of ethnic groups.Nineteen percent of the habitants in the Netherlands are of foreign origin, of which10% are of non-western origin, mainly Turks, Moroccans, Antilleans, Surinamese,and Indonesians.

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5. Culture and the ArtsThe Netherlands is a world leader in the field of art and culture. The arts, in everyform, flourish in a country that has outstanding museums and an impressive varietyof classical and innovative music and theatre. Major international arts festivals areheld annually.

MuseumsWith almost 1,000 museums, the Netherlands has the highest museum densityin the world. Some of the most famous are the Rijksmuseum and the Vincent vanGogh Museum in Amsterdam, the Museum Boijmans-Van Beuningen in Rotterdam,the Mauritshuis in The Hague, and Het Loo Palace in Apeldoorn. Outstandingcollections of modern and contemporary art can be seen at the Stedelijk Museumin Amsterdam, the Kröller-Müller Museum in Otterlo, and the BonnefantenMuseum in Maastricht.

Radio, Television, and the MediaThere are many independent broadcasters and print media institutions in theNetherlands. Freedom of expression is a cornerstone of the Dutch democraticsystem. The Media Act expressly provides that broadcasting organizations maydecide the nature and content of their program. The government is responsiblefor creating conditions that will enable them to fulfill their vital role in keepingthe citizenry informed.

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Macroeconomic figures VALUE YEARGross domestic product (GDP) € 560 billion 2007GDP per capita € 37,300 2006GDP growth 3.5% 2007Inflation rate 1.6% 2007Total workforce 7,606,000 2007Unemployment rate 4.5% 2007

Dutch Creative Climate and Dutch DesignDutch design is famous around the world. The minimalist, economical approachthat characterizes Dutch design attracts many young designers, architects, andartists who come especially to Amsterdam to work in a climate of artistic freedom,dialogue, and innovation.

The Netherlands is also renowned for its architecture and exceptional urbandevelopment. No less than 50,000 buildings are listed as monuments. Thegovernment protects them and helps pay for their maintenance.

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Typical Dutch

Did you know that…

• the International Court of Justice is at the Peace Palace in The Hague?

• the Netherlands has approximately 480 inhabitants per square kilometre?

• with only 0.008% of the world’s area, the Netherlands is the world’s thirdlargest agricultural exporter?

• Frisian is the second official language of the Netherlands?

• the Netherlands is a founding member of the European Union?

• the Netherlands has at least 15,000 kilometres of cycle tracks?

• Dutch is also spoken in Belgium, South Africa, Suriname, the NetherlandsAntilles, and Aruba?

• the Netherlands still has about 1,000 traditional working windmills?

• the Dutch are the tallest people in Europe?

• almost every Dutch person has a bicycle and there are twice as manybikes as cars?

• the Netherlands has the highest number of part-time workers in the EU(four in ten people)?

• most Dutch people speak at least one foreign language?

• language is rarely a problem for businessmen from Britain and America,because about 75% of the population speak English?

• people from almost 200 nationalities live in Amsterdam?

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II. International Distribution Centres /Customs Facilities

Upon importation of goods into the free circulation of the European Union, importduties and import VAT (and, if applicable, excise duties) in principle become due.Import duties are calculated based on the customs value of the goods multipliedwith the applicable tariff rate. The applicable tariff rate depends on the customsclassification and the (preferential) origin of the goods. Once paid, import dutiesare in principle non-refundable and thus become a cost. Also, postponement of thelevying of import duties using the applicable customs procedures may present thepossibility of a cash flow advantage. Therefore, it may be beneficial to either postponeor avoid the levy of import duties for goods that are entering the Netherlands.

One of these customs procedures is the storing of goods in a customs bondedwarehouse. In the Netherlands, several customs warehousing arrangements areavailable by means of which the levying of import duties can be deferred. Thesecustoms warehouse facilities can be useful when goods are to be re-exported (inwhich case import duty and /or VAT may not be payable at all), or when there aredifficulties applying certain import licensing requirements. Using the customs transitsprocedure, it is possible to transport goods under deferral of import duties betweentwo places in the EU.

In principle, in order to process imported goods, these goods would first have tobe brought into free circulation. This could mean payment of import duties. If nomeasures are taken, these import duties paid cannot be refunded. In order toprevent the processing of goods shifting to countries outside the EU, differentarrangements are in place to process goods with a deferral or refund of importduties provided that the goods are being exported from the EU (Inward processingrelief - IPR). Also, it is possible to use the arrangement where the imported goods aresubject to the tariff rate of the processed goods (Processing under customs control - PCC).This arrangement can, for instance, be beneficial for the pharmaceutical industry,where base materials on the one hand are subject to a relative high import duty rate,but the processed goods on the other are generally subject to a zero rate. Using theOutward processing relief (OPR), it is possible to have products from free circulationof the EU undergo processing or treatment in third countries and re-import theseprocessed goods in the EU with a full or partial relief of import duties.

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1. Customs value and applicable customs rateImport duties are calculated based on the customs value of the goods multipliedwith the applicable tariff rate. The applicable tariff rate depends on the customsclassification and the (preferential) origin of the goods.

In order to determine the customs value of goods imported into free circulation,several methods can be used, which have to be applied in sequential order. Thismeans that one is only allowed to use a subsequent customs valuation method if theprevious method cannot be applied. The most common valuation method is thetransaction value of the goods. In this respect, the transaction value is defined as theprice actually paid or payable for the goods when sold for export to the customsterritory of the EU. It is noted that certain additions or deductions to the customsvalue used may have to be made depending on the circumstances of the case athand. For valuation purposes, a ruling can be obtained from the Dutch Customsauthorities, which ruling is only valid in The Netherlands.

The tariff classification number determines the customs duty rate assessed on theimportation, whether the good is eligible for special duty privileges and whetherthe good is subject to import restrictions (e.g., quota, anti-dumping or countervailingduties, or specific licenses). Failure to correctly classify imported articles can resultin fines or penalties.

Establishing the origin of the products is relevant because it determines whethergoods are eligible for customs duty preferences and if they are subject to importrestrictions (e.g., embargoes, quotas, anti-dumping or countervailing duties, etc.).The country of origin may be defined as the country in which the imported productwas grown, manufactured, or produced. While this may appear to be a simpleconcept, the rules related to country of origin are diverse and often complex.Certainty regarding the customs classification as well as the origin can be obtainedby means of a “Binding Information”, valid throughout the EU.

2. Customs WarehousesA customs warehouse may either be a specific location (such as a tank, building, orsilo) or an inventory system authorized by and subject to the control of the customsauthorities for the storage of non-Community goods. Only upon removal of the goodsfrom the customs warehouse will the applicable import duties,VAT, and excise

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duties become due. In The Netherlands, different types of customs warehouses exist.Each of the different types of warehouses is subject to administrative regulationsand has its individual advantages.

A customs warehouse can be a public or a private warehouse. A public warehouseis authorized for use by warehouse keepers whose main business is the storage of goodsdeposited by other traders (depositors). A private warehouse is for the storage of goodsdeposited by an individual trader authorized to be a warehouse keeper. The warehousekeeper does not necessarily need to own the goods, but must be the depositor.

Some customs warehousing arrangements also provide for a cash flow advantage forthe payment of customs duties (e.g. payment of customs duties on a monthly basisrather than at the moment of importation).

Customs warehousing arrangements in principle only allow the storage of goods. Ifapproved by the customs authorities, it is allowed to perform certain usual activitiesto the goods. These usual activities include actions to ensure reasonable conditionsof the goods during storage and actions that prepare the goods for further distribution(e.g. repackaging). It is not allowed, however, to actively process or alter the goodswhile stored in under the customs warehouse arrangements.

3. AuthorizationIn order to set up and operate a customs warehouse, it is necessary to obtainauthorization from the Customs authorities. The Customs authorities may onlyauthorize a customs warehouse under the following conditions:

a. The applicant is established in the European Community.

b. The warehouse is intended primarily for the storage of goods.

c. There is a genuine economic need for the facility.

d. The applicant is able to comply with the conditions of authorization and hassufficient resources to oversee the setting up of the customs warehouse andto carry out the necessary checks on the control systems, the records, and thegoods stored.

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Unlike Customs authorities in other countries, the Dutch Customs authoritieswill verify in advance whether or not the abovementioned conditions are met. Thisupfront verification provides for certainty with respect to the application of thecustoms warehousing arrangements.

Single (European) authorizationWhere entrepreneurs are established in several countries, EU customs regulationsprovide for a special “single authorization”. In respect of customs warehousing, this“single authorization” allows for the storage of goods in various EU Member Stateswhile only one warehouse authorization is needed. Administrative records may bekept centrally (i.e. at one location) and only one Customs administration, has to bedealt with.

The prior agreement of the authorities concerned must be obtained in orderto apply for a single authorization. The application should be submitted to theCustoms authorities designated for the place where the applicant’s main accountsare held and where at least part of the storage to be covered by the authorizationis conducted. These Customs authorities will communicate the application and thedraft authorization to the Customs authorities in the other EU Member States concerned.

The other Member States are given one month to reply and provide their input.If other Customs administrations submit objections within that period andno agreement is reached, the application may be rejected. Once approved, theauthorization will be issued and a copy of the agreed authorization will be sent toall the Customs authorities concerned. As the other Member States included on theapplication need to be consulted, the applicant should apply at least two monthsbefore the intended start date of the customs warehouse authorization.

The requirements/conditions for domestic authorization as described above, applyaccordingly. In general, a single authorization is only granted if the applicant isalready authorized to operate a customs warehouse within its own Member Stateand the applicant has a proven/satisfactory record of operation.

4. Other International Customs FacilitiesAs outlined above, the customs legislation applicable in the Netherlands has alsoother customs facilities under which the levy of customs duties can be postponed

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or avoided. As mentioned, the storage of goods under a customs warehousingarrangements in principle only allows the storage of goods. The Netherlands hasseveral other customs facilities that prevent the levy of import duties in the eventan entrepreneur wishes to actively process goods in or outside the EU. Below wehave briefly addressed some of these customs facilities that can be of relevancewhen involved in international operations.

Inward Processing Relief Under the so-called Inward Processing Relief, goods (e.g. raw materials or semi-manufactured goods) can be imported into the EU to be processed for re-exportwithout import duties and VAT on the importation of the goods. Strict (administrative)requirements have to be met in order for the relief to be granted. Further, a bankguarantee is required and interest must be compensated for refined goods whichare released into “free circulation”. There are two types of Inward ProcessingRelief: one allows the duty to be suspended, while the other alternative providesfor the duties to be initially paid then refunded at a later stage.

Outward Processing ReliefUnder the Outward Processing Relief, goods which are already imported into freecirculation in the EU can be exported for processing in a third country (i.e. outsideEU). Upon return of the processed goods into EU, a full or partial exemption forcustoms duties will be granted. The advantage is that no or less import duties willhave to be paid on the import of the treated goods. Again several (administrative)requirements have to be met in order for an Outward Processing Relief to be granted.

Processing under Customs ControlIn some cases, goods are imported into the Netherlands in order to be processedwhile the goods are under Customs control. In case of processing under Customscontrol, the goods may be processed into products which are subject to a lowerduty rate before they are put into free circulation. The disadvantage of this methodis that there are some economic conditions that have to be met.The administrativeconditions are minor and cause a light compliance burden.

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Customs Bonded Transport It is also possible for goods to be transported through the EU under a customsbond. As a result of the transport under customs bond, no customs duties andimport VAT have to be paid when the goods physically cross a border. It shouldbe proven, however, that all goods that are transported under the customs bond arealso declared to Customs upon arrival of the transport. If not, customs duties maybecome due as a result of irregularities during transportation.

5. Authorized Economic OperatorIn order to facilitate international trade and to enhance security, EU regulationsnow provide for the so called “Authorized Economic Operator” (AEO) concept. AnAEO trader may benefit from more lenient administrative requirements in respectof the import and export of goods into and from the EU. In order to qualify as anAEO, a trader has to demonstrate compliance with solid security criteria andcontrols as set by the EU regulations.

Reliable and compliant traders may benefit from simplifications in the customsprocedures and from facilitation with regard to customs controls relating to safetyand security. Secure AEO traders may further be informed that their consignmenthas been selected for controls and will get priority treatment for these controls.

Authorized AEO traders may also be allowed to submit less data with the Customsauthorities, and will likely be subject to fewer controls as they would be consideredas secure partners by Customs and as their compliance and reliability would havebeen thoroughly checked when the AEO Certificate was given.

There is no legal obligation to become recognized as an AEO, although beingrecognized as such may constitute an added value for the operator, as it demonstratescompliance with solid security criteria and controls. This will provide a competitiveadvantage to participating companies.

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6. VAT and excisesOn importation of the goods, not only import duties are levied, but also VATon importation and (if applicable) excises, which are levied with respect to the(deemed) consumption of alcoholic beverages, tobacco products, and mineral oils.At the same time, the deferral of import duties may also result in the deferral ofexcise duties and VAT on importation being levied.

VAT on importation in principle becomes due at the actual moment of import ofthe goods. The taxable base for VAT is the customs value to which certain amountsare added. Provided that certain conditions are met, an import license can beobtained as a result of which the import VAT can be reported through the periodicalVAT return, rather than actual payment upon physical importation. This license canthus create a cash-flow advantage. In the Netherlands, the supply of goods whichare placed under customs bond is subject to a zero rate for VAT purposes.

On importation, excise goods can also be brought into free circulation for excisepurposes, as a result of which excise duties become due as well. Under certaincircumstances, however, the levying of excise goods can also be deferred. In thatcase, the excise goods remain under Customs supervision using special excisebonded arrangements. In principle, the levying of excises takes place in the EUMember State where the goods are used or consumed. Excise goods, which arenot transferred using a deferral arrangement, are in principle subject to Dutchexcises upon importation into the Netherlands. In the event the excise goods are,after importation, shipped to another EU Member State, the earlier-paid Dutchexcise duties can be refunded after payment of excise duties in the Member Stateof arrival (and after showing proof of that payment to the Dutch authorities).

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III. Regional Headquarters /Coordination Centers

Regional Headquarters or coordination centers are generally established tosupervise the operations of European and/or Middle Eastern subsidiaries. Salescoordination, administration and accounting, cash management, central billing,re-invoicing, advertising and public relations, as well as group financing andlicensing, are typical activities of a regional headquarters.

The Netherlands offers a central location in Europe, excellent airport facilities,a sophisticated banking system, availability of adequate office spaces, as well asseveral tax advantages, both for companies and for expatriates.

1. General AdvantagesThe Netherlands has the most extensive tax treaty network of all the EU MemberStates. Regional headquarters can apply the treaties in collecting interest androyalties from subsidiaries. The favorable tax treatment of these activities is describedbelow. Expatriates who are temporarily assigned to a Dutch office may qualify fora special tax regime known as the 30% Ruling.

As a general rule, Dutch companies should report taxable income in the nationalcurrency, i.e., the Euro. They may also report taxable income in their functionalcurrency, the US dollar for instance, if certain requirements are met in order toavoid exchange gains and losses due to currency fluctuations. The main requirementis that the company must file its financial statements in the functional currency.

In August 2004, the Dutch State Secretary for Finance announced in a decree thatheadquarters in the Netherlands are allowed to provide intra-group services on afull-cost basis instead of applying a markup or arm’s-length price. A list of activitiesregarded as shareholders’ costs and which are deductible in the Netherlands, hasbeen published.

The Dutch corporate income tax rate is 25.5% as of 1 January 2008. However, profitsup to EUR 40,000 are subject to 20% corporate income tax as of 1 January 2008.Profits between EUR 40,000 and EUR 200,000 are subject to 23%. The tax rateof 25.5% is applicable to the excess profits.

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2. Tax RulingAs in the case of service companies and branches discussed in Chapter III, the Dutchtax authorities may approve an Advance Pricing Agreement (APA) determining thearm’s-length return for activities performed and services rendered. A new taxruling practice was introduced on 1 April 2001. This change was primarily aimedat making the ruling process more transparent and bringing it in line with the OECDTransfer Pricing Guidelines. The Ministry of Finance also intended the new rulingsystem to contribute to the improvement of the business climate for genuine economicactivities in the Netherlands, through a more precise and customized approach.

The new ruling practice consists of an APA practice and an Advance Tax Ruling (ATR)practice. The APA practice is devoted to agreements on transfer pricing methods,arm’s-length results, and operating in conformity with the OECD Transfer PricingGuidelines. The ATR practice concentrates on providing advance certainty as to thefiscal qualification of transactions and international structures. Final APAs and ATRsare issued in the form of determination agreements governed by Title 15 of Book 7of the Dutch Civil Code. The agreement automatically includes approval of an exchangeof information clause allowing the Dutch tax authorities to share information withtreaty parties. It is the intention to publish issued APAs and ATRs in order toguarantee transparency as required by the EU Code of Conduct. The format inwhich publication will take place will be made anonymous or summarized if theidentity of the taxpayer could be derived from an anonymous publication. APAsand ATRs are granted for periods of four to five years unless the facts merit alonger or shorter term. Renewals are envisaged, absent changes in law or facts.In order to obtain an APA, it is possible to arrange a pre-filing meeting with theDutch tax authorities. A pre-filing meeting is generally recommended in orderto determine whether an APA request is useful. In recent years, 80% of all APAand ATR requests have been granted and the time it takes to obtain APAs and ATRshas decreased.

The Dutch State Secretary of Finance has in various occasions, emphasized thatthe APA and ATR practice has his full attention and is important in safeguardingthe Netherlands as a place of business for enterprises operating internationally.It is also possible to reach an agreement with the Dutch tax authorities to providefavorable tax treatment of central invoicing, leasing, and foreign exchange clearingwithin the group.

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3. Holding of SharesHolding companies have no special tax status under the laws of the Netherlands.Tax benefits are available to all companies holding shares in Dutch or foreignsubsidiaries. Dutch holding companies are, therefore, quite different from holdingcompanies in a number of other countries, which are excluded from treaty protection.The Dutch tax authorities are willing to issue ATRs on the applicability of theparticipation exemption for intermediate holding companies in internationalsituations and for ultimate holding companies.

Dividends received by a Dutch company from nonresident subsidiaries are fullyexempt from Dutch income tax under certain conditions (see application participationexemption as described in Chapter XI). The exemption also applies to capital gainsupon the disposal of shares in subsidiaries. With respect to capital losses and costsrelated to the subsidiary, reference is made in Chapter XI, Section 4.

As of 1 January 2004, thin capitalization rules have been introduced in the Netherlands(reference is made to Chapter XI, Section 7.) Tax treaties concluded by the Netherlandsgenerally provide that withholding tax on dividends distributed to a Dutch companyholding at least 25% of the shares in the distributing company is reduced toa substantially lower percentage, or even to zero. Appendix II contains a chartindicating the reduction of foreign dividend withholding tax rates under the taxtreaties concluded by the Netherlands. Those treaties also reduce Dutch dividendwithholding tax on dividends distributed by the Dutch company to its foreign parentto a substantially lower percentage, or even to zero (Appendix V). Pursuant to theimplementation of the EU Parent-Subsidiary Directive on 1 January 1992, dividenddistributions from most qualifying subsidiaries situated in the EU to a qualifyingDutch company are exempt from (foreign) withholding tax.

Furthermore, dividend distributions by a qualifying Dutch company to mostof its qualifying EU parent companies are exempt from Dutch withholding tax(see Chapter XI, Section 17).

The Dutch dividend withholding tax on dividends to a foreign parent may, undercertain circumstances, be reduced by a 3% credit for foreign dividend withholdingtax paid on qualifying dividends received by the Dutch company.

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4. Group Financing and Group LicensingThe Netherlands is particularly attractive to group financing activities. The taxtreaties concluded by the Netherlands generally reduce the foreign withholding taxon interest paid to a Dutch company to a substantially lower percentage, or even tozero. Appendix III contains a chart with the available reductions. Moreover, theNetherlands does not impose any withholding tax at source on interest or anystamp duty on the issuance of bonds.

As of 1 January 2007, Dutch tax law has been providing for a special regimefor qualifying group financing activities. The new regime may create interestingplanning opportunities for cross-border finance transactions. Upon request, thebalance of interest received from group companies, and the interest paid to groupcompanies will be effectively taxed at a rate of 5%. The introduction of the box iscurrently being cleared with the European Commission. Although the group interestbox is part of the revision of the corporate income tax regime, effective as of 2007,the actual date of entering into force of the group interest box depends upon theoutcome of the discussions with the European Commission. Dutch subsidiaries offoreign companies engaged in licensing (i.e., as a licensee of patents, trademarks, ortechnology with the right to sublicense those intangibles) qualify for special incometax treatment. Moreover, the tax treaties entered into by the Netherlands providefor a reduction of foreign withholding tax on royalties to a substantially lowerpercentage, or even to zero, if they are paid to a resident of the Netherlands.Appendix IV contains the available reductions. The Netherlands does not levywithholding tax on outgoing royalties. As a result, royalties can flow through aDutch company at nominal tax cost.

Pursuant to the implementation of the EU Interest and Royalties Directive as of1 January 2004, interest and royalties payments from most qualifying subsidiariessituated in the EU to a qualifying Dutch company are exempt from (foreign)withholding tax.

The Dutch tax authorities are willing to issue APAs to determine the arm’s-lengthincome for Dutch finance companies and Dutch licensing companies. A Dutch BVengaged in financial services can obtain a ruling regarding its Dutch tax positiononly if it meets the following requirements:

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1. BV must have sufficient substance in the Netherlands. A BV is deemed to havesufficient substance if the following conditions are met:

a. At least 50% of all authorized directors are tax residents of theNetherlands;

b. The directors residing in the Netherlands have the relevant professionalknowledge and skills to be able to execute their obligations as directors;

c. The (main) directorial decisions are taken in the Netherlands;

d. BV’s (main) bank account is maintained in the Netherlands;

e. BV’s accounts are kept in the Netherlands;

f. BV is a tax resident of the Netherlands and is not deemed a resident of anyother country;

g. BV should have an appropriate level of equity that enables it to conductits business; and

h. At the time conditions a to g above are verified, the BV must have metall the requirements for the proper filing of various tax returns.

2. The Dutch tax authorities will not issue a ruling if BV does not incur any riskon the functions it conducts based on the ruling. Conduit financing entities meetthis condition if their equity is at least the lower of 1% of the total outstandingloans or EUR 2 million. Please note that this equity should be at risk for thefinancing activities. This safe harbor provision applies for each entity to whichthe company provides loans. If more than one loan is provided to an entity, thesafe harbor provision must be prorated.

If the second requirement (i.e., no risk) is the only one that cannot be met, but thereis sufficient substance, a ruling can be obtained if the company gives the Dutch taxauthorities the liberty to provide information spontaneously to the countries fromwhich the interest or royalty will be received. According to the Dutch State Secretaryfor Finance, the information that is spontaneously exchanged concerns structure,functions, risks, and remuneration.

In order to determine the taxable spread to be reported, it is in principle, no longerpossible to rely on the minimum spread of 1/8% for intercompany loans. In orderto determine an arm’s-length remuneration, a functional analysis must be made

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based on the OECD Transfer Pricing Guidelines. This margin could also be lowerthan the 1/8% of the “old” ruling policy. Under the situation previous to 1 April 2001,it was not necessary to build up a file to defend the intercompany pricing. Currently,an APA can be applied for, if desired, but there is no requirement to do so in orderto start conduit financing and licensing activities in the Netherlands.

The Dutch tax authorities can conclude an agreement with a flow-through entityregarding the substance and risk requirements of a Dutch finance company and/ora Dutch licensing company only if certainty in advance is also requested for thearm’s-length nature of its remuneration.

Dutch entities that do not incur a genuine risk in respect of intra-group loans orroyalty transactions are no longer permitted to credit the foreign withholding taxesrelated to interest or royalty income. The interest and royalties received and paidare excluded from the taxable income in the Netherlands provided that:

1. The Dutch entity receives and pays interest or royalties to and from an entitywithin the same group;

2. The interest and royalties received and paid relate directly or indirectly to financingor royalty transactions that are closely connected; and

3. The flow-through company does not incur a genuine risk that could affectits equity.

A flow-through company is deemed to incur a genuine risk in respect of a loan ifthe equity is at least 1% of the outstanding loans or EUR 2 million and the taxpayercan prove that the equity capital will be affected if a risk arises. Even though theinterest and royalty income as well as the expenses are excluded from the taxableincome, the flow-through entity should still report arm’s-length remuneration withregard to the services relating to the loan or royalty transaction. A grandfather rulewas in effect until 1 January 2006 for flow-through entities performing transactionsbefore 31 March 2001.

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IV. Sales Support, Distribution and ProductionA foreign company considering establishing production and/or sales operations inthe Netherlands or in Europe is likely to carry out the project in phases.

1. Liaison OfficeIn the initial phase, a liaison office may be opened in order to explore the marketand to establish contacts with prospective customers. The office may provideinformation about the company’s products and maintain a supply of goods ormerchandise for display. Activities may include delivery, advertising, the collectionof information for the benefit of the foreign headquarters. In more general terms,it may also carry out preparatory or supporting activities exclusively for the benefitof the foreign headquarters. These activities are generally non-taxable under Dutchtax treaties if conducted in such manner that the entity is not deemed to be apermanent establishment for tax purposes.

2. Sales SupportIf the start-up phase proves to be successful, the company may decide to expand theactivities of the liaison office to include sales support and distribution activities,such as processing, packing or re-packing, (central) distribution, shipping, invoicing,repair, marketing, promotion, etc. The Dutch tax authorities may be requested toissue an Advance Pricing Agreement setting the arm’s length return on the servicesrendered by the Dutch company (in general, companies are required to submit anindication of an arm’s length return on services rendered on the basis of a transferpricing study that is in line with the OECD Transfer Pricing Guidelines). As long asthe company performs few functions and bears little risk, the arm’s length returnrequired may be moderate.

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3. ProductionIf the company enters into a third and final stage by organizing a full-fledgedproduction and sales operation (with the customary business risks for bad debts, etc.),the company will be required to report an arm’s length return that allows forremuneration for the risks being incurred. However, it will then also qualify forthe tax benefits available to Dutch companies, such as an investment allowance forbusiness assets, accelerated depreciation of certain assets and generous losscompensation privileges. These facilities are described in Chapter X.

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V. Legal forms of doing businessA company can engage in business in the Netherlands through a subsidiary or abranch. Compared with other EU countries, Dutch corporate law provides a veryflexible and liberal corporate framework for the organization of branches andsubsidiaries by nonresident companies or individuals. There are no special restrictionson foreign-owned companies planning to start a business in the Netherlands.

1. BranchThe organization of a branch of a foreign company in the Netherlands does notrequire prior government approval. The foreign head office should simply filecertain documents and data with the Trade Register of the Chamber of Commerce,which are as follows:

For the branch:

• the trade name, a brief description of its activities, number of employees,amount of invested funds, and full address of the branch. For the branchmanager (who need not be a Dutch resident):

• surname, first name, full address, date and place of birth, nationality, and theextent of his or her power and authority to represent the branch; his or hersignature and certified copy of an identification card or passport which must bedeposited.

For the foreign company:

• the company’s name and legal form, the (foreign) trade register with which itis registered, the number under which it is registered, as well as personaldetails and representative authority of its managing directors and supervisorydirectors;

• legalized copies of the Deed of Incorporation, Articles of Association, andbylaws (if there are any) of the company (which may be submitted in Dutch,English, German, or French);

• the annual accounts of the company as drawn up, audited, and disclosedpursuant to the law of the country of origin (which may be submitted inDutch, English, German, or French); and

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• an original extract from the foreign trade register or document of registration,which should not be older than one month prior to registration of the branch.

2. SubsidiaryDutch law distinguishes two types of limited liability companies: the public limitedliability company (Naamloze Vennootschap or NV) and the private limited liabilitycompany (Besloten Vennootschap or BV). The main differences between these twoentities are as follows:

1. BVs (as opposed to NVs) cannot issue bearer shares as well as share certificatesevidencing the shares;

2. The transfer of shares in BVs (as opposed to NVs) is always subject to theblocking provisions as set forth in the Articles of Association, which maycontain prior approval of the general meeting of shareholders or anothercorporate body as designated under the company’s Articles of Association,or a right of first refusal of the other shareholders; and

3. BVs can be formed with a minimum issued and paid-in capital of EUR 18,000,while NVs must have a minimum issued and paid-in capital of EUR 45,000.

A Dutch subsidiary may be established and owned by one or more shareholders,who may either be individuals or legal entities, regardless of their nationalities.BVs are generally the preferred vehicle for a foreign company in establishinga wholly-owned Dutch subsidiary.

The issuance and transfer of registered shares, or the transfer of a restricted right tothe shares (for instance, a right of pledge) requires the execution of a notarial deedbefore a Dutch civil law notary. This obligation does not apply to NVs whoseshares or share certificates are in bearer form or are officially listed in a regulatedstock exchange.

3. Societas Europaea (SE)As of 8 October 2004, it is also possible to incorporate a European company orSocietas Europaea (SE), which has a legal personality and is in many respects,comparable to a Dutch NV.There are four ways to incorporate an SE:

1. through a legal merger between two companies based in different EU MemberStates;

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2. through incorporation of an SE as a holding company for two companies basedin two different EU Member States or with subsidiaries in two different EUMember States;

3. through incorporation of an SE as a subsidiary of:

a. two companies based in two different EU Member States; or

b. an SE;

4. through a change of corporation form from an eligible company (e.g., an NV)to an SE.

Only legal entities can form an SE; natural persons can become a shareholder of theSE after its incorporation.

An SE can transfer its registered office from one EU Member State to another. Inaddition, a group that has companies throughout the EU can now create a uniformmanagement structure by forming an SE, since SEs can opt for a one-tier or two-tierboard system. Another relevant practical aspect is that the formation of SEs makesinternational legal mergers possible between companies incorporated under thelaws of EU Member States.

4. Branch v. SubsidiaryThe most important difference between a branch and a subsidiary is as to exposureto liability. A subsidiary has limited liability. As a result, a shareholder in principle,is liable only to the extent of its capital contribution. A branch is not a separatelegal entity; thus, the (foreign) company of which the branch forms part is fullyliable for all the obligations of the latter.

Manufacturing, warehousing, and rendering of services may be carried out by bothtypes of operations. Holding, finance, and licensing operations, on the other hand,are better conducted by a subsidiary, since it is able to benefit from tax treaties.The circumstances and relevant factors must be considered each time before a finaldecision is made.

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5. PartnershipA partnership, whether general (Vennootschap Onder Firma or VOF) or limited(Commanditaire Vennootschap or CV), can be formed by at least two partners, whomay either be individuals or legal entities. The parties conclude a partnershipagreement and the partnership (not the contract) must be registered with the TradeRegister of the Chamber of Commerce. The partners in a general partnership(VOF) are jointly and severally liable for all obligations of the same. Pursuant toa limited partnership (CV), however, the limited or “silent” partner is liable only upto the amount of his capital contribution, provided that he does not in any way takepart in the management of the partnership vis-à-vis third parties. The limitedpartner is not registered with the Trade Register.

A special partnership form is the European Economic Interest Grouping or EEIG(Europees Economisch Samenwerkingsverband or EESV) for the cooperation betweenentrepreneurs in Europe. The EEIG is a legal form based on a European Statute.An EEIG formed under the Dutch law has a legal personality and enjoys fiscaltransparency throughout the European Economic Area. It is suitable for jointventure activities as well as specific intra-group purposes. There are no restrictionson foreign nationals entering into a partnership with Dutch residents. The formationof an EEIG requires at least two partners, which may comprise partnerships, residentwithin the European Economic Area.

6. Formal Foreign CompaniesAccording to the Formal Foreign Companies Act (“FFCA”), a company incorporatedunder any laws other than Dutch and which conducts its business entirely or almostentirely in the Netherlands without having any further real ties with the state underwhose law it was incorporated, is considered a Formal Foreign Company. Underthe FFCA, the management of such company is obliged to register with the TradeRegister of the Chamber of Commerce in the Netherlands the company, its deed ofincorporation, its Articles of Association, the number under which the company isregistered, and the details of the sole shareholder (if applicable). Furthermore,Formal Foreign Companies must file their annual accounts with the Trade Registerof the Chamber of Commerce as well as an audit statement confirming that theirissued and paid-up share capital, as well the company’s equity is at least equal toEUR 18,000. Companies which are subject to the laws of an EU Member State oran EEA party, however, are exempted from most provisions of the FFCA.

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7. AgentsA commercial agent is a person or company that mediates against payment withrespect to the conclusion of contracts and, possibly, concludes those contracts inthe name and for the account of the principal. Dutch agency law is based on ECDirective 86/653/EC and is substantially mandatory in nature, particularly thoseprovisions that aim at protecting the agent.

For example, mandatory notice periods apply and an agent is in principle entitledto receive a goodwill compensation upon termination. It is also important to notethat prior approval of the Dutch Centre of Work and Income may be required beforenotice of termination can be given to a so-called “small” agent (i.e. an individualwho acts as agent for not more than two principals and who does not employ morethan two assistants).

Parties are free to determine the governing law of their agreement. However, achoice for foreign law will not set aside the so-called Dutch “overriding mandatoryrules”.To date, the rules regarding goodwill compensation and the special terminationprotection applying to “small” agents have been considered as such overridingmandatory rules.

Finally, it should be noted that EU and Dutch competition rules may also have aneffect on agency agreements.This subject is thoroughly elaborated in Chapter XVI.

8. DistributorsA distribution agreement differs from an agency agreement in that the distributorpurchases products or services from the supplier and resells them to third partiesin its own name and for its own account.

Dutch law does not provide for specific provisions on distribution agreements.Consequently, distribution agreements are governed by the general principles ofDutch contract law. These principles are rather liberal and allow for substantialfreedom for the contracting parties.The parties are thus in principle bound by theiragreement, including the termination provisions thereof.A Dutch court may, however,set aside a contractual provision if such a provision is deemed unacceptable in viewof the principles of reasonableness and fairness.

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When a distribution agreement is silent on termination, such agreement maybe terminated by giving reasonable notice if such infers from the principles ofreasonableness and fairness. All relevant factual circumstances need to be taken intoaccount in order to determine the reasonableness of a notice period (e.g. the durationof the relationship, the dependence of the distributor, investments recently made etc.).Depending on the circumstances, notice periods may vary from one month to morethan one year.

As a general rule, a distributor shall not be entitled to compensation if a reasonablenotice period has been granted. As an exception to this rule, a distributor may beentitled to compensation on the basis of the principles of “reasonableness and fairness”despite the fact that a reasonable notice period has been granted.This may, forexample, be the case if the manufacturer has given the impression that the contractwould be continued, and the distributor has made investments that cannot beearned back.

Finally, it should be noted that EU and Dutch competition rules have a significanteffect on distribution agreements.This subject is thoroughly elaborated inChapter XVI.

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VI. The Subsidiary

1. Incorporation of Dutch NV and BVA Dutch NV (Naamloze Vennootschap met beperkte aansprakelijkheid or public limitedliability company) and a BV (Besloten Vennootschap met beperkte aansprakelijkheid orprivate limited liability company) are incorporated by one or more incorporatorspursuant to the execution of a notarial deed of incorporation which includes thecompany’s Articles of Association.

The notarial deed of incorporation must be executed in the Dutch language beforea Dutch civil law notary in the Netherlands. Prior to incorporation, a statement ofno objection from the Ministry of Justice as well as a bank statement must be obtained.

The statement of no objection is a declaration of the Ministry of Justice that is issuedafter verification of data of the parties involved either as incorporators, managingdirectors, or ultimate beneficial owners. The bank statement, to be issued by abank which is a credit institution referred to in Section 1:1 of the Dutch FinancialSupervision Act (Wet op het Financieel Toezicht) and is registered as a credit institutionpursuant to that Act or whose business operations are subject to governmentalsupervision in another Member State of the European Communities or in anotherstate which is a party to the Agreement on the European Economic Area, confirmsthat the incorporation capital has been transferred to a bank account in the name ofthe NV or the BV in incorporation.

The name of the company is followed by ‘NV’ or ‘BV’ and in case an NV or a BVis in the process of formation the abbreviation “i.o.” (“in oprichting,” in the processof being incorporated) is added after the name. An NV or a BV is allowed to dobusiness during the pre-incorporation period and the NV i.o. or the BV i.o. can beregistered with the Trade Register of the Chamber of Commerce. The personsacting on behalf of the NV i.o. or the BV i.o. are personally liable until the NV orthe BV has ratified the actions performed on its behalf during the pre-incorporationperiod.

2. Incorporation cooperativeA Cooperative is incorporated by the execution of a notarial deed in the DutchLanguage by a Dutch notary in the Netherlands. No Ministry of Justice approval

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and bank statement are required. Dutch law requires that the Cooperative isincorporated by at least two incorporators. Unless the deed of incorporationexplicitly states otherwise, the incorporators become automatically members ofthe Cooperative upon incorporation. The word ‘coöperatie’ or ‘coöperatief’ must beincluded in the name of the Cooperative as well as the reference W.A., B.A. orU.A. which indicates the level of liability of members. Upon incorporation, theCooperative is registered with the Trade Register of the Chamber of Commerce.

3. CapitalizationA Dutch NV and a BV must have an authorized and issued capital, divided intoa number of shares with a par value expressed in euros. Shares without a par valueare not permitted. Upon the formation, at least 20% of the authorized capitalmust be issued and at least 25% of the par value of each share issued must be paidin.The minimum issued share capital is EUR 45,000 for an NV and EUR 18,000for a BV.

The identity of shareholders who have not fully paid their shares must be listedwith the Trade Register of the Chamber of Commerce. Managing or supervisorydirectors are required to hold shares in the NV or the BV.There is no statutoryrequirement for a Cooperative to maintain a minimum amount of capital.TheArticles of Association or the separate members’ agreement can oblige a memberto contribute funds or assets to acquire a membership interest in the Cooperative.

4. Transfer of shares and membership interestAn NV can issue bearer or registered shares and a BV can only issue registeredshares. Bearer shares are freely transferable upon delivery of the related sharecertificates. Registered shares can be either ordinary, preferred, or priority shares.Registered shares issued by an NV may be freely transferred, subject to anyrestrictions that may be contained in the company’s Articles of Association.

The Articles of Association of a BV must stipulate limitations on their transferability.Such restrictions require the transferor to either offer the shares to the othershareholders (“right of first refusal”) or to obtain prior approval for the transferfrom the general meeting of shareholders or any other corporate body of thecompany as specified in the Articles of Association.

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The transfer of registered shares in an NV and a BV requires a notarial deed oftransfer to be executed before a Dutch civil law notary in the Netherlands. Thetransfer of shares is recorded in the shareholders’ register. The registration withthe Trade Register of the Chamber of Commerce is updated accordingly in case ofa sole shareholder.

Membership interests in the Cooperative can be held by (foreign) private individuals,(foreign) legal entities, and partnerships. The Articles of Association may providethat the membership interests are freely transferable or make transfers subject tocertain restrictions, such as prior consent of the management board, the generalmeeting of members, or the meeting of a certain class of membership interests.

5. Shareholders’ registerThe managing directors of an NV and BV with registered shares must keep ashareholders’ register at the registered office of the company. The register containsthe company name, NV or BV number, authorized and issued share capital thenumbers of all registered shares, the names and (electronic) addresses of theshareholder, pledgor, and usufructuary, the extent to which the par value of theshares has been paid up as well as the particulars of any transfer, pledge, attachment,or usufruct on the shares.

Each shareholder, pledgor, and usufructuary of shares has the right to inspect theshareholders’ register and receive a certified excerpt. Any amendment or adjustmentof the shareholders’ register requires the signature of one of the managing directors.

6. Issuance of new sharesUpon issuance of registered shares, at least 25% must be paid up. Bearer sharesmust be paid in full upon issuance. Shares may also be paid in kind, provided thata Dutch registered accountant’s statement is obtained, confirming that the valueof the contribution in kind is equal to or exceeds the total par value of the issuedshares. The amount exceeding the total value is considered as non-stipulated sharepremium.

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The issuance of registered shares requires a notarial deed executed before a Dutchcivil law notary in the Netherlands and is recorded in the shareholders’ register.The registration with the Trade Register of the Chamber of Commerce is updatedaccordingly.

7. ManagementThe NV, the BV, and the Cooperative are managed by a board of managing directors,consisting of one or more managing directors who are appointed and dismissedby the shareholders. A managing director can be a (foreign) private individual ora (foreign) legal entity. From a Dutch corporate law point of view, none of themanaging directors needs to be a Dutch resident.

The Articles of Association state the number of managing directors and whethera managing director is solely or jointly authorized to fully represent and bind thecompany. A provision to this effect can be invoked against third parties. The Articlesof Association may provide that a number of specified acts of the board of managingdirectors require prior approval of the shareholders, the board of supervisorydirectors, or another corporate body. These cannot be invoked against thirdparties, unless they are aware of this provision and have not acted in good faith.

8. Supervisory directorsAn NV, a BV, and a Cooperative may institute a supervisory board to advise andsupervise the managing directors, but do not participate in the management. Onlya (foreign) private individual can be appointed as a supervisory director. They areappointed and dismissed from their position through the general meeting ofshareholders and general meeting of members respectively. No person may serveas managing director and supervisory director at the same time.

9. Large Companies RegimeAn NV and a BV are subjected to the Large Companies Regime if the company,in three consecutive years, meets the following criteria:

• The issued capital of the company, together with reserves as reflected in thebalance sheet, amounts to at least EUR 16 million;

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• The company and/or an affiliated company (i.e., an enterprise of which thecompany owns at least 50% of the shares) has installed a Works Council; and

• Together, the company and its affiliate(s) employ an average of at least100 employees in the Netherlands.

As a consequence hereof, the NV or the BV should institute a supervisory boardand the board of managing directors is to be appointed by the supervisory board.A company may voluntarily apply to be subjected to the Large Companies Regime.Provided certain conditions are met, a mitigated Large Companies Regime isavailable.

An international holding company that restricts its activity exclusively or almostexclusively to the management and financing of group companies and of its andtheir participations in other legal persons can be exempted from the Large CompaniesRegime, provided that the majority of their employees, employed by the companyand by the legal persons with which it forms one group, work outside the Netherlands.

10. Single-member companiesA single-member company is an NV or a BV in which all its shares are held by asingle legal entity or a private individual.The sole shareholder must be registeredwith the Trade Register of the Chamber of Commerce and all legal acts betweenthe sole shareholder and the company must be in writing if they are beyond thescope of the company’s day-to-day business and the company is represented by thesole shareholder, who is also the company’s managing director.

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VII. Reporting, Auditing, and PublicationRequirements

1. Financial statementsThe annual accounts of a Dutch NV, a BV, or a Cooperative consist of the balancesheet, the profit and loss account, and explanatory notes and the consolidatedannual accounts if applicable. Cooperatives shall substitute the profit and lossaccount for a statement of operating income and expenses.

Each year within five months after the end of the financial year of the company,annual accounts are prepared by the board of managing directors. The annualaccounts shall be signed by all managing directors and supervisory directors. If oneor more of their signatures are missing, this shall be stated giving the reason therefor.The annual accounts are submitted to the shareholders’ meeting or general meetingfor adoption within five months following the end of the financial year. In specialcircumstances, the general meeting of shareholders or members may provide foran extension of six months. The adoption should take place within two monthsafter the preparation. In case the NV or the BV is subjected to the Large CompaniesRegime, the annual accounts are also to be submitted to the company’s Works Council.

The board of managing directors must file the adopted annual accounts within eightdays with the Trade Register of the Chamber of Commerce. In the event that theannual accounts are not adopted within two months after the period permitted bylaw, i.e., within 13 months (5 months + extension of 6 months + 2 months) afterthe financial year, the board of managing directors should file forthwith the draftannual accounts with the Trade Register of the Chamber of Commerce with areference to their draft status. In certain circumstances the annual accounts mustbe accompanied by a director’s report an auditor’s report.

If a Cooperative has not installed a supervisory board and no auditor’s report issubmitted to the general meeting an audit committee consisting of at least twopersons, none of whom can be a managing director, has to be appointed annually bythe general meeting, which will report on the annual financial documents providedby the board of managing directors.

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2. Director’s reportThe board of managing directors must draw up the director’s report (small companiesare exempt from this obligation). The report gives a true and fair view of the stateof affairs as that in the balance sheet and of the course of the business during theprevious financial year. The director’s report contains information on expectedfuture business, particularly (unless this conflicts with legitimate interests) oninvestments, financing, personnel, and the development of turnover and profitabilityas well as information about research and development activities. Pursuant to theDutch Corporate Governance Code, Dutch NV’s that are listed on a European StockExchange are expected to devote a chapter in the annual report to the broad outlineof their corporate governance structure, to the compliance with the corporategovernance code, as well as to the non-application of any best practice provisions.

If extraordinary circumstances that would not normally need to be addressed in theannual accounts influenced the expectations of future business, an explanation ofthose circumstances must be provided. The director’s report may not conflict withthe annual accounts.

3. Accounting principlesThe annual accounts prepared in accordance with generally-accepted accountingprinciples shall provide such a view as enables a sound judgment to be formed onthe assets and liabilities and results of the company and, insofar as the nature ofannual accounts permit, of its solvency and liquidity. If so justified by the internationalstructure of its group, the annual accounts may be prepared in accordance withgenerally accepted accounting principles in one of the member states of the EuropeanCommunities. If the company makes use of the aforementioned possibility, it shallmake a statement in the explanatory notes of its annual accounts.

4. Other informationThe annual accounts prepared by the board of managing directors may include aproposed allocation of profits including the determination of amounts available fordividends or the treatment of losses for the financial year, a summary of profit-sharingcertificates or comparable securities, important events that occurred after thebalance sheet date and a list of branches, and the countries where those branches

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are located. Furthermore, Dutch law contains detailed requirements for thecomposition of the balance sheet, as well as the profit and loss statement and theexplanatory notes, the valuation principles, and determination of the results.

5. LanguageThe annual accounts and the director’s report must be written in Dutch, unlessthe shareholders have resolved to use another language.The annual accounts anddirector’s report must be translated into Dutch, French, German, or English priorto the filing with the Trade Register of the Chamber of Commerce.

6. CurrencyThe sums quoted in the annual accounts must be expressed in euros. However,If justified by the activity of the company or the international structure of itsgroup, its annual accounts may be prepared in a foreign currency.

7. ClassificationThe minimum reporting, auditing, and publication requirements depend on the sizeof the company. It may suffice for small and medium-sized companies to publish anabridged balance sheet and explanatory notes. A small company does not need topublish its profit and loss accounts and other information; medium-sized companiesmust publish an abridged version of their profit and loss account. Small, medium-sized, and group companies whose accounts are included in the consolidated accountsof another company are subjected to less stringent reporting, auditing, and publicationrequirements. A company qualifies as small, medium-sized, or large if it meetscertain criteria.

Financial information on subsidiaries is used to determine the size of a companyas if the company were required to consolidate, unless it is exempt from groupconsolidation requirements. A company will not be reclassified unless and until itmeets the criteria of another category for two consecutive years:

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Small Medium-sized LargeTotal assets < EUR 4.4 M < EUR 17.5 M > EUR 17.5 MNet turnover < EUR 8.8 M < EUR 35 M > EUR 35 MEmployees < 50 < 250 > 250

8. Exemption for group companiesSubject to strict requirements, a group company may be exempt from its reporting,auditing, and publication requirements. The exempt group company has the rightto prepare an abridged version, consisting solely of its individual annual accounts;it does not need to prepare a director’s report, nor does it have to comply withcertain auditing and publication requirements. In order to make use of theexemption, the following requirements must be fulfilled:

• The exempt company’s financial information has been consolidated by anothercompany whose accounts have been drawn up;

• The consolidating company has declared in writing that it assumes joint andseveral liability for any obligations arising from legal acts by the exemptedcompany;

• The shareholders have declared in writing their agreement to derogate fromthe statutory requirements after the commencement of the financial year andbefore the adoption of the annual accounts;

• The consolidated accounts, the director’s report, and the auditor’s report havebeen drawn up in or translated into Dutch, French, German or English; and

• The declarations and documents are to be filed for deposit with the Chamberof Commerce.

9. Consolidated accountsThe company solely or jointly with another company as the holding company of agroup, or as part of a group, is required to include consolidated annual accounts inthe explanatory notes to its annual accounts, showing its own financial informationand of its subsidiaries in the group and other group companies.

The obligation to consolidate is not required for information concerning:

• group companies, the combined significance of which is not material to thegroup;

• group companies, the required information of which can only be obtained orestimated at disproportionate expense or with great delay;

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• group companies, the interest in which is only held for disposal.

Consolidation may be omitted if:

• On consolidation, the company qualifies as a small company;

• No company to be involved in the consolidation has securities in issue officiallylisted on an exchange; and

• The company has not been notified in writing by at least 1/10 of its membersor by at least 1/10 of its issued capital of an objection thereto within sixmonths from the commencement of its financial year.

A part of a group may be excluded from the consolidation, provided:

• The company has not been notified in writing by at least 1/10 of its membersor by at least 1/10 of its issued capital of an objection thereto within sixmonths from the commencement of its financial year;

• The financial information which the company should consolidate has beenincluded in the consolidated annual accounts of a larger entity;

• The consolidated accounts and the director’s report are prepared in accordancewith the Seventh EC Directive or similar principles; and

• The consolidated accounts, the director’s report, and the auditor’s reports aredrawn up in or translated into Dutch, French, German, or English andsubmitted with the Trade Register of the Chamber of Commerce.

10. Auditing requirementsMedium-sized and large companies are required to have their annual accountsaudited. Annual accounts of group companies that do not need to be drawn up inaccordance with the legal requirements do not need to be audited. The externalauditor must examine whether the annual accounts provide the requisite legaldisclosures and whether the annual accounts, the director’s report, and otherinformation comply with the statutory requirements. It should also be verified thatthe director’s report does not conflict with the annual accounts. The auditor mustbe a certified Dutch accountant or a foreign auditor licensed to practise in theNetherlands and is to be appointed by the shareholders. If the shareholders fail todo so, other respective corporate bodies may be authorized to appoint the accountant.

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11. Act on Formal Foreign CompaniesThe Act on Formal Foreign Companies (Wet op de formeel buitenlandse vennootschappen)entered into force on 1 January 1998, and was amended on 1 June 2005. Thepurpose of this Act is to prevent abuse in respect of certain foreign companies(i.e., companies that are formally incorporated under domestic law but that havetheir actual management in the Netherlands). The advantage for the incorporatorsof such companies is that the preventative supervision is avoided and, in particular,the regulation in respect of the protection of capital is more flexible. Since the lastamendment, the Act contains substantial exemptions for foreign companies that aregoverned by the laws of the European Union or the Agreement regarding theEuropean Economic Space of 2 May 1992. These exemptions merely relate to theminimum capital requirements. The managing directors of the foreign companiesare to be registered the company with the Trade Register of the Chamber ofCommerce. For companies not formally governed by the laws of the EuropeanUnion or the European Economical Space, must include an auditor’s statementstating that the issued capital and the stockholders’ equity amounts to at least thestatutory minimum share capital required for a Dutch BV. The normal reportingand publication requirements described above apply to all formal foreign companies.

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VIII. Corporate Governance Code(Code Tabaksblat)

The Dutch Corporate Governance Code (the “Code”), also known as the CodeTabaksblat named after the Chairman of the Dutch Corporate Governance Committee,applies to Dutch NV companies with an official listing in the Netherlands and/orabroad. These companies must devote a chapter in their annual report providingfor a general description of their corporate governance structure and compliancewith the Code. In principle, they are not required to provide details in relation toeach provision of the Code. However, in case a company fails to comply with theprinciples or best practice provisions, or does not intend to comply therewithduring the current or subsequent financial year, an explanation must be given inthe annual report. The Netherlands Authority for the Financial Markets (AutoriteitFinanciële Markten) will check whether the company has included such chapter andif such chapter is consistent with other information included in the annual report.It is up to the General Meeting of Shareholders whether the explanation of thecompany is satisfactory or not.

1. Principles and Best Practice ProvisionsThe Code sets forth general principles, each of which are followed by specific bestpractice provisions. Listed companies are to comply with each principle and provision,or alternatively disclose in writing (in a separate chapter in the annual report) whyand to what extent it does not apply them (“comply or explain”). Considerableattention is given to the companies’ financial reporting. The audit committee,composed of individual Supervisory Board members, will play an active role insupervising the functioning of the internal accounting department and the riskmanagement and control systems in general. The external auditor shall attendmeetings of the Supervisory Board and the audit committee at which the annualaccounts are to be approved or adopted. Detailed recommendations are given inrelation to the content of the auditor’s report and direct obligation to answerquestions posed by the Supervisory Board members and the General Meeting ofShareholders. The Code also proposes to legally formalize the position of theCompany Secretary, who will be appointed by the Supervisory Board and whoseduty will be to assist the same.

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2. Five ChaptersThe Code is subdivided into several chapters, containing recommendations inrelation to:

• the compliance with and enforcement of the Code itself;

• the Management Board;

• the Supervisory Board and its committees;

• the shareholders and General Meeting of Shareholders; and

• the audit of the financial reporting and the position of the internal auditorfunction and of the external auditor.

Below are the main recommendations from each of the chapters. The full text andfurther information (though limited in English) can be found on the Committee’swebsite: www.commissiecorporategovernance.nl.

3. Compliance and EnforcementThe Management Board and the Supervisory Board are responsible for the company’scorporate governance structure and its compliance with the Code. Any deviationsfrom the principles and best practice provisions should be specifically disclosed,discussed, and approved during the General Meeting of Shareholders. Any majorchanges in the compliance with the Code in the years thereafter should again bedisclosed to and discussed in the shareholders’ meeting following the years in whichthey are implemented.

4. Management Board• A Management Board member is appointed for a maximum term of four years,

renewable for a maximum of four years at a time.

• The Management Board is responsible for managing the company’s businessrisks and drafting a risk control policy.

• The Management Board reports annually on the functioning of the internal riskmanagement and control systems, including significant changes and plannedimprovements in that respect.

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• The Management Board must ensure that there is a way for employees toreport alleged company irregularities of a general, operational, and financialnature to the chairperson of said board or to a designated official (“whistleblowerprotection”).

• A Management Board member may have no more than two Supervisory Boardseats with listed companies and may not serve as chairman of said board ofanother listed company. Membership of the Supervisory Board of other companieswithin the group to which the company belongs does not count for this purpose.

• Options granted to the Management Board members have a minimum termof service of three years and become unconditional only if they have fulfilledpredetermined performance criteria.

• Shares granted to the Management Board members without consideration mustbe retained for a period of at least five years, or at least until termination ofemployment with the company.

• A Management Board member shall give periodic notice of changes in hisholding of securities in Dutch listed companies to the compliance officer,unless said Management Board member has transferred the discretionarymanagement of his securities portfolio to an independent third party.

• The compensation upon dismissal of Management Board members shouldnormally not exceed their salary for one year (based on the “fixed” remunerationcomponent), unless this would be manifestly unreasonable.

• The most important elements of the remuneration package, including the levelof prearranged compensation upon dismissal (“golden parachutes” and severancepackages), must be disclosed.

5. Supervisory Board• Each Supervisory Board member must be capable of assessing the company’s

general policy, and must have the specific expertise required to fulfill tasks thatform part of the role assigned to him or her within the framework of theBoard’s profile.

• All Supervisory Board members must actively seek to obtain sufficient informationin order to form a sound and well-informed opinion.

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• Upon their appointment, Supervisory Board members follow an introductionprogram which deals with general financial and legal affairs, specific aspectsthat are unique to the company in question and their responsibilities. TheBoard conducts an annual review to identify aspects in relation to which theSupervisory Board members require further training or education during theirperiod of appointment.

• At least one member of the board must be a financial expert in the sense thathe or she has relevant knowledge and experience in financial administrationand accounting.

• No one may simultaneously serve on more than five boards of listed companies(being the Chairman of a board counts as double).

• A Supervisory Board member may be appointed for a maximum of threesuccessive four-year terms.

• The Supervisory Board must prepare an annual remuneration report containingextensive information on the Management Board remuneration policy. Thisreport is submitted for approval to the shareholders’ meeting.

• Each Supervisory Board with four or more members must have an auditcommittee, a remuneration committee, and a selection and appointmentcommittee, each of which has specific detailed responsibilities.

• In the event of (suspected) accounting irregularities, the audit committee mustbe the external auditor’s primary contact.

• The chairmanship of the audit committee may not be fulfilled by the Chairmanof the Supervisory Board or by a former member of the Management Board.

• The same applies to the remuneration committee, with the additional exclusionof any Supervisory Board member who is a Management Board member ofanother listed company.

• The Supervisory Board is assisted by the company secretary. The companysecretary is appointed and dismissed by the Management Board, after approvalof the Supervisory Board has been obtained.

• The Code contains detailed provisions regarding the activities of the variousSupervisory Board committees.

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6. Shareholders and General Meeting ofShareholders

• The trust office holding shares on behalf of depositary receipt holders shall,without limitation and in all circumstances, issue proxies to such holders whoso request.

• Decisions on important acquisitions or divestitures are subject to the approvalof the shareholders meeting.

• The profit retention/dividend policy will be placed on the agenda of the annualmeeting and changes in this policy are submitted thereto.

• Institutional investors must annually publish their policy on the exercise of votingrights ensuing from shares held in listed companies and disclose, on request,how they have voted on specific cases.

• Shareholders must have access to the shareholders’ meeting by webcast ortelephone.

7. Financial Reporting• The Management Board is responsible for the quality and completeness of

publicly-disclosed financial reports.

• The Supervisory Board supervises the monitoring of the internal proceduresfor the preparation and publication of all financial reports.

• The external auditor can be asked questions at the shareholders’ meeting inrelation to his statement on the fairness of the annual accounts.

• The external auditor attends the meetings of the audit committee and theSupervisory Board in which decisions are made on the periodic externalfinancial reporting.

• The Code lays down instructions on the content of the external auditor’sreport to the Management Board and the Supervisory Board.

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8. Monitoring of the CodeStarting from 2005, a special committee, the Corporate Governance CodeMonitoring Committee, has monitored the Code. The Committee particularlyfocused on:

• the application of and compliance with the Code;

• the attendance rate of shareholders at General Meetings of Shareholders; and

• the remuneration of Management Board members.

The Committee will publish its final report mid-2008. In this report, theCommittee will make recommendations on possible amendments to the Code.

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IX. Personal Income Tax

1. GeneralIn the Netherlands, private individuals are subject to personal income tax. Everyindividual who lives in the Netherlands (i.e., a resident) is subject to taxation onhis or her worldwide income. An individual who does not live in the Netherlands(i.e., a non-resident) is subject to taxation only on certain income from a Dutchsource, as stipulated by law. Examples include income obtained from a Dutch businessoperated by a branch in the Netherlands, income obtained from Dutch real estate,directors’ fees, income from employment in the Netherlands, and benefits froma substantial interest (aanmerkelijk belang) in a company located in the Netherlands.However, a non-resident may opt to be treated as a resident taxpayer for personalincome tax purposes, provided that the individual is a resident of the EuropeanUnion or of a country that has signed a double taxation treaty with the Netherlandscontaining a provision on the exchange of information. Please note that somearticles are excluded by law for non-resident who have obtained resident status.The Dutch tax authorities (Belastingdienst) may wish to tax recipients of Dutchsource income, but whether the tax authorities can actually do so depends on theprovisions set out in a treaty for the avoidance of double taxation in many cases.A tax treaty will be applicable only if the recipient of Dutch source income isa resident of one of the treaty countries.

2. 2001 Personal Income Tax ActThe 2001 Personal Income Tax Act distinguishes three types of income that aresubject to personal income tax and classifies them under “Box I,” “Box II,” and“Box III.”

• Box I income includes profits, employment income, income from otheractivities, and income deemed from residential home ownership.

• Box II income includes income from shares in case of substantial interest of 5%or more.

• Box III income includes income from savings and investments. Each box has itsown rules for determining the tax base and its own tax rate. Income from BoxI is taxed at a progressive rate with a maximum of 52%.

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Income from Box II is taxed at a flat rate of 25% and income from Box III is taxedat a flat rate of 30%. Box III income is set at a fixed notional yield of 4% of thetaxpayer’s average equity. There are impermeable “walls” between the three Boxes:losses that the taxpayer incurs in Box I can be set off, i.e., carried backward orforward, against Box I income only, and the same applies to losses in Box II. Thetaxable income in Box III is calculated at 4% of the fair market value of the taxpayer’sproperty, minus the amount of his or her outstanding debts and minus a basicallowance of EUR 20,315. In other words, the tax burden on savings and investmentsthat fall within the scope of Box III, minus debts and the basic allowance, is 1.2%(4% of income x 30% tax rate).

3. Income from Employment

Managing and Supervisory DirectorsIn general, remuneration received by managing directors and supervisory directorsof companies located in the Netherlands is subject to income tax, even if they arenonresidents and perform their duties outside the Netherlands. The companypaying the remuneration must withhold wage tax (as a pre-levy on income tax)on payments made to the directors.

Other EmployeesEmployment income earned by Dutch resident employees is fully subject topersonal income tax. Employees who are residents of a non-treaty country aresubject to Dutch income tax on their employment income to the extent that theemployment is deemed to be performed within the Netherlands. Employees whoare residents of a treaty country, but who work in the Netherlands are also subjectto Dutch tax. In general – based on international tax treaties (if applicable) -employment income is taxed in the country where the work is performed.

However, it is possible for employees to be taxed in the country of residence if:

• The employee spends fewer than 183 days per calendar year in the workingcountry;

• The remuneration is not paid by an employer in that working country; and

• The remuneration is not charged to a branch of the employer in that workingcountry.

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4. Income Tax RulingThe Dutch tax authorities grant special tax benefits to foreign employees who aretemporarily assigned to a Dutch subsidiary or branch from abroad, i.e., employeeswho are resident in the Netherlands. Under the so-called 30% ruling, 30% of theemployee’s salary may be paid out as tax-free compensation for costs, and theemployee may, at his or her request, benefit from treatment as a nonresident fortax purposes. Consequently, he or she will not be taxed on passive income suchas interest. Please note that in general, an addendum to the employment contractshould be drafted to apply the 30% ruling in respect of the agreed-on wages.

The main conditions attached to the 30% ruling pertain to:

a. The Employee’s Professional Position;

b. The Employee’s Prior Employment or Stay in the Netherlands; and

c. Status of the Employer.

The Employee’s Professional PositionThere are two conditions with regard to the employee’s professional position:

1. An employee assigned to the Netherlands (or hired from abroad by a Dutchcompany or branch) must have specific expertise. The specific expertiserequirement should be understood in a broad sense. As a rule, top-levelmanagers of international groups, scientists, teachers at international schools,and personnel assigned in a job-rotation plan can be deemed to comply withthis requirement (provided that in the case of the last category, they have morethan 2.5 years of experience in the company).

2. The specific expertise must be scarce or unavailable on the Dutch labormarket. The employment contract does not necessarily have to be performedin the Netherlands; the 30% ruling also applies to income earned in relationto employment performed outside the Netherlands, provided such income istaxable in the Netherlands on the basis of Dutch tax law or under a tax treaty.This may be particularly relevant with respect to directors’ fees.

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The Employee’s Prior Employment or Stay in the NetherlandsThe period during which the 30% ruling can apply is reduced by the amount oftime the employee has spent working or living in the Netherlands in the last 15 years.However, this is not the case if the employee left the Netherlands more than 10 yearsprior to returning and has not worked in the Netherlands in the last 10 years. The30% ruling is granted for a maximum period of 10 years. The 10-year periodcommences on the first day of employment or prior to arrival in the Netherlands.

Status of the EmployerIn order to be able to apply the 30% ruling, the employer is obliged to withholdwage tax in the Netherlands. In order to apply for the 30% ruling, the employerand employee should file a joint application request with the Tax Inspector in Heerlen(the Netherlands). Standard application forms are available for this purpose. Inprinciple, there is no time frame in which the request for the 30% ruling should befiled. However, the application will have retroactive effect to the date on whichemployment in the Netherlands commenced only if filed within four months afterthat commencing date. If that period has expired, the 30% ruling will take effectstarting on the first day of the month following the month in which the applicationform is filed. If the 30% ruling is not granted, it is possible to file an objection tothe tax inspector’s decision within six weeks.

5. Levy of TaxesDutch personal income tax is levied by a personal income tax assessment based ona tax return submitted to the Dutch tax authorities. Taxpayers usually receive a taxreturn automatically; it must be filed before April 1 of the following calendar year.An extension of this period can be obtained by request.Wage tax, Dutch dividendtax, or foreign withholding taxes already paid on personal income for the taxableyear, will be set off against the personal income tax due. On balance, this mayresult in a refund or a payment of personal income tax. Non-residents are noteligible for personal deductions, e.g., for alimony payments or losses incurred onventure capital investments. The only exception is the deduction for mortgageinterest paid on a house located in the Netherlands. Labor costs are deductible bymeans of a “Labor tax credit” for both resident and non-resident taxpayers.

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6. Income Tax Rates

General tax creditThe general tax credit is not specifically related to one of the Boxes and is creditedagainst the combined amount of tax due in Boxes I, II, and III income. Somespecific expenses that are not related to one of the boxes, e.g., some personalobligations or exceptional expenses are deducted by means of a reduction in BoxesI, II, or III income. The general tax credit is EUR 2,074 for individuals up to theage of 65 and EUR 970 for individuals aged 65 or older.

Tax Rates(i) The following four tax rates apply in 2008 for individuals up to the age of 65

and who are residents in the Netherlands.

The rate in the first bracket (33.60%) consists of 2.45% for income tax and31.15% for social security contributions. The rate in the second bracket (41.85%)consists of 10.70% for income tax and 31.15% for social security contributions.The rates in the third and fourth brackets consist only of income tax.

(ii) The following four tax rates apply in 2008 for individuals aged 65 or older andwho are residents of the Netherlands. The rate in the first bracket (15.70%)consists of 2.45% for income tax and 13.25% for social security contributions.The rate in the second bracket (23.95%) consists of 10.70% for income taxand 13.25% for social security contributions. The rates in the third and fourthbrackets consist only of income tax.

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Rate Taxable Income33.60% up to EUR 17,57941.85% EUR 17,579 up to EUR 31,58942% EUR 31,589 up to EUR 53,86052% in excess of EUR 53,860

Special RatesThere are no special tax rates in the 2001 Personal Income Tax Act.

7. Substantial InterestGenerally, an individual has a substantial interest if he or she, alone or togetherwith his or her partner (spouse or registered partner), directly or indirectly:

• owns 5% or more of the nominal paid-in capital of a company;

• has the right to acquire 5% or more of the nominal paid-in capital ofa company; and/or

• has a profit-sharing note entitling him, her, or them to 5% or more ofthe annual profits or liquidation revenue.

If an individual holds less than 5% of the subscribed capital of a company, he or shemay nevertheless have a substantial interest if certain relatives also hold a substantialinterest in that capital. If an individual holds a substantial interest, all of his or herother holdings in the company, including stock options, claims, and other forms ofprofit participation will qualify as substantial interest and will be taxed as such inBox II.

An individual who owns a substantial interest is taxed on all the benefits derivedfrom that holding, including regular periodic benefits, such as dividends and capitalgains received upon the disposal of shares in the company at the rate 25%. A capitalgain or loss consists of the transfer price minus the acquisition price. A capital lossfrom a subscribed capital can be deducted only from income from substantialinterests in Box II.

Notwithstanding the above, if the individual places an asset at a company’s disposalwhile that individual has a substantial interest in that same company, the income

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Rate Taxable Income15.70% up to EUR 17,57923.95% EUR 17,579 up to EUR 31,58942% EUR 31,589 up to EUR 53,86052% in excess of EUR 53,860

from the asset will be subject to personal income tax at the progressive rates of Box I.Similarly, assets placed at a partnership’s disposal will be subject to personal incometax at the progressive rates. The net income from option rights on the company inwhich the individual holds a substantial interest will also be taxed at the progressiverates of Box I.

Fictitious SalaryAn employee or manager who works in a company in which he or she has asubstantial interest has to take a fictitious salary into account, which will be taxedin Box I. The salary earned in a calendar year is, in principle, at least EUR 40,000per employment contract. As a result, an employee with a substantial interest hasto earn at least the fixed amount of EUR 40,000, which is treated as taxableincome. However, the fictitious salary can be higher or lower, depending on thespecific circumstances of employment. The company has to pay wage tax over thisfictitious salary. The wage tax is a deductible salary cost item for corporate incometax purposes.

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X. Corporate Income TaxThe Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969)distinguishes between resident taxpayers and nonresident taxpayers. Dutchsubsidiaries of foreign companies are regarded as resident taxpayers, while Dutchbranches of foreign companies are regarded as nonresident taxpayers. Please notethat, as of 1 January 2007 a tax reform (known as “Werken aan Winst”) has beenapproved in the Netherlands with reference to the corporate income tax (“2007 CITReform”) whose aim is to make the Dutch corporate tax system more competitiveand efficient in the EU region. Among other things, the 2007 CIT Reform hasamended the corporate income tax rate, the participation exemption regime, thedomestic dividend withholding tax rates, certain rules on the interest and costdeductions, as well as the availability of losses. It has also introduced optionalseparate tax regime for intra-group financing income as well as for the exploitationof Dutch registered patents (i.e., Group Interest Box and Patent Box).

1. SubsidiariesSubsidiaries are subject to corporate income tax on their entire worldwide income.Certain statutory exemptions do however exist.

Tax RateAs of 1 January 2008, subsidiaries are taxed at a flat corporate income tax rate of25.5% for profits that exceed EUR 200,000. However, profits up to EUR 40,000are subject to 20% corporate income tax and profits between EUR 40,000 andEUR 200,000 are subject to 23%. The tax rate of 25.5% applies to the excess.

ResidencyA company incorporated under the laws of the Netherlands is deemed to be aresident of the Netherlands for corporate income tax purposes. However, for certaincorporate income tax facilities, the residency of a company is not determined by itsincorporation under laws of the Netherlands. These facilities include the mergerand the demerger facilities, and the application of the fiscal unity regime. For theseparticular tax facilities and in the case of a company incorporated under foreign

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law, the place of residence for Dutch corporate income tax purposes will bedetermined by factual circumstances, whereby the seat of central management ofthe company is of crucial importance.

Computation of Taxable ProfitsThe Dutch Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969)does not prescribe a specific method for computing annual taxable profits. It onlyrequires that the annual profits be determined in accordance with sound businesspractices and in a consistent manner from year to year, regardless of the probableoutcome. A modification of the method used is allowed only if it is justified bysound business practice.

“Sound business practice” is not defined by law. The Supreme Court has held thata system of computation is in compliance with sound business practice if it is basedon generally accepted accounting principles concerning the proper method ofdetermining profits. A system of computation is only deemed not to be in compliancewith sound business practice, if its application is found to be incompatible withexplicit statutory provisions.

As of 1 January 1997, Dutch companies may, upon prior request and subject to certainconditions, calculate their taxable income in the functional currency of the group ofwhich they are a part. In this way, currency exchange risks may be eliminated.

Since the Corporate Income Tax Act of 1969 does not contain any schedules relatingto depreciation of capital assets, valuation of inventory, capitalization, amortizationof cost, and the like, there is considerable freedom in adopting a suitable system,as long as it is in accordance with sound business practice. Dividend distributionsby a Dutch company are subject to a 15% withholding tax rate. That rate may bereduced to a lower percentage, or even to zero, by virtue of a tax treaty orEU regulations. See Section 20 and Appendix V.

The Arm’s Length PrincipleThe arm’s length principle is codified in the Corporate Income Tax Act of 1969.The arm’s length requirement will be deemed not to have been met if the termsand conditions of transactions between associated entities are such that unrelatedparties would not have agreed to them. In retroactively determining the incomerealized by an entity, the Dutch tax authorities have the option of ignoring terms

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and conditions that would not have been agreed to by unrelated parties.With thecodification of the arm’s length principle, entities must document the informationbased on which the transfer prices between the associated enterprises have beenagreed upon. The Dutch tax authorities will provide the taxpayer with a reasonableterm in which to collect the required information and incorporate it in itsadministration.

Group Interest BoxThe 2007 CIT Reform has introduced an optional separate tax regime for incomederived from group finance activities The mechanism of the Group Interest Boxprovides that the balance of taxable interest received and interest paid in respect ofloans to and from related companies will be taxed (separately from the generaltaxable base) at the effective rate of 5%. In order to apply the regime, a Dutchcorporate taxpayer and all related companies that are subject to Dutch corporateincome tax must make a joint election. For purposes of the Group Interest Boxregime, “related companies” are defined as companies that are ultimately relatedthrough majority (more than 50%) interests.The amount of income that is taxed atthe 5% effective tax rate is obtained by multiplying a percentage over the averagefiscal net equity of the tax payer during a fiscal year. Such a percentage is equal tothe periodically-published interest rate that is applied to liabilities owed to or by thetax authorities. The Group Interest Box will not enter into force until a “no-stateaid” declaration has been obtained from the European Commission.The EuropeanCommission is currently scrutinizing the compatibility of the Group Interest Boxwith the EU rules on state aid. If the Commission approves these measures, theintroduction will be retroactive to January 1 of the year in which the approvalis granted.

Patent BoxThe 2007 CIT Reform has introduced an optional separate tax regime for incomederiving from the exploitation of Dutch registered patents, in order to create a moreattractive environment in the Netherlands to perform R&D activities. This regimeis referred to as the “Patent Box.” The income from a patent for purposes of thePatent Box is defined as benefits minus related R&D expenses, other charges, andamortization of the IP.

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Through elimination of part of the income from patents from the taxable base, suchincome will effectively be taxed at a rate of 10%. The application of the Patent Boxregime is fully optional and applies only to patents that were first registered on orafter 1 January 2007.

As the Patent Box has already received the “no-state aid” declaration from theEuropean Commission, it is effective starting 1 January 2007.

Dividend withholding taxThe Dutch domestic dividend withholding tax rate is 15%. Such a percentage maybe lowered by means of the application of tax treaties and the EU Parent/SubsidiaryDirective. Furthermore, no dividend withholding tax is levied on dividend distributionsto companies residing in the European Union that have a minimum shareholding of5% in the nominal contributed share capital of the Dutch entity, to the extent thatthe EU shareholder meets the additional conditions required for the application ofEU Parent/Subsidiary Directive.

Finally, dividend withholding tax is refunded to companies residing in the EuropeanUnion and which are exempt from corporate income tax (such as pension funds), ifthe exemption is also allowed under Dutch domestic rules.

2. BranchesDutch branches of nonresident companies are regarded as nonresident taxpayers forcorporate income tax purposes.

Domestic Source IncomeNonresident taxpayers are subject to corporate income tax only on their domesticsource income. For practical purposes, the main domestic sources of income are:

• profits derived from any business carried out in the Netherlands by means ofa Branch or a Permanent Representative;

• income from a substantial shareholding as defined in Chapter 4 of the IndividualIncome Tax Law of 2001 in a resident company (i.e., at least 5%), providedthat the shares are not considered business assets; and

• net income from immovable property located in the Netherlands.

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Domestic sources do not include royalties paid by domestic licensees, neither dodomestic sources include interest payments paid by Dutch branches.

Branch Profit RemittancesBranch profit remittances are not subject to withholding tax. The nonresidentcompany is regarded to be the taxpayer and not the Dutch branch of the company.

Computation of Taxable ProfitsThe Corporate Income Tax Act of 1969 does not contain any provisions on howtaxable profits should be attributed to a Dutch branch of a nonresident company.In practice, the following principles govern the attribution:

• The branch is considered an independent entity for corporate income taxpurposes; and

• Intercompany transactions must be carried out on an arm’s-length basis.

Since the allocation of profits is difficult, the Dutch tax authorities are generallywilling to enter into agreements with taxpayers on the determination of the taxableprofits of the branch (an “Advance Pricing Agreement”), based on arm’s-lengthallocation of income. These agreements are confirmed in writing in the form ofAPAs and are strictly observed by the Dutch tax authorities.

Method of Taxation and Tax RateThe determination of domestic source income is basically the same for branchesand subsidiaries. The branch is also subject to corporate income tax at the samerate as the subsidiary, i.e., 25.5% (this is according to the rules that apply effective1 January 2008). However, profits up to EUR 40,000 are subject to a 20% corporateincome tax as of 1 January 2008. Profits between EUR 40,000 and EUR 200,000are subject to 23%. The tax rate of 25.5% is applicable on the excess profits.

Foreign Branch ProfitsProfits earned by foreign branches of a Dutch resident company, are exempt fromDutch corporate income tax if the branch is subject to foreign tax, regardless whatthe rate might be. Foreign losses are deductible from domestic taxable profits.However, future profits are, in principle, set off by such losses for the purpose ofapplying the foreign corporate income tax exemption.

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3. Branch v. SubsidiaryAs indicated above, branches and subsidiaries are taxed virtually on the same basis.The main differences are described below:

1. Most tax treaties provide that certain auxiliary activities carried out in theNetherlands do not constitute a branch for corporate income tax purposes and,as a result, do not incur Dutch taxation. This exception does not apply toDutch subsidiaries.

2. The profit from a Dutch branch may be transferred to its headquarters freefrom any withholding tax. Dividends paid to a foreign parent company are,however, subject to Dutch dividend withholding tax at the ordinary rate of15% (reduced to a lower percentage, or even to zero, by virtue of a tax treatyor EU regulations).

3. Interest paid by a subsidiary on loans and royalties is, in general, tax deductibleif it is at arm’s length (however, see Section 6). Internal interest and royaltypayments are not taken into account between a branch and its headquarters.

4. Participation Exemptions

Basic RuleUnder the participation exemption regime, dividends received from a qualifyingSubsidiary and capital gains realized on the disposal of shares in such a subsidiaryare exempt from Dutch corporate income tax. The participation exemption includesamendments to the sale or acquisition price of a qualifying participating interest.In addition, the participation exemption includes changes in the value of a right toinstallments of the sale or acquisition price of a participating interest, the numberand the amount of which installments were not fixed in the year of sale or acquisition.The participation exemption may also apply to results on financial instruments(including loans) covering currency exchange risks with respect to foreign participatinginterests, provided a ruling is obtained in advance from the Dutch tax authorities.Historically, the participation exemption regime resulted in the establishment ofthousands of holding companies in the Netherlands. Up to 31 December 2006, theparticipation exemption was applicable if the Dutch parent company held at least5% of the nominal paid-up share capital of a subsidiary and the shares were not

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held as inventory. With regard to foreign participations, there were two additionalrequirements, i.e., that the subsidiary is subject to tax and that the subsidiary is notmerely held as a portfolio investment.

2007 CIT Reform: amendments to the requirementsAs of 1 January 2007, the 2007 CIT Reform has amended the participation exemptionregime. The reform is aimed, among other things, at simplifying the regulationsapplicable to the participation exemption and making this regime more “competitive”and fully compatible with EU rules.

The 2007 CIT Reform replaces the former requirements with a simple rule, pursuantto which the participation exemption which will apply to any participation of at least5% in domestic and/or foreign subsidiaries or entities, unless such an investmentis considered both a Passive Investment (pursuant to an asset test on a consolidatedbasis) and subject to less than 10% taxation on a stand-alone basis. Pursuant to thenew rules, an investment qualifies as Passive Investment subject to less than 10%taxation if:

a. The assets of the subsidiary/entity, directly or indirectly, consist of more than50% of “free” portfolio investments1; and

b. The subsidiary is not subject to tax on profits which results in a tax levy of atleast 10% on profits, recalculated according to Dutch tax standards (and withouttaking into account loss carryforward, double tax, or group reliefs). In sum,the revised participation exemption applies to any shareholding of at least 5%in both (i) active companies (regardless of the level of taxation); and (ii) PassiveInvestments that are subject to an effective tax rate of 10% or more. This extendsthe possible application of the participation exemption regime to a number ofnew and very interesting scenarios, as briefly indicated in item 5 below.

On the other hand, income derived from Passive Investments that are subject to aneffective tax rate of less than 10% is taxed at the standard corporate income tax

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____________________1 “Free portfolio investments” are defined as portfolio those not reasonably necessary for the

business activities of the company holding the portfolio investments.This definition includesintra-group financing, leasing, and licensing activities, unless such activities qualify as ‘active’pursuant to detailed safe-harbor rules.

rate of 25.5%. However, a tax credit applies to such income. This credit is set at5% of the gross benefits derived from the Passive Investment (i.e., capital gains/lossesand dividends). If the passive investment itself is not taxed at all, no credit is granted.

Pursuant to the EU Parent-Subsidiary Directive, when the Passive Investment islocated within the EU and certain other conditions are met, the taxpayer can optfor a credit matching of the actual underlying tax paid.

In addition to the foregoing, as of 1 January 2007, the following additional featureshave been implemented.

An important change for real estate investment subsidiaries is that the participationexemption will always apply to these subsidiaries, provided that 90% of the assetsof these subsidiaries consist of real estate (see item f below). Generally, no exemptionis available in cases where the minimum shareholding requirement of 5% is notmet. However, the participation exemption will be applicable if another groupcompany (whether resident in the Netherlands or elsewhere) has a shareholdingof 5% or more in the same subsidiary. Where the Netherlands taxpayer owned,as of 31 December 2006, an interest in a subsidiary of less than 5% in relation towhich the participation exemption applied on the basis of the old legislation, theparticipation exemption remains available for three more years on this participation.Furthermore, profit participation rights and hybrid instruments as described inSection 6 under letter b can benefit from the participation exemption regime ifthe creditor has a qualifying investment in the debtor.

Expenses incurred in relation to Participating InterestsApart from certain provisions limiting the deduction of interest expenses (as indicatedin Paragraph 6 below), as a general rule, all expenses incurred in connection witha subsidiary qualifying for the participation exemption are deductible. Expensesrelated to the acquisition of a subsidiary to which the participation exemptionapplies are added to the cost-price of the subsidiary and therefore not effectivelytax deductible.

Expenses incurred in connection with the disposal of a qualifying subsidiary are,as of 1 January 2007, no longer deductible.

Currency losses realized on loans used to fund participations must be recognized assoon as they are incurred, whereas a currency gain will normally be taxable upon

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redemption of the loan. For companies that fund foreign participating interests withloans denominated in currencies other than the Euro, it is particularly important tocheck whether it is possible to avoid exposure to currency exchange risks by applyingfor fiscal accounting in the functional currency.

Capital Losses under the Participation ExemptionAs a general rule, capital losses and a decline in value of the shares in a qualifyingparticipating interest are not deductible. However, subject to complex anti-abuserules (which will not be discussed exhaustively here), such a general rule is subjectto the following exception. Losses incurred on a completed liquidation of thesubsidiary are deductible. Generally, the deductible amount is equal to the differencebetween the funds invested and the liquidation proceeds. This amount will be reducedby dividend payments made in the previous five (or sometimes ten) years. Liquidationlosses may not be deducted if the activities of the liquidated subsidiary are continuedelsewhere within the same group. Deduction of losses incurred in the liquidationof an intermediate holding company may be denied in certain situations. If a foreignbranch is converted into a subsidiary, the participation exemption will, under certaincircumstances, apply only once losses of the branch incurred in the past have beenrecovered.

Conversion of LoansIn the recent past, a conversion into equity of a loan that had (partially) beenwritten off could lead to a direct realization of taxable profit for the debtor, whichmight have reduced the losses that were eligible for setoff. The difference betweenthe book value of the loan and its fair market value would form taxable income forthe debtor. However, since this provision was met with considerable resistancein the corporate market (especially due to its adverse consequences for internalreorganizations and acquisition structures), a new way of taxing “conversion profits”was introduced.

In the new system, which applies effective early 2006, under certain circumstances,the Dutch creditor realizes a gain upon conversion of a loan to its subsidiary if thisloan has been written off by the creditor. However, this gain is not taxed immediately.Instead, a revaluation reserve is created upon conversion, equal to the amount bywhich the loan has been written off. If the fair market value of the loan increases

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again after its conversion into equity, a taxable profit is recognized for the amountof the increase. The revaluation reserve is simultaneously written off for the sameamount of profit.

New Possible Tax Planning Opportunities as of 1 January 2007Within the framework of the 2007 CIT Reform, the application of the participationexemption may be extended to a number of interesting scenarios, depending oncertain facts and circumstances. Below are certain significant examples.

Active Companies located in “Tax Havens”

Active companies in tax haven jurisdiction used to be disqualified for the participationexemption due to the subject-to-tax requirement. As this requirement was removedfor active companies, 5% or more investments in active operations that are completelyexempt from local taxation are now eligible for the Dutch participation exemption.This renders the Netherlands more attractive than in the past for all sorts of activeinvestments in jurisdictions that traditionally do not levy a profit tax or grantextensive tax holidays and that are currently referred to as “tax havens.”

Mutual Investment Funds and Private Equity Funds

In respect of mutual investment funds, the participation exemption regime used tobe available only to 5% quota holders in Dutch mutual investments funds. Presently,provided that the active asset test is satisfied, a Dutch holding company may applythe participation exemption to such investments regardless of the jurisdiction inwhich the fund is located. This makes the Netherlands an excellent jurisdictionfor feeder companies holding larger investments in certain mutual and privateequity funds.

Hybrid Instruments

The participation exemption for proceeds from hybrid debt instruments in cross-border situations used to be contingent on the requirement that these proceeds werenondeductible at the level of the debtor. The rationale of this requirement was theprevention of double dip structure resulting from mismatches in the classification ofdebt instruments in the jurisdictions involved. The removal of such condition andthe extension of the participation exemption regime to hybrid instruments with

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certain characteristics (as indicated in Section 6, letter b) may open the door tonew double dip structures whereby a Dutch parent company will derive exemptionbenefits from instruments leading to a deduction in the country of issuance.

Real Estate Companies

Finally, the amendments to the participation exemption regime are particularlyfavorable with respect to real estate companies. If more than 90% of the propertyof the subsidiary (on a consolidated basis) consists of real estate and that real estateis not directly or indirectly owned by a fiscal investment institution, the participationexemption applies, provided the parent company holds at least five percent of theshares in the subsidiary.

This “90% Test” must be considered on the basis of the subsidiary’s consolidatedbalance sheet, with intercompany receivables and debts being set off against eachother, meaning that they will not have any effect on the minimum real estatepercentage. The value of the assets must be determined on the basis of their fairmarket value. From 2007 onwards, it is therefore important to separate, as far aspossible real estate investments from business activities such as property management.If this is done properly, both the investment activities (real estate investment) andthe business activities would qualify for the participation exemption.

5. Capital GainsCapital gains are generally subject to corporate income tax at the ordinary rate.Capital losses need not be deducted from capital gains, but may be deducted in fullfrom business profits.

Under certain conditions, however, taxation of capital gains may be delayed:

(a) Capital gains on voluntary or involuntary disposition of tangible and certainintangible capital assets may usually be temporarily reserved (“reinvestmentreserve”); and

(b) Capital gains earned when the capital asset is exchanged for another capitalasset that has the same economic function in the business. For assets witha maximum depreciation period of 10 years, the acquired asset need not havethe same economic function within the business as the replaced asset.

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The gain may even be exempt:

(c) Capital gains on the disposition of qualifying equity participating interests inresident or nonresident companies (as referred to above in Section 4 regardingthe participation exemption); and

(d) Capital gains on the transfer of assets (comprising a business or an independentpart thereof) by one corporate taxpayer to another in exchange for shares (seeSection 13 below).

6. Limitations on Deductions of InterestThis Section provides an overview of certain restrictions on the deduction of interestexpenses considering certain peculiarities of hybrid loans. Article 10a CorporateIncome Tax Act 1969 Interest payments (including related costs and foreign exchangeresults) in relation to “tainted debt” are disallowed under article 10a CITA. Tainteddebt basically is debt which was incurred from a related company or individual(e.g., the shareholder) in order to fund a profit distribution, a capital contributionin a related entity (e.g., a participation of at least 33%) or to acquire shares in anotherentity (which is or becomes a related entity as a result of the acquisition).

The interest expense in relation to these tainted loans is not deductible, unless:

• it can be demonstrated that the contribution of loan capital instead of equityis largely based on commercial motives (i.e., business reasons; the businessreasons criterion is used to exclude tax-driven schemes from eligibility forinterest deduction, the saving of taxes therefore will not qualify as a businessreason) or, alternatively

• the interest payments are effectively taxed in the hands of the creditor at a rateof 10% in accordance with Dutch tax standards; the so-called “compensatorytax exception” (the use of loss carryforward or ACT credits is not allowed if thetax inspector can argue that the payments will not be effectively taxed due tolosses or claims arising in a current year or in the near future; no compensatorytax will be deemed to exist).

As of 2008, this “compensatory tax exception” does not apply any longer if the taxauthorities can reasonably establish that the loan, or the transaction in connectionwith which the loan was given, has not predominantly been entered into for business

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reasons. This means that meeting the 10% compensatory tax threshold at the levelof the creditor does not necessarily entail the deductibility of interest at the level ofthe debtor, as the tax authorities still have the opportunity to challenge a deductionfor interest on a loan if the loan came into existence without sufficient businessreasons. As the law does not include a grandfathering rule for existing loans, thedeductibility of interest on all related party loans that were until 1 January 2008defended on the compensatory tax exception, may potentially be challenged by theDutch tax authorities.

Article 10, 1,d CITA Hybrid LoansDebt is re-qualified into equity for tax purposes if the hybrid loan meets certainrequirements. As a result, the interest on hybrid loans is also re-qualified intodividend and thus not deductible for corporate income tax purposes (or receivedtax-exempt under the participation exemption, if applicable).

Debt is re-qualified into equity for tax purposes, if the following conditionsare fulfilled:

• The remuneration on the loan depends (almost) entirely on the profit ofthe borrower;

• The loan is subordinated to all creditors, and

• The loan has no term, but can be reclaimed only in case of insolvency,liquidation of debtor, or if it has a term of more than 50 years.

Conversely, the participation exemption regime applies to income and gainsreceived on hybrid loans, provided that:

• the creditor of the hybrid loan also has a shareholding in the issuer that qualifiesfor the application of the participation exemption regime;

• a related company of the creditor of the hybrid loan has a shareholding in theissuer that qualifies for the application of the participation exemption regime;and

• the issuer is a related company of the creditor.

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Finally, the (non-)deductibility of the interest paid at the level of the debtor inanother country is not relevant for the application of the participation exemption inthe Netherlands at the level of the creditor. This may lead to an opportunity to taxefficient double dip structures.

Article 10b Corporate Income Tax Act 1969The interest paid and capital losses realized on a loan are not deductible, provided,the following characteristics are present:

• Debtor and creditor of the loan are allied companies;

• The loan has no term or a term of more than 10 years; or

• The remuneration on the loan deviates considerably (i.e., by 30% or more)from an arm’s-length interest rate.

If the redemption date of the loan is postponed, the term of the loan will bedeemed extended accordingly as of the date of issuance of the loan.

Thin Capitalization RulesAs of 1 January 2004, the Dutch Corporate Income Tax Act includes restrictionson the deductibility of interest expenses in the case of companies that are largelyfinanced with debt. These “thin capitalization rules” can be summarized as follows:In principle, the thin capitalization rules provide for a fixed maximum 3:1 debt-to-equity (D/E) ratio, which means that interest (including expenses) on the excesswill not be deductible if and to the extent that the total debt exceeds three timesthe total equity. Whereas debt is taken into account in establishing the D/E ratio,only interest paid to related parties may be disallowed (and only if and to the extentthat such interest exceeds interest received from related parties). Consequently,interest on third-party debt will remain fully deductible, although under certaincircumstances third-party debt may be considered related-party debt if guaranteedby a related company.

The basic rules are reasonably clear: the D/E ratio is established on an annual basisby taking into account the non-weighted average equity at the beginning and at theend of the year. In addition, a de minimis rule is applicable, whereby interest on thefirst EUR 500,000 of debt in excess of the ratio remains deductible.

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For the purpose of calculating this D/E ratio, “debt” is defined as the balance of allloans payable and all loans receivable (e.g., for a company with 200 equity, 1400 debt,and 800 loans receivable, and hence 600 net debt-all interest remains deductible),to the effect that the thin cap rules will not affect the mere borrowing and lendingof funds within a group. Furthermore, “equity” is the company’s equity for taxpurposes, excluding fiscal reserves and with a deemed minimum of EUR 1. As analternative to applying the fixed D/E ratio, a company may from year to year decideto apply the average D/E ratio of the (international) group to which it belongs asits maximum D/E ratio. Unlike the fixed ratio for this purpose, the respectiveD/E ratios will be established on the basis of the respective statutory (consolidated)accounts, if possible, based on the same accounting principles. This alternative mayserve, for instance, companies active in a business with relatively high debt financingor with a high D/E ratio due to losses.

7. Flow-Through EntitiesAs of 1 January 2002, Dutch entities that do not incur a genuine risk in respect ofintra-group loans or royalty transactions are no longer permitted to credit the foreignwithholding taxes related to such interest or royalty income. The flow-throughentity is in fact treated as an intermediary company. Technically, the denial of thecredit is achieved by excluding the interest and royalties received and paid from thetax base in the Netherlands. The interest and royalties received and paid are excludedfrom the Dutch tax base under the following conditions:

(a) the Dutch entity receives and pays interest or royalties to and from a foreignentity within the same group;

(b) the interest and royalties received and paid relate directly or indirectly to a loanor a royalty transaction;

(c) the transactions are “closely connected;” and

(d) the flow-through company does not incur a genuine risk that can affect its equity.

A flow-through company is deemed to incur a genuine risk in respect of a loan ifthe equity is at least 1% of the outstanding loans or EUR 2,000,000 and the taxpayercan prove that the equity capital will be affected if a risk arises. Even though theinterest and royalty income and expenses are excluded from the taxable income,the flow-through entity should still report an arm’s-length remuneration withregard to the services relating to the loan or royalty transaction.

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During informal discussions in 2005 between tax advisors and the Dutch revenue,representatives of the Dutch revenue have indicated that a flow-through company isdeemed to incur a genuine risk in respect of the receipt and payment of royalties ifthe equity of the flow-through entity is at least below 50% of the expected grossroyalty payments to be made by the flow-through company or EUR 2,000,000 andat least 50% of that amount is paid in advance to the licensor.

8. Dividend StrippingA refund, reduction, exemption, or credit of Dutch dividend withholding tax onthe basis of Dutch tax law or on the basis of a tax treaty between the Netherlandsand another state will be granted under the Dutch Dividend Tax Act of 1965 onlyif the dividends are paid to the beneficial owner of the dividends. Using so-calleddividend stripping transactions, taxpayers subject to dividend withholding tax havesought to benefit from tax treaty and domestic law provisions to which they wouldnot be entitled themselves, e.g., by transferring shares temporarily to another partythat would benefit from a full exemption from dividend withholding tax. The Dutchtax authorities took the position in court that the parties that temporarily acquiredthe shares were not the beneficial owner of the dividends. These attempts werehowever unsuccessful; after the Dutch tax authorities lost a number of cases incourt, the legislator decided to introduce dividend stripping rules which basicallyset out when a party cannot be considered the beneficial owner of the dividends.

A natural person or a legal entity is not deemed to be the beneficial owner if, inrelation to becoming entitled to the dividend distribution, that person or entity haspaid a consideration (in the broadest sense) within the framework of a combinationof transactions, where it may be assumed that:

(a) all or part of the dividend distributions that have been made, directly orindirectly (for instance, due to the payment of the consideration), for thebenefit of:

1. an individual or legal entity with respect to whom or which no exemptionmay be granted from the withholding obligation, whereas such exemptionmay be granted with respect to the party paying the consideration; or

2. an individual or legal entity (again, usually the original shareholder) whoseentitlement to a reduction or refund of dividend tax is lower than that ofthe party paying the consideration; and

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(b) that individual or legal entity, directly or indirectly, retains or acquires aposition in stock, profit-sharing certificates, or profit-sharing bonds that issimilar to its position in such stock, profit-sharing certificates, or profit-sharingbonds before the date on which the combination of transactions referred toabove commenced.

Certain factors reduce the chance of a dividend stripping situation arising, such asthe period between the moment of the transfer and the dividend distribution, thecharacter of the dividend (regular, incidental, or liquidation distribution) and theduration of the transfer.

The Dutch tax authorities are responsible for providing proof of dividend strippingunder the new provision. In the event of a dividend stripping transaction, theDutch company has to withhold 15% withholding tax on its dividend distribution.Regrettably, if the conditions for dividend stripping have been established, noreduction of the 15% withholding tax is provided even if the deemed economicowner would have been entitled to a certain credit, reduction, or refund (e.g., 10%instead of 15%).

9. Tax IncentivesThe following measures provide tax relief to taxpayers:

Investment AllowanceThe investment allowance (investeringsaftrek) is limited to small investments(EUR 2,100 to EUR 236,000) and comprises a deduction of a percentage (in adegressive scale from 25% to 1%) of the invested sum from the profits of the yearin which the investment was made. In addition, an investment allowance of 44%is available for energy-saving investments (EUR 2,100 to EUR 111,000,000).

Furthermore, an investment allowance of 15%, 30%, or 40% is available for certainqualified environment investments (but not if an energy investment has alreadybeen applied for).

If, within five years after the beginning of the calendar year in which the investmenttook place, more than EUR 2,100 in assets for which an investment allowance wasclaimed is disposed of, a proportionate percentage would be added to the company’sprofit (divestment addition or desinvesteringsbijtelling). Withdrawal from an asset is

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deemed to be a disposal in this respect. Assets that are used for the operation of abusiness to which a regulation to prevent international double taxation applies areexcluded from the investment allowance.

Random DepreciationRandom accelerated depreciation (e.g., in one year) can be claimed for certainenvironmental-friendly assets that are on a list of assets and regions compiled by theMinistry of Environmental Affairs. In addition, other assets on a list compiled bythe Ministry of Economic Affairs are eligible for random depreciation.Furthermore, the motion picture industry may also claim random depreciation orapply for an investment allowance.

Tax-free ReservesA tax-free allocation of profits to a reserve is permitted in two instances, providedthat proper accounting records are maintained. Such reserves may be made (a) forthe purpose of spreading intermittently recurring costs (“equalization reserve”);and (b) for replacing tangible or intangible capital assets in case of voluntary orinvoluntary disposition (“reinvestment reserve”).

10. LossesAs of 1 January 2007, a tax loss incurred during a fiscal year can be carried back tothe preceding or carried forward to the nine subsequent years, subject to certaindetailed anti-abuse provisions. This means, for example, that a tax loss in 2007 canbe credited with taxable profit of the year 2006 or with the years 2008 up to andincluding 2016. As a transitional rule, all tax losses incurred up to and including2002 can be carried forward for compensation with taxable profit of the years 2007up to and including 2011. This means that tax losses incurred before 2003 willexpire as of 2012.

The amount of tax losses that may be carried back or forward has to be determinedby the Dutch tax authorities, which they will do after the taxpayer files its annualcorporate income tax return. In sum, the anti-abuse provisions restrict losscompensation if both (i) at least 30% of the ultimate shareholders in a companyhave changed as compared to the oldest year in which the losses were incurred; and(ii) the change of control has occurred after the company terminated or largelyreduced its former business activities.

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Losses incurred in years during which the taxpayer qualifies as a holding company(i.e., during 90% of the year, 90% or more of its work consists of holding or groupfinancing activities) can be set off only against profits derived in years during whichthe taxpayer also qualifies as a holding company. This rule should prevent purely-holding companies from initiating active operations with the (exclusive) aim to setoff their (holding) losses against operating profits.

In addition, holding company losses may neither be carried forward if a holdingcompany increases the balance of its intercompany loans and liabilities (comparedto the balance in the year when the loss was incurred) aimed at generating additionalinterest income which is to be set off against previous losses. The law provides fora safe harbor rule: companies with at least 25 full-time employees who are notengaged with the holding (management) of subsidiaries or the financing of affiliatesare deemed not to be holding companies for loss compensation purposes.

11. LiquidationCapital gains arising from the liquidation of a company are subject to corporateincome tax at normal rates, unless an exemption applies (e.g., participationexemption to capital gain on qualifying shareholding).

Liquidation distributions to shareholders are treated as follows:

(a) Repayment of paid-in capital, including share premiums and capitalized profits,but excluding retained earnings, is tax-free (with certain exceptions); and

(b) Any other payment is deemed to be a dividend, and therefore subject todividend withholding tax. Dividend withholding tax will not be levied if therecipient is

(i) a Dutch resident company that qualifies for the participation exemption;

(ii) an EU resident company that qualifies for the EU Parent-SubsidiaryDirective and at the time of the liquidation holds at least 5% of the issuedand paid-in capital of the distributing company; and/or

(iii) a recipient that may benefit from an exemption based upon a tax treaty.

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12. Mergers and Demergers

Business MergerTaxation of capital gains, realized on the transfer of the assets and liabilities (comprisinga business or an independent part thereof) of one company to another (existing ornewly incorporated) company may be “rolled over” under the “merger exemption”if the business is transferred in exchange for shares in that other company. Thisexemption is subject to the following conditions:

(a) The only compensation received by the transferring company consists of sharesin the receiving company;

(b) The future levy of corporate income tax is assured. This condition implies thatfor tax purposes, the transferee company must take the same basis in the assetsand liabilities the transferring company had immediately prior to the transfer;

(c) None of the companies suffered losses eligible to be carried forward prior tothe merger;

(d) Both companies are subject to the same tax regime. This would not be the caseif, for instance, one company is an regular taxpayer while the other companyqualifies as an investment institution and is therefore subject to a 0% corporateincome tax rate; and

(e) The shares acquired by the transferring company are not disposed of withinthree years.

Under Dutch tax law, mergers and demergers can be exempt from Dutch corporateincome tax provided certain requirements are met. In general, the legal mergerand demerger exemption does not apply if the merger/demerger is predominantlypursued with the aim of avoiding or deferring taxation.

The Ministry of Finance issued several regulations in the form of “standard conditions”that must be met for the merger exemption to apply if some of these conditions arenot met. This exemption has undergone only technical changes as a result of theimplementation of the EC Merger Directive. For instance, the exemption is alsoapplicable if a permanent establishment of a nonresident company is converted intoa resident company. In principle, this exemption will apply only insofar as the transferof assets leads to a full financial and economic integration of the business involved.

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Merger by Share-for-Share ExchangeAs a result of the implementation of the EC Merger Directive, it is possible for anonresident taxpayer (e.g., an individual) holding shares in a Dutch corporation toexchange those shares for shares in another EU corporation without triggeringDutch corporate income tax. Once again, specific requirements must be fulfilled.One of the most relevant conditions is the condition that both EU corporationsinvolved in the merger must be qualified corporations. Furthermore, the (acquiring)corporation must acquire more than 50% of the voting shares in the Dutchcorporation.

Legal MergerThe Corporate Income Tax Act of 1969 also provides for the “legal merger” facility,whereby the assets and liabilities of the absorbed company are passed on to theabsorbing company, and the absorbed company itself ceases to exist. The shareholdersin the absorbed company receive shares in the absorbing company. The two companiesare basically amalgamated into one, without the necessity of liquidating the absorbedcompany. Alternatively, a new third company can absorb the assets and liabilities ofthe two former companies.

One of the conditions for a legal merger is that both companies involved must beeither NVs or BVs. In practice, the tax treatment of a legal merger will be similarto that of a business merger.

DemergerIn general, the legal demerger of companies allows the transfer of all or part of theproperty, rights, interest, and liabilities of one legal entity to one or more otherlegal entities by means of a universal transfer of title, i.e., without the separatetransfer of all of the assets and liabilities.

The main principle is that the shareholders of the legal entity being demerged allbecome shareholders of the transferee-company (i.e., the acquiring company orcompanies). In general, two main types of demerger may be distinguished:

• a full demerger whereby the property, rights, interests, and liabilities of a legalentity that ceases to exist on completion of the demerger are acquired by twoor more other legal entities; and

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• a partial demerger involving a split whereby all or part of the property, rights,interests, and liabilities of one legal entity are acquired by one or more otherlegal entities (the original legal entity does not cease to exist on completionof the demerger). Demergers can be effected without corporate income taxbeing incurred under certain conditions, which is quite similar to the conditionfor the transfer of assets.

13. Fiscal UnityThe Dutch Corporate Income Tax Act of 1969 provides for a fiscal unity regimethat, subject to certain conditions, permits companies that are members of a fiscalunity to file a consolidated tax return. Upon request, companies that are tax residentsof the Netherlands (an NV, BV, a cooperative, or a mutual guarantee association)may form a fiscal unity with subsidiaries in which a participation of at least 95% isheld. The main advantages of the fiscal unity regime are that profits and losses maybe freely set off among the members of the fiscal unity and members can avoid therealization of income on transactions between them. After the formation of a fiscalunity, only the parent company is in fact recognized as a taxpayer for Dutch corporateincome tax purposes. Any income or expense at the level of the subsidiary companyis automatically aggregated at the level of the parent company.

The most important characteristics of a fiscal unity are:

(a) To opt for fiscal unity, a parent company must own at least 95% of the shares ofa subsidiary;

(b) Under certain conditions, qualifying subsidiaries may enter into a fiscal unitywith the parent company during the fiscal year (e.g., as of the date of acquisitionof the subsidiary);

(c) Fiscal unities may be ended towards one or more consolidated subsidiariesduring the course of the fiscal year (e.g., as of the date of disposal of thesubsidiary);

(d) A company leaving the fiscal unity may, under certain conditions, retain lossesthat have not yet been set off and that were incurred during the fiscal unityperiod, provided that these losses were attributable to that company; and

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(e) Under certain conditions, Dutch permanent establishments of foreign companiesmay enter into fiscal unity with a Dutch (resident) company or another Dutchbranch of a foreign company, provided that there is a shareholding of at least95% between the companies.

14. Investment Companies (FBI)Investment Companies (Fiscale Beleggingsinstelling, hereinafter referred to as “FBI”)enjoy a beneficial tax regime if certain requirements are met. Based on this regime,profits are not subject to tax, under the obligation to distribute the net investmentincome within eight months of the following financial year. Furthermore, capitalgains are not mandatorily distributed and can instead be transferred to a tax-free“reinvestment reserve.” Please note that profit distributions (except for a distributionof the reinvestment reserve) will trigger the application of a 15% Dutch dividendwithholding tax, unless reduced by an applicable tax treaty or the Parent SubsidiaryDirective.

Recently, certain requirements of the FBI regime (i.e., accessible to foreign legalentities, shareholders’ requirements, and real estate development activities) have beenamended. The changes were mainly intended to remove certain features from theregime that represent potential infringements to EU law. Furthermore, the scopeof the regime with respect to real estate development activities has been amended.

In order to qualify as an FBI, the following cumulative requirements must be metthroughout the entire tax year:

1. The FBI must be set-up as a Naamloze vennootschap (“NV”), besloten vennootschap(“BV”), Fund for Joint Account, or any other Dutch resident entity establishedunder the laws of the Netherlands Antilles, a European Union Member State orany other state in case a Double Tax Treaty has been concluded with that otherstate, provided the legal form of these foreign entities is comparable to the NV,BV, Fund for Joint Account;

2. The (statutory and actual) activities are collective passive investments;

3. Debt is maximized at 60% of the tax book value of real property investmentsand 20% of the tax book value of other investments;

4. The net investment income must be distributed within eight months of thefollowing financial year;

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5. The net investment income must be distributed pro rata to all participants.Furthermore, there cannot be any differences in distribution rights (e.g., incomeand accumulation shares);

6. If the vehicle is quoted on a financial market under the Financial SupervisionAct, or the vehicle/its trust has a license under the Financial Supervision Act orhas been exempt from being licensed:

• the interest is not held for 45% or more by an entity which is subject toa profit tax (excluding qualifying investment institution) or by two ormore of these entities if they are related as defined in the law; and

• individuals cannot have an interest of 25% or more in an exemptinvestment company quoted on a financial market under the FinancialSupervision Act or in a non-quoted exempt investment company whichhas a license under the Financial Supervision Act;

7. If the vehicle is not quoted on a financial market under the Financial SupervisionAct, or the vehicle/its trust does not have a license under the FinancialSupervision Act or has not been exempt from being licensed:

• at least 75% of the interest must be directly or indirectly held by individualsor exempt investors, or by investment institutions quoted on a financialmarket under the Financial Supervision Act; and

• individuals cannot hold an interest of 5% or more;

8. The interest in the vehicle is not held for 25% or more by Dutch residentcompanies via a nonresident corporate shareholder; and

9. A director or more than half of the members of the supervisory board cannotbe a director, a member of the supervisory board, or an employee of an entitywhich holds (alone or together with related entities) 25% or more of the sharesin the vehicle, unless this latter entity is quoted on a financial market under theFinancial Supervision Act.

With regard to the requirements (6) and (7), we note that under certain conditions,the Dutch tax authorities accept that these requirements are not yet fulfilled duringthe two years following the incorporation of the FBI. Fiscal reserves or goodwillwill be taxed at the moment the FBI regime becomes applicable. However, theregime cannot apply automatically.

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Real estate development activities are now allowed by the FBI or by 100%subsidiaries of an FBI, under the following limitations:

• The FBI is allowed to hold shares in a subsidiary that conducts real estatedevelopment activities. Such subsidiary will be taxed against the regular25.5% corporate income tax rate. The FBI is explicitly not allowed to developreal estate in the FBI itself;

• If the FBI wishes to develop its own real estate investments, the subsidiarymay develop the real estate held by the FBI in exchange for an arm’s-lengthremuneration. The result is a taxable development activity at the level of thesubsidiary and exempt passive investment income at the level of the FBI;

• The renovation of real estate by the FBI itself is also allowed, as long as thecosts related to the renovation stay within 30% of the fair market value of thereal estate.

As from 1 January 2008, a new credit mechanism was introduced for FBI’s. Basedon this credit mechanism, Dutch dividend withholding tax that should be paid bythe FBI to the tax authorities can be reduced by the Dutch and foreign withholdingtax levied on investment income of the FBI.

15. Exempt Investment Fund (VBI)Currently, investments are pooled via the FBI regime mentioned above, or viaa transparent entity. The main advantage of the FBI is that the proceeds fromthe investments are not subject to corporate income tax. However, the profits(excluding capital gains) realized by the FBI must be distributed to the participantsannually and, consequently, become subject to 15% Dutch dividend withholdingtax. In order to create a more favorable regime (i.e., no mandatory distribution ofdividends, no dividend withholding taxation in the Netherlands) a second investmentvehicle (Vrijgestelde Beleggingsinstelling, herein referred to as “VBI”) has beenintroduced as from 1 August 2007.

Any taxpayer in the Netherlands that is subject to corporate income tax can opt forthe application of this VBI regime, provided the following requirements are met:

• The VBI must be set up as a Naamloze vennootschap (“NV”), Fund for Joint Account,or any other Dutch resident entity established under the laws of the Netherlands

Antilles, a European Union Member State or any other state in case a DoubleTax Treaty has been concluded with that other state, provided the legal form ofthese foreign entities is comparable to the NV, BV, Fund for Joint Account;

• The VBI should be set up as an open-end investment fund, meaning that thefund should allow the repurchase of shares at regular moments;

• The VBI regime is stricter towards the allowed activities. It is only allowed toinvest in so-called “financial instruments” as defined in the MiFID, e.g., shares,bonds, options, futures, swaps. It is allowed to invest in Dutch and foreign realestate indirectly, i.e., via a (non-transparent) Dutch or foreign entity or a realestate investment fund. In addition, it is possible to invest in foreign real estatethrough a transparent or non-transparent entity or partnership, while thelimitation is only focused at Dutch real estate.

Please note that due to the lack of tax treaty protection, withholding tax levied bythe investor country will be actual costs for the investment fund. Interest bearinginvestments (instead of dividend generating investments) are therefore mostinteresting, since less countries levy interest withholding tax;

• The VBI has no specific shareholders requirements, thus individuals, corporations,and institutional investors can invest via a VBI. However, in order to meet thecollective investments test, the VBI regime may not be used as a portfolioinvestment company that was primarily set-up for one shareholder; and

• The VBI should be diversifying risks, meaning it cannot invest in one asset only(apart from feeder funds).

The VBI regime does not have any distribution obligations. However, Dutch(corporate and individual) investors do have to revaluate their interest to fairmarket value every year, as a result of which the underlying (realized andunrealized) income will be taxable at the level of the Dutch shareholders.

Note that the Dutch participation exemption does not apply to a shareholding in aVBI. Furthermore, a VBI cannot credit withholding taxes incurred, as it is notsubject to tax. For the same reason,VBIs do not have access to the Double TaxTreaty network of the Netherlands.

Conclusively, the VBI is an attractive vehicle for structuring investments likeinterest bearing investments, since inbound interest flows are usually not subject to

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withholding tax. In such case, the proceeds derived from investments are receivedwithout any Dutch tax burden by the ultimate shareholder, as the income of the VBIis not taxed in the Netherlands and neither is a dividend distribution from the VBIto its shareholders.

16. Transfer pricing regimeThe Netherlands transfer pricing regime is covered by a series of six relevanttransfer pricing decrees that address roughly anything from advanced certainty toobservations regarding the appropriate cost base and competencies.

Most important are the decree IFZ2004/680M (which contains information onGroup services and shareholder activities; “Support” services; Contract research;Cost Contribution Arrangements (CCA); Arm’s-length prices in case valuation isuncertain; Crediting or offsetting withholding taxes) and IFZ2004/126M on theformer flow-through entities (FTE).

The Dutch tax authorities aim to be the premier service providers in that theystrive to provide for rapid advance certainty in a mutually agreed period of time.

17. European Economic Interest Grouping andSocietas Europaea

EEIGSince July 1989, it is possible to form a European Economic Interest Grouping or“EEIG” (in Dutch: Europees Economisch Samenwerkingsverband or EESV) in theNetherlands. An EEIG must be registered with the Trade Register of the Chamberof Commerce. An EEIG with official address in the Netherlands is considered alegal entity under Dutch law. A regulation has been published with respect to thetaxation of EEIGs. The following general rules apply:

(a) EEIGs are “tax-transparent” and therefore not subject to Dutch corporateincome tax. The profits resulting from the activities of an EEIG are taxableonly in the hands of its members;

(b) “Tax transparency” does not apply to other taxes (e.g., wage tax);

(c) Foreign members will be subject to tax in the Netherlands only if the businessin the Netherlands is run via a permanent establishment or a permanentrepresentative;

(d) The EEIG itself does not have access to the Dutch tax treaty network, as it doesnot qualify as a Dutch resident; and

(e) No capital tax is due in the absence of any capital divided into shares.

Societas EuropaeaAs of 8 October 2004, it is possible to incorporate a European company or SocietasEuropaea (SE). The SE has legal personality and is in many respects comparable to aDutch NV or BV. For Dutch tax purposes, an SE that has its registered office in theNetherlands is treated similarly to a Dutch NV (a public limited liability company).This means that SEs are subject to the same taxes as Dutch NVs and that SEs haveaccess to the same tax facilities available to NVs, such as the fiscal unity facility andthe participation exemption. SEs are also eligible for the benefits of the EU ParentSubsidiary Directive, the EU Interest and Royalties Directive, and the EU MergerDirective. There are four ways to incorporate an SE:

(a) through a legal merger between two companies based in different EU MemberStates;

(b) through incorporation of an SE as a holding company for two companies basedin two different EU Member States or with subsidiaries in two different EUMember States;

(c) through incorporation of an SE as a subsidiary of:

(i) two companies based in two different EU Member States; or

(ii) an SE; and

(d) through a change of corporation form from an eligible company (e.g., an NV)to an SE.

Although there are rules restricting the way an SE may be incorporated, anyone canbecome a shareholder.

An SE is able to transfer its registered office from one EU Member State to another.In addition, a group that has companies throughout the EU can now create a uniform

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management structure by forming an SE, since SEs can opt for a one-tier or two-tierboard system. Another relevant practical aspect is that the formation of SEs makesinternational legal mergers possible between companies incorporated under thelaws of an EU Member State.

18. EU Interest and Royalty DirectiveThe EU Interest and Royalty Directive took effect on 1 January 2004. Referringto the Directive, companies that are directly related and are able to meet certainconditions are no longer subject to withholding tax on interest and royalty payments.Furthermore, EU Member States have the option not to apply the Directive ifcompanies do not meet a direct shareholders’ test for an uninterrupted periodof two years. The Directive is effective for the EU Member States. Since theNetherlands does not levy a withholding tax on interest and royalty payments, theeffects of the implementation of the Directive in Dutch legislation are limited.

19. EU Savings DirectiveThe EU Savings Directive took effect on 1 July 2005. The aim of the Directive is toenable taxation of savings income in the form of interest payments. Payments madein one Member State to beneficial owners who are individual residents for taxpurposes in another Member State fall under the scope of the Directive. After theobligatory exchange of information from the Member State where the paymentoriginates to the Member State of which the beneficiary is a resident, the incomemay be taxed in accordance with the laws of the latter Member State. In principle,a zero withholding tax rate applies for payments between Member States. However,a transitional period is observed for Austria, Belgium, and Luxembourg.

20. EU Parent-Subsidiary DirectiveThe Directive gives complete relief from double taxation in the EU on dividendincome by abolishing dividend withholding tax on dividends flowing from asubsidiary to its parent company (or to a permanent establishment of the parentcompany) within the EU, provided that the companies have a qualifying parent-subsidiary relationship. As of 1 January 2007 (and in 2008), participating interestsin a parent-subsidiary relationship of 15% or more qualify for the provisions of the

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Directive. Starting 1 January 2009, this percentage will be lowered to 10%. Thewithholding tax exemption may be applied under the Directive if all the followingcriteria are complied with:

(1) The parent company holds a minimum of 15% of the capital of the subsidiary;

(2) Both the parent and subsidiary have one of the legal forms listed in the Annexto the Directive;

(3) The parent and subsidiary are companies that, according to the tax laws of theirrespective countries, are considered resident in their respective countries fortax purposes and under the terms of a double taxation agreement concludedwith a third country. Neither is considered to be a resident for tax purposesoutside the EU.

(4) The parent and subsidiary are companies that are subject to one of the taxeslisted in the Directive, without the possibility of being exempt or having anoption to be exempt.

As of 1 January 2007, Dutch domestic law provides for an exemption fromdividend withholding tax on distributions made to 5% or more shareholders in theEU. This means that the Dutch rules are more favorable than required by the EUparticipation exemption.

21. EU Merger DirectiveThe EU Merger Directive is implemented in Dutch law and is described underSection 12.

22. Summary of the Netherlands’ Bilateral Tax TreatiesThe Netherlands has one of the most extensive tax treaty networks in the EU. Thetreaties generally provide for substantial reductions of withholding tax on dividends,interest, and royalties. Appendices II-V contain lists of the treaties currently inforce and under negotiation as well as the treaty reductions for withholding taxes.Most tax treaties negotiated by the Netherlands relating to income and capital arebased on the draft models published by the Organisation for Economic Co-operationand Development (OECD) in 1963, 1977, and 1992-2000.

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• Albania

• Argentina

• Armenia

• Aruba

• Australia

• Austria

• Bangladesh

• Barbados

• Belarus

• Belgium

• Brazil

• Bulgaria

• Canada

• China (excludingHong Kong andMacau)

• Croatia

• Czech Republic

• Denmark

• Egypt

• Estonia

• Finland

• France

• Georgia

• Germany

• Ghana

• Greece

• Hungary

• India

• Indonesia

• Iceland

• Ireland

• Israel

• Italy

• Japan

• Jersey

• Jordan

• Kazakhstan

• Korea

• Kuwait

• Latvia

• Lithuania

• Luxembourg

• Macedonia

• Malaysia

• Malta

• Mexico

• Moldova

• Mongolia

• Morocco

• Netherlands Antilles

• New Zealand

• Nigeria

• Norway

• Pakistan

• Philippines

• Poland

• Portugal

• Romania

• Russia

• Singapore

• Slovak Republic

• Slovenia

• South Africa

• Spain

• Sri Lanka

• Suriname

• Sweden

• Switzerland

• Taiwan

Tax treaties are currently in force in the following countries:

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Tax treaties are still in force in the following countries after split or separation fromthe (former) Soviet Union:

• Azerbaijan *

• Kyrgyzstan *

• Tajikistan *

• Turkmenistan

(former) Yugoslavia:

• Bosnia-Herzegovina

• Montenegro (Fed. Republic)

• Slovenia

• Serbia (Fed. Republic)

* Treaty unilaterally applied by the Netherlands.

** Signed on 8 December 2006. Treaty is not yet in force.

* See (b) for application treaties with the former Soviet Union and former Yugoslavia.

• Thailand

• Tunisia

• Turkey

• Turkmenistan

• Uganda

• Ukraine

• United Kingdom

• United States

• Uzbekistan

• Venezuela

• Vietnam

• (former) Yugoslavia

• Zambia

• Zimbabwe

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Tax treaties with regard to the profits from air and/or sea shipping are currently inforce in the following countries:

• Algeria

• Australia

• Azerbaijan *

• Brazil

• Canada

• China

• Cuba

• Cyprus

• Costa Rica

• France

• Germany

• Hong Kong

• Indonesia

• Iran

• Isle of Man

• Japan

• Kenya

• Kyrgyzstan

• Libya

• Mexico

• Peru

• Saudi Arabia

• Slovakia

• Switzerland

• Tanzania

• Turkmenistan *

• Turkey

• United Kingdom

• Argentine air/sea

• Armenia air

• Albania air

• Azerbaijan air

• Bahrain air

• Barbados air

• Belarus air

• Brunei air

• Canada air

• Cape Verde air

• China (People’s Rep.) air/sea

• Croatia air

• Cuba air

• Czech Republic air

• Egypt air

• Estonia air/sea

• Georgia air

• Hong Kong air/sea

• Hungary air

• Iran air

• Korea sea

• Latvia air/sea

Negotiations are underway or will be held regarding the conclusion of tax treaties with:

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Negotiations are underway regarding the conclusion and/or amendment of taxtreaties with regard to the profits from air and/or sea shipping with:

• Lithuania air/sea

• Macau air

• Macedonia air

• Malawi air

• Maldives air

• Mexico sea

• Oman air

• Poland sea

• Panama air/sea

• Qatar air

• Russia sea

• Saudi Arabia air

• Senegal air

• Seychelles air

• Slovak Republic air

• Slovenia air

• South Africa air

• Sudan air

• Suriname air

• Syria air

• Togo air

• Ukraine air

• United Arab Emirates air

• Uruguay air

• Uzbekistan air

• Venezuela air/sea

• Vietnam air

• Angola

• Colombia

• Faroe Islands

• Gabon

• Ghana

• Guatemala

• Haiti

• Iran

• Ivory Coast

• Jamaica

XI. Other Taxes

1. Value-added Tax (VAT)

Taxable PersonsIn general, taxable persons are all entities or individuals that perform taxable suppliesof goods and services, or intra-Community acquisitions, in the course of a business,in the Netherlands. If a foreign business supplies goods and services within theNetherlands, it is considered a taxable person for Dutch VAT purposes.

Taxable TransactionsVAT is imposed on the following transactions:

• the supply of goods or services by a taxable person in the course of a business;

• the intra-Community acquisition of goods from other EU countries by ataxable person or a non-taxable legal person in excess of a certain threshold;

• the intra-Community acquisition of new means of transport by anyone; and

• the importation of goods from outside the EU by anyone.

Dutch VAT is due if these transactions can be located in the Netherlands.

If a foreign business (without a fixed establishment in the Netherlands) suppliesgoods or services to a taxable person or a nontaxable entity established in theNetherlands, a reverse charge mechanism generally applies. Pursuant to thereverse charge mechanism, the Dutch VAT due is levied on the taxable person ornontaxable entity receiving the goods or services.There is no VAT registrationthreshold in the Netherlands.

Place of SupplyGoods are supplied (and VAT is due) in the country where the goods are located atthe time the right to dispose of the goods has transferred. If the goods are transportedin relation to the supply,VAT is due in the country where that transport commences.

Services are generally deemed supplied (and are therefore subject to VAT) in thecountry where the service provider is established.Various exceptions to this general

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rule exist, e.g. advisory services, financial services, and telecommunication servicesare deemed to take place (and are taxed) in the country where the (VAT-taxable)recipient of the service is located. As of 1 January 2010, the rules for the place ofsupply will change. As of that date, the general rule for business-to-business suppliesof services will be that services are deemed to take place in the country where therecipient of the service is established. In cross-border situations, the liability to payVAT is shifted to the (VAT-taxable) recipient. Exceptions to the general rule forbusiness-to-business services will continue to exist.The general rule for business-to-consumer services will not change.

A taxable person who sells and transports goods to a taxable person located inanother EU country performs an intra-Community supply in the EU country ofdispatch of the goods.The receiving taxable person performs a taxable intra-Community acquisition in the EU country of arrival of the goods. Non-taxable legalpersons are treated as taxable persons for their intra-Community acquisitions ifsuch acquisitions exceed an annual threshold (EUR 10,000 in the Netherlands) inthe current calendar year, or exceeded this threshold in the previous calendar year.

Exempted ActivitiesVAT exemptions include the following categories:

• exemptions for public policy reasons in the fields of education, culture, orsocial welfare;

• exemptions based on a policy to avoid administrative complications for thesupplier (such as postal services, banking, and other financial transactions); and

• exemptions related to the supply of Dutch real estate. In principle, the supplyof Dutch real estate is exempt from VAT.There are three exceptions:

(i) the supply of a building and accompanying land up to a period of two yearsafter the first use of the building is subject to VAT;

(ii) the supply of “building land” is subject to VAT. Building land can bedescribed as undeveloped land intended for building purposes.VAT on thesupply of such property is due only if at least some activities have beencarried out to make the land more suitable for building activities or if abuilding permit is issued; and

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(iii) the supply of real estate may also be subject to VAT if the seller and thepurchaser have opted for a VAT-taxed supply through a joint request.Thisrequest can be granted only if the purchaser uses the real estate for morethan 90% of the taxable activities.

RatesThe general Dutch VAT rate is currently (2008) 19%. A reduced rate of 6% appliesto a number of essential goods and services, such as food, gas, electricity,pharmaceutical products, and the like.

A zero rate generally applies to supplies of goods not cleared through Customs(either because they are merely passing through the Netherlands or because theyare in storage in the Netherlands), supplies of goods that are exported out of theEU, intra-Community supplies, and services connected to such supplies.

Payment, VAT Returns, and Administrative RequirementsVAT is due on the aggregate value of the goods and services sold during the precedingperiod. A special scheme exists for qualifying sales of used goods, works of art,antiques, and collectors’ items. Under this scheme,VAT can be calculated on theprofit margin.

Depending on the amount of turnover,VAT returns must be filed monthly, quarterly,or annually.VAT returns must be submitted and the VAT due must be paid withinone month after the filing period.Taxable persons established in the Netherlandsmust file their VAT returns electronically (i.e. online or using a designatedsoftware program).

Taxable persons performing intra-Community supplies must also file quarterly ECSales listings, stating the names and the VAT identification numbers of their customersin other EU countries. In addition, taxable persons have to provide the Dutch CentralBureau of Statistics with information regarding their intra-Community trade if theirintra-Community supplies or acquisitions exceed the threshold of EUR 400,000(INTRASTAT filings).

The VAT system is built around invoices and the obligation to issue them. Invoiceshave three functions in the VAT system:

(i) They contain information as to which VAT regime is applicable;

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(ii) They enable the tax authorities to carry out audits; and

(iii) They enable taxpayers to prove, whenever necessary, their right to recoverinput VAT.

There are several mandatory items that must appear on invoices.Taxable personsmust have copies of all their sales invoices and originals of all purchase invoices intheir records at all times.

2. Real Estate Transfer TaxThe acquisition of Dutch immovable property, including the acquisition of beneficialownership, is subject to a real estate transfer tax of 6%.The transfer tax is calculatedon the purchase price or the market value, whichever is higher. Under the law,transfer tax is to be paid by the purchaser, but it is customary for the buyer and theseller to agree on who will effectively bear the tax.

The acquisition of (the beneficial ownership of) rights to real estate, shares belongingto a substantial interest in a real estate company, and certain certificates entitlingthe holder to a proportionate share of immovable property are, under certainconditions, also subject to the 6% transfer tax.

Acquisitions by way of inheritance and gifts (except for gifts of shares in real estatecompanies) and acquisitions by a company within the scope of an internal reorganizationqualify for an exemption from transfer tax under certain conditions. Furthermore,an exemption may apply if the acquisition of the supply of immovable property issubject to VAT.

3. Withholding Tax DividendsDividends and other distributions of profits (including interest on loans which areconsidered to be equity and liquidation payments in excess of the paid-in capital)paid by companies that are resident in the Netherlands are subject to 15% dividendwithholding tax in the Netherlands.

Under certain circumstances, the rate of 15% is reduced. Reference is made toSections 4 (0% under the participation exemption), 17 (0% under the EU ParentSubsidiary Directive), and 19 (the rate is reduced under bilateral tax treaties tousually 0%, 5%, or 10%).

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A dividend tax return must be filed with the local Tax Inspector by the distributingcompany, and the dividend tax withheld must be paid to the Tax Collector withinone month after the date on which the dividend becomes payable.The Tax Inspectormay impose a penalty for late filing of a dividend tax return.

Interest and RoyaltiesThere is no Dutch withholding tax on interest and royalties paid by companies thatare resident in the Netherlands.

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XII. Financial Regulations

1. Exchange Control RegulationsNo license is required for payments in euros between residents and nonresidents.However, pursuant to the 1994 Foreign Financial Relations Act (Wet financiëlebetrekkingen buitenland 1994) and the 2003 Reporting Provisions (Rapportagevoorschriftenbetalingsbalansrapportages 2003), certain designated residents are required to reportsome payment information to the Dutch Central Bank (De Nederlandsche Bank, “DNB”)for statistical purposes.

The information to be provided depends on the type of institution that has foreignfinancial relations. DNB has set specific profiles, which lists the information to beprovided. Some institutions may be designated as “reporting institutions” by DNBif certain criteria, e.g., regarding the scope or frequency of international payments,are met. DNB may also request specific information from institutions that are notdesignated institutions. Finance companies established or active in the Netherlandsare required to notify this to DNB within three weeks after they have been established.Pursuant to the 2003 Reporting Provisions, finance companies are, in general,required to report their activities within two weeks of starting business operationsin the Netherlands. Please also refer to section 3.1 Banking activities below.

2. Capital/LoansNo license is required for the repatriation of capital, loans, interests, dividends,branch profits, royalties, and fees, as long as the requirements of the 2003Reporting Provisions are observed.

3. Regulated financial activitiesThe Financial Supervision Act (Wet op het financieel toezicht, the “FSA”) has comeinto effect on 1 January 2007. The FSA encompasses practically all the rules andconditions that apply to the Dutch financial markets and their supervision. In total,the FSA replaces eight former supervision acts (i.e., Dutch Banking Act, SecuritiesTrade Supervision Act, Insurance Undertakings Acts, and the like.).The extensivesystem of supervision of financial institutions is therefore now regulated by onesingle act, supplemented by implementing regulations based thereon. Under the

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FSA a clear distinction is made between the supervision tasks of DNB (prudentialsupervision) and those of the Autoriteit Financiële Markten (the “AFM”) (supervisionof conduct of business).

The following description does not intend to be exhaustive but rather to give a high-level overview of the most important activities that are regulated under the FSA.

Banking activitiesAny company that in the conduct of its business or profession obtains “repayablefunds” outside a restricted circle from (legal) persons, other than from so-called“professional market parties,” pursuant to section 1:1 of the FSA and grants loansfor its own account qualifies as a “credit institution” (bank).

In order for any company to act as a credit institution in the Netherlands, a licenserequirement applies, subject to a general exemption being applicable or an individualdispensation being granted by DNB. “Repayable funds” comprise any monies thatmust be repaid, for whatever legal reason, if it is clear beforehand what the nominalrepayable amount is and in which manner any remuneration (such as interest) is tobe calculated. Professional market parties include, inter alia, licensed institutionssuch as banks, investment funds and large corporations. A “restricted circle” isdeemed to exist between persons and/or companies that belong to an objectivelylimited group, the criteria of access to which are determined in advance, such as toensure that access to such group is not easily realizable. In addition, a “restrictedcircle” presupposes and requires the existence of a legal relation between the person/company that attracts repayable funds and the persons/companies that provide suchfunds at the point in time where the aforesaid funds are attracted.The legal relationimplies that the “members” of such restricted circle must reasonably be aware of thefinancial situation of the person/company attracting the repayable funds.

As the definition of “repayable funds” could entail more than just the borrowing ofthe monies, some caution is required when assuming that a company does not qualifyas a “bank” as it is not attracting “repayable funds.” It is possible that monetaryobligations which are created in the context of complex financing structures butwhich do not necessarily constitute an obligation to repay borrowed monies couldbe deemed to be “repayable funds” in the context of the Financial Services Act.

“Non-banks” (such as certain finance companies and cash-pooling hubs) may alsoqualify as credit institutions. An exception from the license requirement is available

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for group finance companies that technically qualify as “banks” if the conditions ofthat exception can be met. A company may not operate as a bank or use the term“bank” without the proper license and registration. Banks and credit institutionsthat have been established in the European Union do not require a new license toact through branch offices in other countries within the European Union. Theymay rely on the license of their home state (“home state control”) pursuant to a so-called “European Passport.” The “European Passport” can be relied upon once therelevant notification requirements have been fulfilled.

DNB closely supervises the administration, liquidity, and solvency of all Dutchbanks. An exception is made for the supervision of the administration and solvencyof Dutch branch offices of banks that have their corporate seat in another EUcountry, in which case the supervision remains with the banking authorities in thebank’s country of origin. Dutch banks are generally involved in a wide range offinancial activities, including:

• granting loans;

• effecting domestic and international money transfers;

• exchanging foreign currency;

• brokering publicly-listed securities; and

• assisting in the introduction of companies for the application of listing onEurolist by Euronext Amsterdam NV.

The FSA also regulates the activities of so-called “financial institutions” in theNetherlands, i.e., companies whose main business it is to perform one or more ofthe activities listed in Appendix I of Directive 2006/48/EC2 or to acquire or hold____________________2 Being the following activities: (i) acceptance of deposits and other repayable funds; (ii) lending;

(iii) financial leasing; (iv) money transmission services; (v) issuing and administering means ofpayment (e.g., credit cards, travelers’ cheques, and bankers drafts); (vi) guarantees and commitments;(vii) trading for own account or for account of customers in: (a) money market instruments(cheques, bills, certificates of deposit, and the like); (b) foreign exchange; (c) financial futures andoptions; (d) exchange and interest-rate instruments; and (e) transferable securities; (viii) participationin securities issues and the provision of services related to such issues; (ix) advice to undertakingson capital structure, industrial strategy and related questions and advice as well as services relatingto mergers and the purchase of undertakings; (x) money broking; (xi) portfolio management andadvice; (xii) safekeeping and administration of securities; (xiii) credit reference services; and(xiv) safe custody services.

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participating interests and that do not also qualify as “credit institution” (as definedabove). EU-based financial institutions that are authorized to act as such in theirhome state on the basis of a certificate of supervised status, may rely on suchcertificate to provide the same services in the Netherlands (either via branch orcross-border), subject to prior notification to the DNB.

For non-EU financial institutions, a DNB license may be required, depending onthe specific nature of the services provided.

SecuritiesPursuant to the FSA, it is prohibited to offer securities3 to the public in theNetherlands or to or have securities admitted to trading on a regulated market(within the meaning of Directive 2004/39/EC) situated or operating in theNetherlands unless a prospectus drafted in accordance with Directive 2003/71/EC(the “Prospectus Directive”) has been approved by the AFM prior to such offeringor admission to trading. The implementing regulations promulgated pursuant tothe FSA contains several grounds for exemption from the prospectus requirement(e.g., offerings of securities with a consideration lower than EUR 2.5 million,which limit shall be calculated over a period of 12 months), offerings targetingexclusively-qualified investors, offerings to less than 100 persons not beingqualified investors in the Netherlands, offerings of securities with a minimumconsideration per investor/minimum denomination per security of EUR 50,000).Once a prospectus has been approved by the competent authority of a MemberState, a simple notification to the competent authority of another Member Stateis in principle sufficient in order for the issuer to be allowed to offer the securitiesat hand in such other Member State. Pursuant to current Dutch law, it is alsoprohibited to make a public bid for securities that are listed on a securities exchangein the Netherlands unless an offering document, which must meet certain specificcriteria, has been made public by the bidder in the Netherlands prior to such publicbid. The legislative proposal implementing Directive 2004/25/EC, which came

____________________3 Being: (i) tradable shares or other tradable securities or rights equivalent to tradable shares;

(ii) tradable bonds or other forms of negotiable securitized debt; or (iii) other tradable securitiesissued by a legal person, company or institution through which securities meant under (i) or (ii)may be acquired by the performance of the rights pertaining thereto or by conversion or that issettled in money.

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into effect in the Netherlands on 28 October 2007, introduced a compulsory bidrequirement for any (legal) person who/which, acting alone or in concert, acquiresa participating interest of 30% in a public company the shares of which are admittedto trading on a Dutch stock exchange.

Investment firms (i.e., brokers, dealers, “market-makers” and portfolio managers)must have a license to offer or render investment services in the Netherlands.To obtain such license, investment firms must comply with certain financial,administrative, and organizational requirements. The daily policy makers of suchfirms must also pass certain reliability and solidity tests. The requirements thatsecurities institutions have to fulfill are quite elaborate and the institutions areclosely monitored by the AFM for compliance. As a result of the implementationof the Markets in Financial Instruments Directive (“MiFID”) in the Netherlandsas of 1 November 2007, commodity derivative contracts now fall within the scopeof the definition of “financial instruments” under the FSA. Intermediation activitiesrelating to these “new” types of financial instruments are therefore, inter alia,subject to the aforesaid license requirement. Furthermore, investment firms areobliged to classify4 their clients in accordance with the MiFID rules prior to anyinvestment services being provided. Based on such classification, different regimesapply, notably in respect of the level of protection and pre-contractual informationdue to clients. Pursuant to the new best execution rules introduced by the MiFID,investment firms are required to draft an execution policy describing, for eachtype of financial instruments, the procedures and arrangements they have in placewith a view to providing best execution their clients. Under the MiFID rules,investment firms, including portfolio managers must implement (and regularlyreview) adequate measures and procedures to tackle, prevent, channel, and manageconflicts of interest. They must inform their clients in respect of the measures theyhave taken in order to tackle conflicts of interest. For EU-based investment firmsholding a permit to offer their services in another Member State, a notification tothe AFM is sufficient for them to offer their services in the Netherlands, eitherthrough a branch or “cross-border” (though several Dutch additional rules will stillapply to branches).

____________________4 Clients can be classified as either “professional client,” “eligible counterparty,” or “nonprofessional

client.”

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Entities that operate a regulated market or a Multilateral Trading Facility5 (“MTF”)are also required to have a license in order to be lawfully active as such in theNetherlands. Licenses are granted by the Ministry of Finance. Several Euronextentities,6 as well as MTS Amsterdam NV and European Energy DerivativesExchange NV currently hold a license to operate a regulated market in theNetherlands. In addition, the aforementioned Euronext entities also hold a licenseto operate Alternext Amsterdam, which is the only MTF currently active in theNetherlands.

The Market Abuse Directive has been fully implemented in the Netherlands.The AFM is responsible for the enforcement of the relevant provisions of the FSA,along with the Public Prosecution Service. It is prohibited to effect a transactionin or from the Netherlands involving listed securities (either in the Netherlandsor in a regulated market in another Member State) or similar instruments whilehaving inside information about a company that issued the said securities orinstruments. Inside information is specific information about a company that hasnot been published and, if published, can be expected to influence significantlythe price of the issued securities (or linked financial instruments), regardless ofwhether the price goes up or down. Issuers are obliged to maintain and regularlyupdate insider lists. It is also forbidden to manipulate any regulated market(i.e., worldwide) on which securities are traded that are also admitted to a regulatedmarket in the Netherlands.

____________________5 “Multilateral trading facilities” are trading platforms operated by an investment firm or a market

operator, which bring together multiple third-party buying and selling interests in financialinstruments in the system in accordance with non-discretionary rules, in a way that results ina contract.This is often referred to as ‘in-house matching’. As a result of the implementation ofMiFID cross-EU/EER, any entity holding a license to lawfully operate as a multilateral tradingfacilities in a member State may use such license as a so-called ‘European passport’

6 Including, inter alia, NYSE Euronext (International) BV, NYSE Euronext (Holding) NV, Euronext NV,Euronext (Holding) NV, NYSE Euronext (International) BV, and NYSE Euronext (Holding) NV

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Major disclosure reportingChapter 5.3 of the FSA contains amended7 reporting requirements in respect ofmajor holdings in Dutch public companies (i.e., the so-called NV’s) the shares ofwhich are listed on an EU regulated market (“Issuing Institutions”). This includes:

(i) reporting requirements applicable to Issuing Institutions themselves in respectof their issued share capital (e.g., reporting requirements for each change of1% or more compared with previous notification made);

(ii) initial and ongoing reporting requirements for managing directors and supervisorydirectors of Issuing Institutions in respect of their voting rights and participatinginterest in both the Issuing Institution at hand and so-called “related IssuingInstitutions”; and

(iii) ongoing reporting requirements for shareholders and other persons holdinga right to vote in the shareholders’ meeting of an Issuing Institution.

The scope of the below overview is limited to the above category under (iii). Pursuantto the FSA, any person or entity acquiring or losing control over shares in the issuedcapital of a Dutch public company the shares of which are listed on an EU regulatedmarket must report that change pursuant to the Disclosure Act if the change incontrol leads to a transgression of one of the thresholds laid down in the FSA.The following thresholds are applicable: 5, 10, 15, 20, 25, 30, 40, 50, 60, 75, and95%. The reporting requirements are applicable to changes in both the participatinginterest (i.e., shares) one holds and the total number of votes one is entitled to castin the general meeting of shareholders of the relevant Issuing Institution. The FSAcontains a very elaborate regime for the determination of both the entity obliged todisclose and the calculation of the relevant participating interests and/or total votesheld. Section 5:45 FSA lays down several general criteria based on which imputationof the participating interests and/or voting rights takes place.

For example, in general terms, a parent company is deemed to hold both theparticipating interests and the voting rights held by its subsidiaries; a subsidiaryis deemed not to hold any participating interests or voting rights. This rule mayresult in the parent company being obliged to aggregate and disclose differentparticipating rights and/or votes held in the same Issuing Institution by different

____________________7 The new provisions implement EU Directive 2001/34/EC in the Netherlands.

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subsidiaries. Similarly, in principle, a person is deemed to indirectly hold thevoting rights that a third party holds if such person has entered into a durable(i.e., for more than one shareholders meeting) voting agreement with such thirdparty (and vice-versa). The obligation to report changes also applies to indirectcontrol held through (security) interests (e.g., right of pledge, right of usufruct).Section 5:45 FSA also contains specific provisions with regard to participatinginterests and votes held by collective investment schemes and/or their managementcompanies. In certain cases, (temporary) exemptions may apply. The disclosureof major holdings in listed companies is enforced by the AFM.

Investment FundsPursuant to the FSA, it is prohibited to offer a participating right in a collectiveinvestment scheme the management company of which does not have a licensegranted by the AFM. A collective investment scheme is an investment company ora unit trust that solicits or obtains monies or other goods for collective investmentin order to allow the holders of participation rights to share in the income of theinvestment. A license to operate as (the management company of) a collectiveinvestment scheme in or from the Netherlands can be obtained from the AFM ifcertain financial, administrative, organizational, reliability, and solidity criteria aremet. An exemption from the requirement to obtain a license may apply if, forexample, the participation rights are exclusively offered to, and any monies orgoods are obtained exclusively from qualified investors or if such offer does notexceed 100 investors, not being qualified investors. An exemption may also applyto venture capital companies (participatiemaatschappijen).

(Management companies of) so-called Undertakings for Collective Investments inTransferable securities (“UCITS”) incorporated and duly licensed as such in aMember State of the European Union may offer their participation rights in theNetherlands subject to notification to the AFM, either cross-border or via a Netherlandsbranch. The AFM maintains a special register of these UCITS. Collective investmentschemes (not being EU-based UCITS) having their seat in a country where adequatesupervision is exercised (being currently, subject to change:

Guernsey, Ireland, Jersey, Luxembourg, Malta, and the United States of America)which intend to offer their participation rights in the Netherlands are obliged toinform the AFM of such intention, providing the AFM in due course with a so-called “certificate of supervised status” issued by the regulator of the relevant

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“adequate supervision country.” The AFM may reject such application if either thecontemplated offering or the related distribution scheme is not in accordance withthe applicable Dutch provisions. The AFM maintains a register of these “adequatelysupervised” collective investment schemes.

Other regulated activitiesIn short, the FSA also regulates, among others, the following activities/entities:

(i) insurance and reinsurance activities (including (re)insurance intermediationand advising on insurance-related products);

(ii) the offering, advising on, and intermediation in respect of individualinvestment objects;

(iii) the offering, advising on and intermediation in respect of financial products toconsumers (in most cases) in the Netherlands;

(iv) advertisements in respect of financial products in the Netherlands;

(v) the recognition and operation of securities exchanges in the Netherlands;

(vi) clearing institutions (i.e., entities whose business it is to conclude contractsregarding financial instruments with a central counterparty that acts as anexclusive counterparty in respect of these contracts, of which the provisionsindicating the essence of the performance correspond to the provisions formingparty of contracts concluded by third parties or by the party itself in itscapacity as a party to the contract, on a market in financial instruments andwhich indicate the essence of the performance in the latter contracts; and

(vii)the acquisition of a qualified holding (i.e., 10% or more) in a bank, collectiveinvestment scheme management company, UCITS, investment firm or insurerestablished in the Netherlands.

Money LaunderingPursuant to the Disclosure of Unusual Transactions Act (Wet Melding OngebruikelijkeTransacties), any company that renders financial services on a professional basis(e.g., banks and brokers) or other services involving the sale, or the mediation inthe sale, of means of transport, precious stones and metals, objects of art, antiquities,jewelry, jewels, and other precious objects to be designated by governmental decree

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must report “unusual” transactions to the Unusual Transactions Disclosure Office(Meldpunt Ongebruikelijke Transacties) of the Ministry of Justice. The Ministry hasestablished certain objective indicators to allow companies to judge whethera transaction is deemed unusual and should be reported.

Furthermore, pursuant to the Services Identification Act (Wet Identificatie bijDienstverlening), any company that renders specific (financial) services on aprofessional basis must verify the identity of a client before those services may berendered to that client in or from the Netherlands. Parties to transactions involvingthe sale, or mediation in the sale, of means of transport, precious stones and metals,objects of art, antiquities, jewelry, jewels, and other precious objects, which arepartly or wholly paid in cash must be formally identified under the ServicesIdentification Act. The identification requirements and reporting requirementsalso apply to other professionals, including attorneys, notaries, and tax advisors.

In order to implement the Third Money Laundering Directive, the Dutch legislatorhas proposed to change the Disclosure of Unusual Transactions Act and the ServiceIdentification Act. The new regulations will be ‘principles based’. Financialinstitutions had indicated that the very specific requirements for customeridentification were unnecessarily confining. Instead of prescribing the exact processof gathering the relevant information, the new rules will focus on the goal, ratherthan the means.

Customer identification requirements will be based on a ‘risk oriented approach’.Service providers must consider the client, relationship, product or transaction inorder to determine the risk involved. The Disclosure of Unusual Transactions Actwill include, inter alia, the responsibility to identify transactions of which theobvious objective is money laundering or terrorist financing and to refrain fromfacilitating such transactions. How institutions will determine these factors is, intheory, up to them. The Dutch financial regulator has taken the view that institutionswill develop their own policy in this regard, which will be subject to their scrutiny.

Another proposal has been made to combine the two separate Acts into one coherentAct. Both proposals are currently being debated in the House of Representatives(“Tweede Kamer”). No expected implementation date has been published.

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XIII. Visa, Residence Permit, and Work Permitfor Non-EU Nationals

1. Visit to the Netherlands Not Exceeding

Three MonthsMany foreign nationals do not require a tourist or a business visa to enter theNetherlands if their stay will not exceed three months. It is advisable to check withthe Dutch Embassy or Consulate whether a visa is required. The visa is issued for amaximum period of 90 days, and is not extendible. Furthermore the holder of thevisa may remain no longer than 90 days within half a year within the SchengenArea. Member States of the Schengen Area are: Austria, Belgium, the CzechRepublic Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Italy,Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal,Spain, Slovakia, Slovenia, and Sweden.

2. Visit to the Netherlands Exceeding Three MonthsA foreign national intending to remain in the Netherlands for more than threemonths must apply for a residence permit.The conditions for obtaining a residencepermit depend entirely on the purpose of coming to the Netherlands. In thischapter, a residence permit for the purpose of work will be handled. A foreignnational intending to work and reside in the Netherlands must, usually, obtain threetypes of documents:

(i) A temporary residence permit (Machtiging tot Voorlopig Verblijf or “MVV”), whichenables the holder to enter the Netherlands. Please note that an MVV is notrequired for citizens of the European Economic Area, the European Union andSwitzerland, Japan, Canada, Australia, Monaco, and New Zealand.

(ii) A residence permit, which enables the holder to live in the Netherlands; and

(iii) Under certain conditions, a work permit, which enables the holder to work inthe Netherlands.

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There are two different procedures for applying for an MVV:

(i) The foreign national can apply in the country where he or she lives; or

(ii) The employer in the Netherlands or the person with whom the foreign nationalwill be staying in the Netherlands can apply on his or her behalf.

Depending on the purposes of stay, obtaining an MVV can take between two weeksto six months. For employment purposes, and if the Dutch employer applies bymeans of the expedited procedure, the MVV will usually be granted within two tothree weeks. Please note that during the MVV procedure, the foreign national isnot allowed to enter or reside in the Netherlands.

3. Residence permitA foreign national who intends to stay in the Netherlands for more than three monthsand who has gained entrance to the Netherlands, is required to obtain a residencepermit (verblijfsvergunning). Please note that a residence permit will not be grantedif the foreign national was first required to obtain an MVV. The residence permit isgenerally issued for a maximum of one year and if no changes of circumstances haveoccurred, it is extendible on a yearly basis. After having been in the possession ofa residence permit for five years, the foreign national may apply for a permanentresidence permit.This permanent residence permit is renewable every five years.

4. Work permitAn employer who wants to recruit an employee from outside the EU/EEA usuallyneeds to apply for a work permit for that employee. For completeness’ sake, pleasenote that the Netherlands has (temporarily) opted out for the full mobility of theworkforce in respect of two new EU members. In this respect, for those nationalsfrom Romania and Bulgaria, work permits are usually required.

There are different procedures for applying for a work permit. The applicableprocedure depends entirely on the applicant’s specific circumstances and the natureof the company he or she is being posted from and the nature of the companywhere he or she will be working in the Netherlands.

Generally, the Dutch employer must prove that the labor market has been scannedfor workers who have priority. In this respect, the employer must prove that the

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vacancy has been reported to the Centre for Work and Income and, usually, to theEuropean Employment Service (EURES) for at least five weeks prior to the workpermit application. Furthermore, the employer is required to advertise the job in aDutch national newspaper, a professional journal, and must have engaged a recruitmentoffice. If a company is unsure whether it is subject to the said reporting obligation,the company is advised to consult our office in advance. In order to avoid unexpectedrefusals, companies should be cautious about assuming that a job does not need tobe reported to the various authorities. Please note that application procedures fordifferent types of employment require extensive preparation.This is not only necessaryfor the application as described above, but also for those who want to stay in theNetherlands as self-employed, or for those who want to work in a university, thefield of sports, or elsewhere. Several exceptions exist, and for this reason, it isadvisable to contact our office timely.

5. Knowledge Migrant WorkersSkilled and highly educated foreign workers do not require work permits to workin the Netherlands. This regulation is applicable to those who hail from Romaniaand Bulgaria and those countries which are not members of the EuropeanEconomic Area.

As of 1 January 2008, a knowledge migrant worker is one employed in the Netherlandsand receives an annual salary of at least EUR 47,565 (from the age of 30 onwards)or EUR 34,881 (up to and including the age of 29). Knowledge economy workerswill not be covered by the Dutch Foreign Employment Act but are expected tocomply with the rules of the Immigration and Naturalization Service (IND). Theknowledge migrant worker must therefore apply for the required residence permitand the IND will decide whether to grant the residence permit. This decision willbe taken within a short period (approximately two to three weeks) assuming thatthe IND receives a complete application.

An important requirement for admission as a knowledge migrant worker is thatthe future employer has a contract with the IND. For completeness’ sake, pleasenote that the IND will sign the contract only with an established legal entity in theNetherlands where the knowledge migrant worker will be employed. Consequently,no contracts will be signed with entities established in a foreign country.

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XIV. Labor Law

1. TermAn employment contract may be concluded verbally or in writing. A written contractmay take the form of an agreement or letter signed by both parties. In either case,the employer is obliged to inform the employee in writing of the conditions applicableto his or her employment. The information to be provided by the employer isbased on peremptory law and must include, but is not limited to the following:

• the parties’ identities and places of residence;

• the place of work;

• the length of the employee’s normal working day or week;

• the initial base salary and any other pay components, vacations, and the noticeperiod; and

• whether a pension arrangement is in place.

An employment contract may be concluded for an indefinite term (as in an open-ended contract), for a specified term (as in a fixed-term contract), or for a specifictask or project. If no term (or special task) is specified, the contract will be deemedopen-ended.

Probationary PeriodParties to a contract may agree on an initial probationary period in writing only.The length of the probationary period must be the same for both parties.Thestatutory maximum probationary period for an employment contract for an indefiniteterm is two months. The statutory maximum probationary period for a fixed-termemployment contract is one month if the contract covers a period of less than twoyears, and it is two months if the contract covers a period of two years or more.Deviations to the detriment of the employee are possible pursuant to a collectivelabor agreement. If the maximum period is exceeded, the probationary period willbe invalid altogether. During the probationary period, either party may terminatethe contract at any time, without observing a notice period and without any liability

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for severance pay unless the termination is, for instance, for discriminatory reasons.At the employee’s request, the employer must provide the causes for termination ofthe employment contract during the probation period.

2. Non-Competition ClauseNon-competition clauses, applicable for a certain scope of activities, certaingeographical area, and for a certain number of years, are quite common in theNetherlands. In order to validly restrict an employee from accepting competingemployment after termination of the employment contract, the non-competitionclause must be agreed upon in writing and signed by both parties and the employeemust be at least be 18 years of age at the time of signing. The mere reference toa non-competition clause in a collective labor agreement and/or internal rules andregulations will not suffice. A request for enforcement of the non-competitionclause by the employer can be restricted or denied by the court. The court mightdeny the request of the employer for enforcement of the non-competition clausewhen an employee becomes too restricted by the non-competition clause in findinga new job as a consequence of this clause which is too broad. A non competitionclause may become invalid if the responsibilities ensuing from the employee’sposition are substantially amended in the course of employment.

3. Termination

Open-ended ContractsAn employer must obtain approval from the Dutch Center for Work and Income(“CWI”) before terminating an employment contract. After obtaining approvalfrom the CWI, the employer may terminate the employment contract, with dueobservance of the statutory or agreed-on notice period, unless there is a ban ontermination imposed by law (e.g., illness or pregnancy). Any dismissal by anemployer without the approval of the CWI is void. This procedure usually takesabout four to eight weeks, depending on the circumstances of the case.

Under certain circumstances, this approval of the CWI is no longer required. Dueto new legislation in 2006, the CWI will no longer subject the business economicalnecessity for dismissal to a test if the employer and the trade unions have reachedan agreement on that subject.

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Fixed-term ContractsAn employment contract entered into for a specified term or for a specific projectends by operation of law upon expiration of the term or completion of the project,without giving any notice thereof.

Within three years, an employee can be given no more than three consecutivefixed-term contracts that end by operation of law (and therefore require no noticeof termination). If more than three fixed-term employment contracts are concludedbetween the same parties at intervals not exceeding three months or if the totalduration of successive contracts is three years or longer, the last employmentcontract will be deemed to be a contract for an indefinite period, i.e., an open-ended contract.

A fixed-term employment contract of three years or longer may be extended onceimmediately after it expires (for no more than three months) without giving rise toan open-ended contract and therefore without giving any notice of termination.

Termination by Mutual ConsentAll employment contracts may be terminated at any time by mutual consent, withor without observance of the statutory or agreed-on notice period and with or withoutpayment of compensation. It is important for the employer to make sure that theemployee’s consent to the agreement is unambiguous. It is therefore recommendedthat the employee seeks legal advice in this respect before accepting it.

Immediate Termination for Urgent CauseA party to an employment contract may be confronted with a situation in which hecannot reasonably be expected to continue the employment relationship (urgentcause). If the employee causes the situation, the employer is entitled to terminatethe contract effective immediately. The employee has a similar right. The law setsforth a number of examples of “urgent causes,” such as gross negligence in theperformance of duties, divulging trade or professional secrets, theft, fraud,embezzlement, or crimes involving a breach of trust. However, only the competentcourt can determine whether the facts of a given case actually constitute urgent cause.

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Termination by the CourtAn employer or an employee may request the Cantonal Division of the competentcourt to dissolve an employment contract. Courts handle employment matters andoperate quite independently of the CWI.

Employers and employees have the right to file a petition for dissolution of anemployment contract. The Cantonal Division of the competent court will dissolve acontract only for serious cause. A serious cause may be an “urgent cause” (i.e., reasonssuch as those described in subsection [4] above or a “change of circumstances” thatjustifies termination of the contract on short notice. Dissolution by court order maybe requested at any time, whether the contract is on a fixed term or open-ended,and even if the employee is pregnant, sick, or disabled. The employer must, however,be able to prove that dissolution of the employment contract is not in any wayrelated to the employee’s illness. In the case of termination on the ground of achange in circumstances, the competent court may decide to award compensationaccording to the principle of reasonableness. Whether compensation is awardedand how much is awarded depends on several circumstances (e.g., the employee’sage, position, future prospects, number of years of employment, and the like).According to the commonly used “Cantonal Court Formula,” severance pay iscalculated by multiplying the number of weighed years of service by the grossmonthly salary and an “adjustment factor.” Years of service up to the age of 40 aremultiplied by one, years of service between 40 and 50 are multiplied by 1.5 andyears of service from the age of 50 and over are multiplied by two.

The basis is the fixed (gross) monthly salary plus all fixed and agreed-on salarycomponents, such as structural bonus payments. Other perquisites, such as pensionpremiums, are in principle not taken into account. Case law, however, shows thatunder some circumstances, courts consider stock benefits to be part of the employee’ssalary and for that reason, take the rights under a Stock Option Plan into accountwhen calculating severance pay and may even rule to continue a Stock Option Planafter termination of an employment contract.

In a “neutral” situation, the adjustment factor is set at one. If the termination of theemployment relationship can be blamed on the employer, the factor will be higherthan one. If the employee is to blame, the factor will be less than one.

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Manifestly Unreasonable DismissalEven if an employer has terminated an employment contract with due observanceof the notice period after first obtaining permission from the CWI, the dismissalmay nevertheless be manifestly unreasonable. A dismissal is considered “manifestlyunreasonable” if, for instance, the consequences of termination are unreasonablyharsh for the employee (in view of the severance payment, if any, awarded by theemployer and the likelihood that the employee will find other types of suitableemployment) compared with the interests of the employer. If an employee believesthat his or her dismissal was manifestly unreasonable, he or she may petition thecompetent court for damages.

Managing DirectorTerminating the employment contract of a Managing Director appointed pursuantto the Articles of Incorporation (“statutair directeur”) is different from terminating anemployment contract with an ordinary employee, because a Managing Director hasa twofold relationship with the company: a corporate relationship and an employmentcontract. Depending on the company’s Articles of Incorporation, the shareholders’meeting is, in most cases, authorized to dismiss a Managing Director from his or hercorporate position as Managing Director. The Managing Director must be giventimely notice of the meeting and his intended dismissal and be given the opportunityto defend himself against the intended dismissal. The employment contract of theManaging Director may in principle also be terminated during the same meeting ofshareholders. The employer may terminate the employment contract without theprior approval of the CWI. In the case of dismissal, the notice period should inprinciple be observed. However, this is not a legal requirement. The company mayreplace it by paying (at least) the equivalent of the salary due during the applicablenotice period.

Payment of additional compensation may be required, depending on thecircumstances. If no compensation is offered, the termination may be deemedmanifestly unreasonable, in which case, damages may be awarded. The court rulesin cases involving Managing Directors, whereas the Cantonal Division of the courtis usually competent in labor cases.

As stated above, a distinction must be made between the corporate and employmentrelationship of Managing Directors. After the aforementioned requirements have

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been met, the Managing Director’s corporate position and civil position (as anemployee) will be terminated. This is different, however, if the Managing Directorreported ill before having received the invitation for the shareholders’ meeting.If a Managing

Director were to become ill, the meeting of shareholders could dismiss him fromhis position as Managing Director under corporate law, but termination of hisemployee status would not be permitted, as the Managing Director would beprotected by the prohibition to give notice during illness. In such cases, theemployer is obliged to petition the competent Court to dissolve the civil lawemployment relationship.

In the event that the company has established a Works Council and the ManagingDirector is the consultation partner of the Works Council (i.e., “bestuurder”within the meaning of the Works Councils Act), the Works Council should berequested for its prior advice regarding the intended dismissal of the Directorbefore seeking termination.

4. Works CouncilUnder the Dutch Works Councils Act, enterprises with 50 or more employeesmust establish a Works Council. Part-time employees and those who are hired inor out are, in principle, also counted when determining the number of employees.The purpose of the Dutch Works Councils Act is to promote consultation betweenmanagement and employees with regard to the business and policies of the company.The members of the Works Council are chosen directly by the employees fromamong their own ranks. The number varies from three to 25, depending on thenumber of employees in the company. One of the members is appointed chairperson.A Managing Director cannot be a member of the Works Council. The WorksCouncil has no executive power and, in general, may only advise management inconnection with the company’s business. The management of the company andthe Works Council meet at least twice a year. During those meetings, discussionsabout subjects concerning the company that either management or the Works Councilbelieves merit deliberation are held. The management has an obligation to providethe Works Council with the necessary data and documentation (such as the financialresults and the legal structure of the company) and to inform it about the resultsand the prospects of the company. As of 1 September 2006, the Works Council alsohas a right to information on the height and content of the terms and conditions of

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employment with respect to different groups of employees, the income developmentbetween the different groups of employees in the company, and the developmentin relation to the previous year. The management has an obligation to provide theWorks Council with this information.

The management must furthermore consult the Works Council in connectionwith a number of important subjects, such as a transfer of control of the company,termination of or a major change in the company’s activities, major investments,significant reorganizations, mergers, takeovers, changes of location or majorworkforce layoffs, and dismissals. In principle, the Works Council must also beconsulted on the appointment and dismissal of a Managing Director if the latterhas sole authority, or shares joint authority with others, over the workforce.

The Works Council has a power of veto over a limited number of decisionsthat directly affect employment conditions, such as pension plans or in-houseemployment regulations.

Members of the Works Council are obliged to observe strict confidentiality withrespect to what they learn during meetings with management. In principle, theycannot be dismissed from employment during their membership without thecourt’s permission.

Enterprises with at least ten but fewer than 50 employees that do not have a WorksCouncil, are required to set up a “personnel representation committee” if themajority of the personnel so requests. Management must consult with the personnelrepresentation committee on a number of subjects, such as proposed decisionsthat may result in job losses or in major changes in the working conditions of at leasta quarter of the employees.

Small enterprises with fewer than ten employees may also set up personnelrepresentation committee on a voluntary basis.The committee has the samefacilities at its disposal as a personnel representation committee in an enterprisewith ten to 50 employees. However, its powers are more limited.

If an enterprise with at least ten but fewer than 50 employees has neither personnelrepresentation committee nor a Works Council, it is obliged to give its employeesthe opportunity to meet with the owner twice every calendar year. The DutchWorks Councils Act also provides the personnel with certain advisory powers.

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It is impossible to give an exhaustive overview of Dutch labor law in thispublication. (Please do not hesitate to contact us if you require further informationor if you would like to receive updated information.)

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XV. Social Security and PensionsWith respect to social security within the Netherlands, a distinction should bemade between:

• national insurance and

• employee insurance.

With respect to social security system within the Netherlands, a distinction shouldbe made between:

• national insurance and

• employee insurance.

1. National InsuranceThe types of insurance in the national insurance system apply to all residents of theNetherlands, irrespective of their nationality. The following Acts fall under thiscategory:

• General Old Age Pensions Act (Algemene Ouderdomswet or AOW).The obligation to pay premiums ends at the age of 65;

• General Surviving Relatives Act (Algemene Nabestaandenwet or ANW);

• General Child Benefit Act (Algemene Kinderbijslagwet or AKW);

• Exceptional Medical Expenses (Compensation) Act (Algemene Wet bijzondereziektekosten or AWBZ).

PremiumsIn general, all premiums paid within the national insurance system are levied withand part of the personal income tax rates. As of 1 January 2008, 17.9% is leviedfor the AOW premiums, 12.15% for the AWBZ and 1% for the ANW premiums.The AKW premium is 0% because it is funded by the government.

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2. Employees’ InsurancePerforming employment activities in the Netherlands in general, leads to compulsoryinsurance in compliance with the following Acts:

• Sickness Benefits Act (Ziektewet or ZW);

• The Work According to Labour Capacity Act (Wet Werk en Inkomen naarArbeidsvermogen or WIA) (The amount of the premium paid varies, dependingon the type of work and the type of company) and Disablement Insurance Act:(Wet op de arbeidsongeschiktheidsverzekering or WAO).

• Unemployment Insurance Act (Werkloosheidswet orWW);

• The New Health Insurance Act (Nieuwe Zorgverzekeringswet) (The employer isobliged to compensate his employee for the mandatory income related contributionof 7.2% of the annual salary up to a maximum of EUR 2,249 in 2008);

• The New National Assistance Act (Nieuwe Algemene Bijstandswet or NABW).

The NABW helps people to provide basic living standards for themselves whenthey are not entitled to any other benefit.

WIA/WAOThe Disablement Insurance Act (WAO) is replaced by the Work According to LabourCapacity Act (WIA) on 1 January 2004. Currently, the Disablement InsuranceAct is merely applicable to employees who became or would become ill before1 January 2004. Therefore, employees who received WAO benefits before1 January 2004 will still be covered by the WAO.

The Disablement Insurance Act insures employees for a wage replacement benefitafter 104 weeks of full or partial disability. The WIA creates incentives for rehabilitationand reintegration into the workforce.

This act, divides disability into two plans: one for individuals who are incapable ofworking due to full permanent disability (IVA) (a) and one for individuals with aremaining ability to work and therefore earn some income (WGA) (b). Individualswho are less than 35% disabled (earn more than 65% of the maximum hourly wage)(maatman inkomen per uur) are not eligible for a WGA benefit (nor IVA benefit).

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Employers have the choice of self-funding the disability benefit and/or insuring thisrisk with private insurers, or pay contributions to a government agency (Authorityfor Employee Insurance, UWV).

Full and permanent Disability (IVA)As of 1 January 2007, full and permanent disabled employees are entitled to 75%of their last salary (which is maximized to the maximum daily wage).

Employees, who in 2006 already received an IVA benefit, have received a raise of70% up to 75% with retroactive effect from 1 January 2007.

Partial Disability (WGA)Partially disabled employees are entitled to 70% of their last salary (which ismaximized to the maximum daily wage). The duration of this benefit will bedependent on their employment history, which must be at least six months toa maximum of five years.

After the wage-related benefit, partially disabled employees who returned to workwould be entitled to supplemental wage benefits equal to 70% of the differencebetween prior earned wages before unemployment (maximized to the maximumdaily wage) and the current wages. However, individuals who were partiallyunemployed would receive income benefits equal to 70% of the minimum wagemultiplied by the percentage of their disability.

PEMBAThe Dutch Premium Differentiation and Market Operation Act (theWet Premiedifferentieen Marktwerking bij Arbeidsongeschiktheidsverzekering or PEMBA) took effect on1 January 1998 and applied to all types of disablement insurances.

The purpose of PEMBA was to differentiate the disability premium on a company-by-company basis which depended on a company’s disablement risk. The premiumwas to be fully paid by the employer. Companies having few employees fallingunder the disablement legislation would therefore pay a low premium. Conversely,those with several such employees pay a high premium.The premium differentiationwas valid for five years. Companies could take out insurance to cover this risk.

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As of 1 January 2008, there are no more individual (for large employers) norbranch-wide (for small employers) differentiated premium obligation regardingthe WAO. All the public insured employers are obliged a uniform premium forthe WAO from that time on.

Moreover, the possibility of premium differentiation for the IVA is also notimplemented, as intended, and employers therefore, are not allowed to take theIVA risk upon themselves (or insure this risk).

Employers are currently allowed to take the WGA risk upon themselves for a periodof four years, with the possibility of differentiation in premium.

As of January 2007, all the WGA benefits have been funded by a basic and adifferentiated premium. The differentiation of the premium will be applied on acompany-by-company basis. If the employer chooses to take the WGA risk himself(or insure the risk), there is no obligation to pay the differentiated premium.

Employers will have the possibility to recover the WGA expenses on the employeesto a maximum of 50%.

3. Sickness and DisabilityUnder present Dutch law (Article 7:629 of the Dutch Civil Code), employers areobliged to continue paying the salary of ill employees for a maximum of 104 weeks.During an employee’s period of illness, the employer is obliged to pay at least 70percent of his or her most recent salary for the first 52 weeks (based on the statutoryminimum wage) and for a period of 104 weeks (based on the maximum daily wage)or until the date on which the employment contract expires, if earlier. Please notethat in November 2004, Social Partners (bodies representing employers andemployees or unions) and the Dutch Government reached an agreement, whichimplied that employers would pay a maximum of 70% of the last salary (up to themaximum daily wage) in total during 104 weeks of illness. Research shows,however, that in practice, social partners do not yet comply with this agreementand the 70% maximum is exceeded in most of the Collective BargainingAgreements (CBAs).

Furthermore, both the employer and the employee have far-reaching obligationswith respect to reintegration. Both parties are obliged to adopt an active approach

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in this respect. In this light, the employer must make sufficient efforts to reintegratethe employee to the extent possible, even in case of one whose employment contractwill end on short notice.

4. Dutch Pension SystemThe pension system in the Netherlands is based on this three-tier system:

(a) The first tier of the Dutch pension plan is the government pension known asthe Old-Age Pension or “AOW (Dutch: Algemene Ouderdoms Wet).” All residentsof the Netherlands are entitled to an AOW pension when they reach the age of65. There is no relation between the amount of the AOW benefit and theamount of contributions paid.

(b) The second tier consists of old-age pension benefits that are supplementary tothe AOW, disability pension, supplementary to Dutch disability law (WIA),and supplementary to a governmental provision for surviving relatives (ANW),a surviving-relatives pension. All these second-tier pensions are financed bycontributions paid by the employer and/or the employee. There are manyways in which the second-tier pension benefits can be arranged. We willexplore this in further detail later on.

(c) The third tier of the Dutch pension system consists of private insurance for theemployee’s salary that is in excess of the second-tier benefits. Employeessometimes arrange for additional pension plans with their employer byconcluding agreements with life insurance companies.

Please note that as of 1 January 2007 the new Pension Act has come into force.This new Pension Act replaced the Dutch Pension and Savings Fund Act (Dutch:Pensioen- en Spaarfondsenwet). The new Pension Act offers more clarity aboutresponsibilities and liabilities between the employer, the employee, and the pensionfunds/insurance companies.

Second-tier Pension BenefitsAlthough in principle, employers are not obliged to provide pension benefits, thereare some situations in which they do not have an option. In some branches (industries),a compulsory Industry Wide Pension plan (Dutch: BPF) is effective. Similarly, as of1 January 2007, employers who do not inform the new employee of the willingness

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to offer a pension plan or not within one month after he starts his job, and who arealready offering a pension plan to their other employees in the same line of business,will be considered to have offered the same pension plan to the new employee.Furthermore, various forms of legislation on equal treatment (age, man/woman,full-time/part-time, temporary labor contracts/indefinite labor contracts, and thelike), existing collective labor agreements, or some specific merger and acquisitionsituations might also lead to pension obligations for the employer.

The second-tier pensions, by law, are held by industry-wide pension funds,company pension funds, or by insurance companies. The following options apply:

1. joining an industry-wide pension plan (this might be compulsory);

2. setting up a company pension plan through self-administered funds approved bythe Ministry of Social Affairs and supervised by the Dutch National Bank(DNB) and the Authority Financial Markets (AFM); and

3. insuring employees with a life insurance company, licensed by the DutchSupervisory Authorities.

Three Insured Pension PlansAs an alternative to an industry-wide pension plan or a company pension plan,pension plans may be fully insured by a life insurance company that is licensed inaccordance with the Dutch Act under the supervision of the Insurance Industry.Insuring a pension plan by a life insurance company as mentioned above, can bedone by means of a “B Policy.” A “B Policy” means setting up insurance entitlementbetween employer and an insurance company, e.g., a life insurance company thatensures the employees an individual or collective entitlement. In contrast to theformer Pension and Savings Fund act, the new Pension Law as of January 2007 nolonger allows new pension plans to be based on a C-Policy, making it possible forthe employee to take out a policy with a licensed life insurance company by givingan allowance for purchasing such an insurance). Insurance companies use deferredannuity contracts as the funding instruments, combined with risk insurance toprovide pre-retirement and post-retirement death benefits and a waiver of premiumson disability. The rates are mostly based on an interest discount rate of 3% a year.Because investment returns tend to be higher, a “profit” or “gain” can be generatedon the policies.

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Several Ways to Finance and Arrange SupplementaryPension BenefitsThere are several ways in which old-age pension benefits can be arranged and financed,i.e., by a defined benefit system or a defined contribution system.

Defined Benefit system (DB)A DB system can take the following forms:

a. Final Pay System; and

b. Average Pay System.

Final Pay SystemUnder the Final Pay System, the pension accrued is a fixed percentage of thepensionable base (salary minus franchise) applicable in the initial year as of thecommencement date of service or the commencement date of the pension plan.With regard to future increases of the pensionable base, pension claims areallocated to the previous years of service from the commencement date ofemployment or of the plan. Therefore, the amount of the old-age pension dependson the employee’s salary on the pension date, the years of employment and thefranchise.

Advantage of the final pay system:

• Under the final pay system, any salary increases lead to an ideal pension accrual,because the pension is based on the most recent salary.

Disadvantages of the final pay system:

• The pension costs may increase out of control due to salary increases (thusincreasing the pensionable base) at a later age. Conversely, upon a reductionof the pensionable base, the pension costs will also be progressively lower.

• If employment is terminated, time-proportional pension claims must be paidup, i.e., the total pension claims on the basis of the employee’s most recentsalary, less the pension claims in relation to the period between the terminationdate and the pension date.

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Note: Moderate Final Pay SystemTo prevent a situation in which pension increases at a later age will lead to majorcosts increases, the final pay system often includes provisions to limit the costs.A frequent provision stipulates that the pensionable bases after a certain age (55or 60 years) are taken into account only with respect to future years of service.Alternatively, it may be determined that promotions after the employee reachesa certain age (55 or 60 years) no longer count for pension increases, but only theusual periodical salary increases. Employers have to be aware that these kinds ofstipulations might be in conflict with Dutch equal treatment law.

Average Pay SystemIn this system, the pension accrual is a fixed percentage of the pensionable base inthe first year as of the commencement date of employment or the commencementdate of the plan. Upon each consecutive increase of the pensionable base, a pensionis accrued only for years of service yet to come. In this way, the pension to bedistributed on the pension date is calculated on the average of all pensionable basesover the entire period of participation in the plan.

Advantages of the average pay system:

• The costs of an average pay system can generally be estimated easily and keptunder control, because pension increases following major salary increases aregranted only for future years of service (average);

• If the pensionable base decreases due to a lower salary, the pension loss will besmaller, as salary decrease occurs later in the employee’s career; and

• Upon termination of the employment contract, there will be no need to pay upany time-proportional pension claims.

Disadvantage of the average pay system:

• Pension accrual is not ideal, particularly if a major salary increase occurs at alater age. This can be compensated to some extent by indexing the pensionclaims

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Defined Contribution System (DC)A DC system can take the following forms:

a. Defined Contribution System; and

b. Collective Defined Contribution System.

Defined Contribution SystemUnder a defined contribution system, it is not the final pension that is the standard,but the costs that form the basis of the pension commitment. Thus, rather thana pension commitment, a premium commitment is involved.

Advantages of the defined contributions system:

• A premium system is one in which the employer can control the costs;

• The International Financial Reporting Standards (IFRS) will not lead to anyrecords of pension obligations in the company books (balans). The pensionpremiums will be shown only in the profit and loss account (resultaten rekening);

• Upon termination of the employment, the employer need not pay up any timeproportional pension claims;

• If the pensionable base decreases, the pension accrued by the employee in thepast will not be affected;

• In a defined contribution system, it is still possible to accrue a full pension of70% of the employee’s final pay; and

• As pensions are partly the responsibility of the employee, premiums can be usedto accrue pension at the employee’s discretion. For instance, the employeecould insure only an old-age pension rather than an old-age pension incombination with a surviving relatives’ pension.

Disadvantages of the defined contribution system:

• Older employees who develop their career later in life in a situation with a highrate of inflation may not accrue a full pension;

• As the employee gets older, the years for premium payment become fewer,which means that less pension can be accrued;

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• Upon marriage, cohabitation, or expansion of the family at a later age,provisions for surviving relatives have to be financed from the same premiums;and

• The final pension, owing to different circumstances (investment risks, interest,and the like) is not as easy to forecast. Therefore, it is impossible to indicatethe relation between the employee’s final pay and the insured pension on thepension date.

Collective Defined Contribution system (CDC)As of 2005, International Financial Reporting Standards (IFRS) for companiesquoted on the stock exchange has led companies to reconsider their existing DBpension plans. The impact of IFRS on the company books, when having a DBpension plan, is tremendous. The Project Unit Credit (PUC) method based onIFRS used, leads to very high pension liabilities in the company books due to thefact that this method takes into account discount rates, salary increases, periods ofservice, inflation, and other actuarial factors.

Although most of the companies affected by IFRS do not wish to be confrontedwith the high liabilities in the company books, most of them also wish to keep theadvantages of the DB System. The combination of the two leads to a so-calledCollective Defined Contribution system.

A CDC pension plan, based on the Average Pay System, might show the followingaspects:

• The employer pays on a yearly base (within a few years), a prefixed pensionpremium;

• Extra risk insurance is already included in the pension premium;

• The pension fund will use the DB system to divide the pension accrual, makingthe yearly pension accrual flexible;

• The basic assumption will be that the premium should provide for the expectedpension. However, if there is a mismatch in expectations and in the final result,the employees will collectively carry the actuarial/investment risks andbenefits; and

• Indexation might be paid by extra interest profits.

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The Dutch National Bank (DNB), however, has already been very critical on the so-called CDC pension plans and has interpreted some of these plans as a DB plan.The interpretation of the DNB has a direct effect on the way the pension plan hasto comply with specific pension provisions. The important interpretation for IFRSmight depend on the interpretation of the pension plan system by the specificaccountant. This means that the CDC pension plan might not be IFRS-proof, whichwill imply a considerable risk for the employer.

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XVI. Competition Rules and Free Movementof Goods

1. Competition RulesThe EC competition rules provided in Articles 81 and 82 of the EC Treaty havedirect effect in the Netherlands. Individuals can therefore invoke these articlesbefore the Dutch courts and they are obliged to apply them.

Article 81(1) of the EC Treaty prohibits agreements and concerted practices betweenundertakings (natural or legal persons) the object or effect of which is to prevent,restrict, or distort competition in the European Union (EU) and which may affecttrade between EU Member States.

Such restrictive agreements or practices may, however, benefit from an exemptionpursuant to Article 81(3). This exemption applies if the agreement or practiceimproves the production or distribution of goods or services, or promotes technicalor economic progress, while allowing consumers a fair share of the resulting benefit,provided that the agreement neither imposes restrictions that are not indispensableto the attainment of these goals, nor afford the parties the opportunity to eliminatecompetition in respect of a substantial part of the products or service in question.

Whether a certain agreement or practice satisfies these conditions for exemptionhas to be determined by means of self-assessment. To facilitate this self-assessment,the Commission provides guidance through the “Modernization Package,” a set ofnotices and one procedural regulation.

In addition, the Commission has adopted the so-called Block Exemption Regulationsthat automatically exempt certain categories of agreements. EC Block ExemptionRegulations currently exist in relation to, inter alia, technology transfer agreements,motor vehicle distribution, specialization agreements, research and developmentagreements, as well as other agreements in specific sectors, such as the insurancesector and the transport sector. All Regulations have direct effect and are directlyapplicable in the Netherlands.

An important EC Block Exemption Regulation is that for vertical agreements thattook effect on 1 June 2000. In principle, the Regulation automatically exempts

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from Article 81(1) of the EC Treaty all vertical agreements for the purchase or saleof goods and services, provided that the supplier’s market share does not exceed30% and the agreement concerned does not contain any “hard core provision.”

Typical hard core restrictions are fixed and minimum resale price maintenance,absolute territorial restrictions, and absolute customer restrictions. Agreementsexceeding the 30% market share threshold are not eligible for automatic exemption,but may still be exempt pursuant to Article 81(3) following an individual self-assessment. Non-competition restrictions imposed on a purchaser in a verticalagreement are generally required not to exceed five years.

Article 82 of the EC Treaty provides that any abuse of a dominant position by oneor more undertakings within the EU (or a substantial part of it) is prohibited iftrade between EU Member States may be affected. Illustrations of possible abusivebehavior are excessive pricing (whether low or high), fidelity rebates, anddiscriminatory practices.

Upon infringement of the Article 81 or Article 82 prohibition, the EuropeanCommission is empowered to impose fines of up to 10% of the worldwide groupturnover of undertakings involved.

The EC Merger Regulation, which gives the European Commission control overmergers and acquisitions, as well as certain types of joint ventures, with aCommunity dimension is also directly applicable in the Netherlands. If certainmonetary thresholds are met, a transaction is considered to have a Communitydimension, and prior notification and clearance of such transaction is mandatory inthe EU. Transactions that fail to meet the monetary thresholds of the EC MergerRegulation may still be caught by the local merger control regimes of MemberStates.

2. Dutch Competition ActThe Dutch Competition Act (Mededingingswet) took effect on 1 January 1998. TheDutch Competition Act implements a prohibition system virtually identical to thatof Articles 81 and 82 of the EC Treaty.

Article 6(1) of the Competition Act contains a general prohibition against restrictiveagreements or practices whether of a horizontal or a vertical nature, provided thatthe de minimis thresholds are exceeded. Agreements or practices that violate the

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prohibition are void. Moreover, parties to such an agreement or practice run therisk of fines of up to EUR 450,000 or 10% of the worldwide group turnover of theundertakings concerned, whichever is higher.

The Competition Act contains a de minimis exception. The general prohibitioncontained in Article 6 of the Act will not apply to cases involving a maximum ofeight companies with a combined turnover of not more than EUR 5.5 million inthe case of goods and EUR 1.1 million in all other cases, such as the provision ofservices. Similarly, the prohibition contained in Article 6 of the Act will not applyif (i) the combined market share of the companies involved is not more than 5%on any of the relevant markets which is influenced by the agreement, decisionor concerted practice; and (ii) the combined turnover of the companies withregard to the relevant goods or services was not more than EUR 40 millionin the previous calendar year.

Similar to Article 81 of the EC Treaty, agreements or practices prohibited underArticle 6(1) of the Competition Act may, under certain conditions, be exempt.Whether a certain agreement or practice satisfies these conditions for exemptionhas to be determined by means of self-assessment. As previously stated inparagraph 1 above, the European Commission has provided guidance for thisself-assessment through a set of notices.

Under the Competition Act, present and future EC Block Exemption Regulationsapply directly in the Netherlands. Any agreement benefiting from exemption underan EC Block Exemption Regulation is automatically exempt. Present and futureEC Block Exemption Regulations also apply to purely Dutch restrictive agreements,as a practical result of which the EC Block Exemption Regulations have remainedthe most relevant documents to scrutinize any and all commercial agreements.

In addition, there are specific Dutch block exemptions for certain exclusivityarrangements relating to shopping malls, promotional pricing campaigns ofa limited duration, and for certain joint tender arrangements.

The Competition Act further prohibits abuse of a dominant position by one or moreundertakings. Generally, this principle also applies to undertakings or governmentalbodies entrusted with the operation of services of a general economic interest, as issimilarly outlined in Article 82 of the EC Treaty.

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The Competition Act also provides for a system of prior merger control. In orderto fall within the ambit of the Dutch merger control provisions, the proposedconcentration (i.e., merger, joint venture, or takeover) must meet the followingthreshold: the undertakings concerned must together, generate a total worldwideturnover of at least EUR 113.45 million in the previous calendar year, of which atleast EUR 30 million must have been generated in the Netherlands by each of atleast two of the undertakings concerned in the previous calendar year. Differentthresholds apply to the banking and the insurance sectors.

However, the NMa does not have to be notified of a concentration if it falls withinthe jurisdiction of the European Commission (the “one-stop-shopping” principle).The EC Merger Regulation enables firms that are involved in a concentration overwhich the Commission does not have automatic jurisdiction to benefit from one-stopshopping. If the transaction has to be notified in three or more Member States, it ispossible for the parties involved to request that only the Commission reviews thetransaction, and not the individual national competition authorities.

The parties to the concentration are free to decide when to notify a merger, but theproposed merger is not allowed to be implemented until four weeks after formalnotification (Phase 1). Within the four-week period, the NMa will inform thenotifying parties as to whether a license is required. If the NMa fails to notify theparties within this period, the proposed concentration will be deemed approved.If the NMa decides within the four-week period that no license is required, partiesare free to implement the transaction.

The NMa may decide that a license is required if it has reason to believe that theconcentration will significantly restrict effective competition on the Dutch marketor a part thereof, especially as a result of the creation or strengthening of a dominantposition. Without that license, the concentration may not be realized and the partieswill need to file a separate notification (Phase 2). Within 13 weeks, and uponcloser examination, the NMa will either grant or refuse the license. The licensewill not be granted if the concentration is seen to significantly restrict effectivecompetition on the Dutch market or a part thereof, especially as a result of thecreation or strengthening of a dominant position.

The Dutch Minister of Economic Affairs has the power to ultimately decide whetherto approve a concentration, thereby overruling the NMa’s refusal, if he believes thatoverriding social interests are involved.

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The NMa has the power to impose fines of up to EUR 450,000 or 10% of a company’sworldwide group turnover (whichever is higher), if parties fail to notify a notifiableconcentration. The fine for withholding information or providing inaccurate ormisleading information to the authorities will amount to a maximum of EUR 450,000or to 1% of the company’s worldwide group turnover. For infringements of theprohibition against restrictive agreements or abuse of a dominant position, the NMahas the power to impose fines of up to EUR 450,000 or 10% of the worldwidegroup turnover of the undertakings concerned, whichever is higher.

Since 1 October 2007, the NMa can also fine natural persons for giving instructionsor exercising de facto leadership with regard to an infringement of the DutchCompetition Act. The maximum fine that can be imposed on a natural person isEUR 450,000.

3. Public Procurement RulesTo a large extent, the Dutch Public Procurement Law consists of legislation andrules in which the EC Public Procurement Directives are converted. Aside fromthis, several regulations exist which contracting authorities are either allowed orobliged to apply.

Prior to 1993, substantial Dutch legislation regarding public procurement did notexist. Legislation only existed with regard to public works contracts. In order tocover the entire EC public procurement legislation, the Framework ProcurementAct (Raamwet EEG-voorschriften aanbestedingen) was enacted in 1993. This actconstitutes a framework law on EC procurement rules.

At present, the Framework Procurement Act functions as a legal basis for RoyalDecrees, by which EC public procurement legislation is implemented. Two RoyalDecrees came into force on 1 December 2005, the result being that the Dutchgovernment complied with its obligation to implement the two ProcurementDirectives before 31 January 2006. The first is the Decree Public ProcurementSpecial Sectors (Besluit Aanbestedingen Speciale Sectoren), which implements theUtilities Directive. The second is the Decree Public Procurement (BesluitAanbestedingsregels voor Overheidsopdrachten), which implements the other “Classic”Directive (regarding services, works, and supplies).

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Before 1 December 2005, the EC Directives on public procurement were implementedunder Dutch law by means of a mere reference to these Directives. The adoptionof the new Royal Decrees resulted in a full text implementation with which thelegislator has kept as close as possible to the original text of the Directives. The onlyreferences made to the Directives are there to implement the models forannouncements and to the financial threshold values.

Despite the full text implementation, the text and order of the Royal Decrees havebeen slightly modified with regard to the Directives. For instance, contrary to theDirectives, the rules on the scope of enforcement of the Directives have beenbundled in the Royal Decrees and some of the longer articles of the Directives havebeen shortened to several paragraphs to enhance the legibility.

Furthermore, the Alcatel8 jurisprudence of the EC Court of Justice has been included,unlike in the Directives. Another addition was put in the Royal Decrees to complywith the Dutch obligations under the Agreement concerning the EuropeanEconomic Area and the Government Procurement Agreement.

Most optional procedural provisions of the Directives have been taken over andspecifically implemented in the Royal Decrees.

Naturally, if there is room for debate on the scope of the definitions or clauses inthe Royal Decrees, the main rule of the La Scala9 case will apply, being that theDirective must be interpreted in such a way as to ensure that it is given full effect.Before the end of 2008, the Dutch government is planning to enact a bill that is toreplace the Framework Procurement Act. This bill, known as the Procurement Act(Aanbestedingswet), was passed by the Dutch Lower Chamber and is currently beingconsidered by the Dutch Upper Chamber. Aside from implementing the Directives,the Procurement Act is intended to serve as a tool for the Dutch government for amore accurate execution of European and international procurement obligations.The two Royal Decrees will remain in force when this new framework law is adoptedin order to timely implement any modifications of the Directives, developments incase law, any international obligations regarding public procurement, and specificnational additions to the Directives.

____________________8 EC Court of Justice, 28 October 1999, C-81/98 Alcatel Austria.9 EC Court of Justice, 12 July 2001, C-399/98 La Scala.

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____________________10 Ministry of Defense, Ministry of Agriculture, Ministry of Transportation and Ministry of Housing,

Spatial Planning and Environment.11 However, with the adoption of the new Procurement Act, procurement disputes can no longer be

settled before the Court of Arbitrators.12 The Directives do not have a direct effect on the residents of the EU member states.

The Works Procurement Regulation 2005In the Dutch system, the four “building” ministries10 are obliged to apply theWorks Procurement Regulation 2005 (Aanbestedingsreglement Werken- ARW 2005)for contracts both within the scope of the Directive and national procurementprocedures, for instance, those below the respective threshold value. The applicationof this Regulation is not mandatory for noncentral authorities, say, municipalities.Some municipalities might still use the old Uniform Procurement of WorksRegulations (Uniforme Aanbestedingsreglementen, for instance, the UAR 2001 or theUAR EG-1991), which are based on the old Directives, and refer disputes to theCourt of Arbitrators.11

The Works Procurement Regulation 2005 is fully compliant with the Directive andthe Royal Decree. If there is any discrepancy between the different regulations, theRoyal Decree prevails.12

The regulation can also be voluntarily used by all other contracting authorities forEuropean and national procurement procedures. The regulation provides for twodifferent sets of rules: one for European procurement procedures and one fornational procurement procedures. The national public procurement procedures donot have a statutory basis within the Dutch legal system. However, due todevelopments in both European and national case law, the general principles ofprocurement law (such as the principles of nondiscrimination objectivity andtransparency) should also be complied with in cases where the Directives do notapply. In these cases, the Works Procurement Regulation 2005 could help thecontracting authorities to put up work in accordance with these principles.

Contracting authoritiesContracting authorities are the state, regional or local authorities, bodies governedby public law, or associations formed by one or several of such authorities (jointlyreferred to as “public authorities”). The definition of “state” is given a functional

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interpretation, rather than a formal approach. In the Netherlands, there are morethan a thousand entities that can qualify as public authorities that have to adhere tothe Framework Procurement Act.

Moreover, as far as the utilities sector is concerned, contracting authorities aredefined as public authorities or public undertakings that exercise relevant activities.Besides, if an entity which is not a public undertaking, exercises relevant activitieson the basis of special or exclusive rights granted by a competent authority, it is alsoregarded as a contracting authority, regardless of its legal status. As a consequence, theFramework Procurement Act can also be applicable to private companies. Apartfrom certain important exemptions, relevant activities for the purpose of theUtilities Directive are as follows:

• the provision (in short) of services to the public in connection with the production,transport, or distribution of drinking water, electricity, gas, or heat (or theirsupply);

• the exploitation of a geographical area for the purpose of:

1. exploring for or extracting oil, gas, coal, or other solid fuels; and

2. the provision of airport, maritime or inland port, or other terminalfacilities to carriers by air, sea, or inland waterway;

• the operation of networks providing a service to the public in the field oftransport by railway, automated systems, tramway, trolley bus, or cable; and

• the provision or operation of postal services.

The Framework Procurement Act does not apply to contracts that the contractingauthorities award for purposes other than the pursuit of relevant activities. TheFramework Procurement Act refers to the various threshold values, which arestated in the Directives.

Main principlesDutch public procurement law that implements the EC Directives is based onfour principles:

• adequate advertising of the intention of the contracting authorities to placepublic procurement contracts, so that companies have the opportunity tocompete for the award of the contracts;

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• a ban on the use of technical specifications which favor or eliminate certainundertakings;

• objective criteria for the participation to and the award of public contracts; and

• the general principles of proper government.

The first three principles are corollary to the general principles of procurementlaw, such as nondiscrimination, objectivity, and transparency. According to Dutchand EC case laws, contracting authorities should always comply with the generalprinciples of proper government and the general principles of procurement law,regardless of whether or not the Framework Procurement Act applies.

AdvertisingAdvertising rules oblige contracting authorities to send notices to the Office forOfficial Publications of the EC in Luxembourg. The content of notices may differ.It is determined by various publication requirements. Notices can or must take theform of indicative notices after the beginning of the budgetary year, call for tender,design contest notices, notices on the existence of a qualification system, or noticeson contracts awarded.

Voluntary use of advertising possibilities for contracts, which fall outside the scopeof the Framework Procurement Act, is allowed. On a regular basis, notices are alsopublished in the Official Gazette (Staatscourant) and Cobouw, a newspaper for theconstruction industry. The Dutch government promotes electronic procurement;for instance, through the Internet.

As stated above, Dutch and EC case laws require compliance with the generalprinciples of procurement law and proper government. This entails, inter alia, thatthe contracting authority should always exercise a proper level of transparencywhile procuring contracts.

Award proceduresAward procedures include the following:

• the open procedure;

• the restricted procedure;

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• the negotiated procedure; and

• the competitive dialogue.

If the open procedure is followed, all interested contractors, suppliers, or serviceproviders may submit tenders. If the restricted procedure is followed, only thosecontractors, suppliers, or service providers that have been invited may submit tenders.

If one is not invited, a request to participate in the procedure can be made. If thenegotiated procedure is followed, contracting authorities may consult contractors,suppliers, or service providers of their choice and negotiate the terms of contractwith one or more of them. This is not allowed when the open or restrictedprocedure is followed.

The Directives have introduced a new procedure, being the competitive dialogue,which is also implemented by the Royal Decree in the Dutch legal system.

Contracting authorities who wish to execute a complex project are often unable toascertain their specific needs to consequently set those down in specifications forthe project.

For those projects, the Directives have introduced a more flexible procedure fora contracting authority to assess its needs and to organize the procurement procedurein a regulated dialogue with the preselected tenderers. With the introduction ofthe competitive dialogue procedure, the possibility to use the negotiated procedureis more limited than before.

Time limitsTime limits for the receipt of requests or tenders may be fixed by contractingauthorities, but may not be less than indicated in the EC Directives. In cases whereurgency renders the time limits impracticable, they may be reduced.

Selection criteriaCriteria for qualitative selection consider the company (and not the contract).In some cases, a separate category of criteria is allowed by the use of additionalspecific conditions, for instance, the capability of a company to hire long-termunemployed workers. By not defining these criteria, uncertainty has been createdas to what extent public procurement can be used by governments as an instrumentto execute a social or economic policy.

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Criteria for qualitative selection are divided into criteria for the evidence of thecompany’s financial and economic standing on one hand, and for the evidence of thecompany’s technical knowledge or ability on the other. Registration in an official listof recognized companies may be used as an alternative evidence to prove suitability.

Award criteriaPublic contracts are awarded on the basis of one of two possible criteria. Contractsare either awarded to the tender with the lowest price only or to the one that iseconomically most advantageous. When the award is given to the economicallymost advantageous tender, various criteria, including the price, are taken intoaccount, such as running costs and technical merit. The Framework ProcurementAct does not address the application of the EC state aid regime. Regionalpreference schemes, used when awarding public procurement contracts, may stillexist in practice, but are likely to be prohibited if as a result, a percentage of thecontracts is restricted to certain companies established in a certain area of theNetherlands.

4. Import and Export: Free Movement of GoodsTrade to and from the Netherlands (like trade to and from any other EU MemberState) is subject to the rules on the free movement of goods. Articles 28 to 31 ofthe EC Treaty provide that all measures that tend to restrict imports from orexports to other EU Member States are prohibited. Such restrictions can bejustified only in exceptional cases, e.g., for reasons of public security, the protectionof health and lives of human beings, animals or plants, or the protection of industrialand commercial property.

The general rule is that any product that has been legally manufactured andmarketed in another EU Member State should be allowed to circulate freely withinthe Netherlands, and vice versa. Articles 28 to 31 of the EC Treaty have a directeffect in the Netherlands and can be invoked before Dutch courts. With regard totrade between the Netherlands and other EU Member States, all customs dutieshave been abolished.

The common EU customs tariff rate applies to trade between the Netherlands andnon-EU countries. In addition, the European Commission’s import and exportregulations for trade with non-EU countries must be observed. Depending on the

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country of origin or the destination of a product or the type of goods (e.g., textiles,dual-use, or strategic goods), import or export licenses may be required. Additionalcontrols exist for certain goods, such as livestock or chemicals.

5. The European Economic AreaThe European Economic Area (EEA) Agreement took effect on 1 January 1994.The EEA consists of the 27 EU Member States13 plus Iceland, Norway, andLiechtenstein. The EEA Agreement provides for a set of competition rules, whichare virtually identical to the EC competition rules. In addition, the free movementof goods rules mentioned above also apply to goods of EEA origin.

6. StandardizationOne of the objectives of the Community is to eliminate technical barriers totrade and to promote the use of European standards. In furtherance of this aim,a considerable number of EC Directives have been enacted to harmonize technicaland safety requirements, and have been implemented in the Netherlands and inother Member States, as well. These Directives relate to the lawful marketabilityof a variety of products, such as machinery, toys, and medical devices. Productsthat are produced in conformity with European standards are presumed to be inconformity with the EC Directives on Technical Harmonization. Products thatcomply with those Directives are required to carry the CE mark and can be freelymarketed throughout the European Union.

____________________13 Member States: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,

France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, theNetherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, and theUnited Kingdom.

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XVII. Intellectual Property

1. PatentsPatents filed on the basis of extensive research can be registered in the Netherlandsfor a period of 20 years. As of June 2008, it is no longer possible to file for short-term patents (with a validity of six years), as these patents create too many legalinsecurities due to the lack of an extensive research as part of the applicationprocedure. Applications for a Dutch patent must be submitted to the IndustrialProperty Office (Bureau voor de Industriële Eigendom) in Rijswijk, the Netherlands.As of June 2008, the description of the patent application may be filed in theEnglish language. The conclusion thereof, however, still needs to be filed in theDutch language.

The owner of a patent may grant licenses to third parties for the use of its patent.If it is considered necessary for the public interest, or if the patent is not adequatelyused in the Netherlands within three years after its rights are granted, the ownercan be compelled to grant a license. Compulsory licensing can also be enforced ifthere is a certain level of dependency between an existing patent and the applicationfor which the license has been requested, if it contains an important new technology.

The Dutch Supreme Court gave way to cross border relief in multi-jurisdictionalpatent infringement cases in 1989 in its Lincoln v. Interlas judgment. Since then,Dutch courts have allowed for cross border injunctions in numerous instances.The possibilities for obtaining cross border injunctions have been restricted lately.The Court of Appeal in The Hague in its decision of 1998 EGP/Boston Scientificrequired the Dutch defendant to be the “the spider-in-the-web,” i.e., the companydetermining the policy with respect to all companies involved in the allegedlyinfringing act in other EU countries where the cross border injunctions was sought.Recent European case laws (European Court of Justice in 2006 in its decisionsGat/Luk and Roche/Primus) have further restricted the possibilities to obtain cross-border injunctions.

The Netherlands is a party to the (1975) Treaty of Paris for the Protection ofIndustrial Property, the (1973) European Patent Convention, the (1970) PatentCooperation Treaty, and the (1963) Strasbourg Convention.

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Applications for a European patent can be filed with the European Patent Office inMunich, Germany, or with its subdivision in Rijswijk, the Netherlands.

2. CopyrightThere are no formalities required to obtain copyright protection. A work qualifiesfor copyright protection if it has an “original and personal character”.Therefore,copyrightable works made or published in most countries of the world will likewisebe protected under the Dutch 1912 Copyright Act (Auteurswet 1912). Copyrightprotection continues for 70 years after the death of the author or, in some cases,after the publication of the work. The Netherlands is a party to the 1886 BernConvention on the protection of literary and artistic works and the 1952 UniversalCopyright Convention.

The Dutch 1912 Copyright Act has been amended to implement the EuropeanDirective of 22 May 2001 on the harmonization of certain aspects of copyrights andrelated rights in the Information Society (the “Copyright Directive”). The amendedDutch Copyright Act entered into force on 1 September 2004. The CopyrightDirective introduces a reproduction right, a right of communication to the public,and a distribution right. Further to the implementation of the Copyright Directive,the Dutch 1912 Copyright Act has introduced new exceptions and limitations, suchas the exception of use for purposes of caricature, parody, or pastiche. Furthermore,new provisions with respect to the protection of technological measures and rightsmanagement information have been included in the amended Dutch 1912Copyright Act.

As a result of Directive (EC) 2001/84 of 27 September 2001 on “droit de suite,”the Dutch Copyright Act has recently been amended to introduce a right ofremuneration for the original author on further sale of an original work (“droitthe suite”).

The Netherlands is one of the few European Union Member States likewise, toprotect non-original works, such as phone books, timetables, and other collectionsof data, provided that they are meant to be made available to the public. However,the scope of protection is limited.

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3. Neighbouring RightsPerforming artists, producers of sound recordings and broadcasting companiescan claim neighbouring rights that are related to copyrights under the Dutch 1993Neighbouring Rights Act (Wet op de naburige rechten). Registration is not required.Neighbouring rights may be exercised for a period of 50 years after the first ofJanuary of the year following the year of the initial performance. Further to theimplementation of the Copyright Directive, the Dutch 1993 Neighbouring RightsAct has also been amended.

4. Protection of DatabasesApart from protection under Dutch copyright law, databases have obtained sui generisprotection further to the implementation into Dutch law of the European Directive96/9 of 11 March 1996 on the legal protection of databases. The producer of adatabase is granted exclusive rights to prevent extraction and/or reutilization of thewhole or of a substantial part, if the database shows that there has been a qualitativelyand/or quantitatively substantial investment in obtaining, verifying, or presentingthe contents. The rights run from the date of completion of the database and willexpire 15 years from the first of January of the year following the date of completion.

In its judgment in 2004 of the British Horseracing Board v.William Hill case, theEuropean Court of Justice has limited the scope of costs involved that can contributeto qualifying an investment as substantial. For instance, the costs involved withthe mere creation of data are not relevant. Furthermore, the European Court ofJustice decided that with respect to the scope of database protection, the economicvalue of the extracted or reutilized data is of no importance with regard to theinfringement question.

5. TrademarksBelgium, the Netherlands, and Luxembourg, forming together the Benelux region,have had a uniform trademark protection law since 1971. The EC TrademarksDirective 89/104 of 21 December 1988 has been implemented in the BeneluxTrademarks Act. On 1 September 2006 the Benelux Trademarks Act and theBenelux Designs and Models Act have been merged into the Benelux Treaty forIntellectual Property.

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In principle, trademark owners can oppose the use or registration of a younger signthat is identical and is used for identical goods or services. Furthermore, trademarkowners can oppose the use and/or registration of an identical or similar youngersign that is used for identical or similar goods or services if there exists a likelihoodof confusion.

If an identical or similar trademark has been filed for similar or dissimilar goods orservices, a trademark owner can, in principle, oppose the use of the younger sign ifits existing registration is well known in the Benelux countries and if the use of theyounger sign takes unfair advantage of, or is detrimental to the distinctive characteror reputation of the existing trademark.

In addition, a trademark owner can oppose the use of a younger sign if it is used inany way other than to distinguish goods and such use, without a valid reason, takesunfair advantage of, or is detrimental to the distinctive character or reputation ofthe existing trademark.

To acquire protection, a trademark has to be registered with the Benelux Officefor Intellectual Property in The Hague, in accordance with the Benelux Treaty forIntellectual Property. In principle, words, symbols, colors, three-dimensionalshapes (of a product or packaging), and sounds that distinguish goods or servicescan be registered as trademarks.The Benelux Office for Intellectual Property mayrefuse signs that are not distinctive, misleading, or are in violation of public order.Unregistered trademarks are, in principle, not protected. A trademark registrationis valid for 10 years and can be renewed for another 10 years. It is also possible toregister collective trademarks. The said trademarks distinguish certain collectivecharacteristics of goods and services (e.g., seals of approval, logos for the environment),rather than to distinguish the goods and services themselves.

Since 1 January 2004, the Benelux countries have introduced an opposition procedure,that allows trademark owners to oppose an application for registration of aconflicting sign with the Benelux Office for Intellectual Property. The goal of theopposition is to obtain clarity at an early stage whether a trademark can beregistered or not. Furthermore, the new rules are meant to encourage parties toreach an amicable settlement whenever possible. As of January 2006, oppositionsmay be lodged against new trademarks filed for goods and services in all classes.

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It is also possible to apply for a European Community Trademark registration,which covers all the Member States of the European Union. Trademark attorneyscan file applications in any EU country. On 1 May 2004 the Czech Republic,Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, and the SlovakRepublic joined the EU. Trademark protection of existing European CommunityTrademarks has been extended to these countries automatically and without cost.Owners of older national trademark rights in one of the new Member States canfile an opposition against an allegedly conflicting European Community Trademarkbut only if the same was filed between 1 November 2003 and 30 April 2004.Romania and Bulgaria joined the EU on 1 January 2007. Community trademarkapplications filed between 1 July 2006 and 1 December 2006 can be subject tooppositions based on earlier rights in these new Member States.

The Netherlands is also party to the Madrid Convention and the Madrid Protocol(“the Madrid System”), which makes it possible for persons or legal entities with areal and effective industrial or commercial establishment in a country that is a partyto the Madrid System, and for persons or legal entities with domicile or a registeredseat in an EU Member State, to extend a Benelux trademark registration to anotherMember State and vice versa. In general, the main advantage of internationalregistration is that it is cheaper than filing individual national applications forregistration. The disadvantage of international trademark registration is that itautomatically lapses or is cancelled in all Member States if the national application/registration on which the international registration is based, lapses or is cancelledwithin five years after the international registration.

Countries that are party to the Madrid System and/or the Paris Treaty can claimpriority rights within six months after the application date of the first registration.With Global IP Manager (“GIPM”) Baker & McKenzie can provide web-basedworldwide trademark portfolio management services. GIPM enables our clientsto review instantly online, all IP matters being handled by Baker & McKenzie.Organized by country, legal action, or structured according to brand categories,GIPM replaces the need for in-house attorneys to trace information on the statusof pending applications or current contentious matters.

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6. Designs and ModelsThe provisions of the Benelux Treaty for Intellectual Property protect registereddesigns and models for functional products, i.e., features of shape, ornaments,or patterns. Applications for registration are filed with the Benelux Office forIntellectual Property or with the International Bureau for the Protection ofIndustrial Property, in the case of international applications.

Novelty and having a “distinctive character” are conditions for protection, butoriginality of design is not required. Nevertheless, a design is still considered newif it has been made public for the first time within 12 months before the filing.Pursuant to EC Directive 98/71 of 13 October 1998 (European Directive on theLegal Protection of Designs), the Benelux Designs and Models Act was amendedand came into force on 1 December 2003. As a result, the possibilities of takingaction against design infringements on the basis of unfair competition (tort) havebeen broadened. The Benelux Designs and Models Act was merged into the BeneluxTreaty for Intellectual Property on 1 September 2006. The term of protection(five years) can be extended four times, for a maximum total of 25 years.

As a result of EC Council Regulation 6/2002 of 12 December 2001 on CommunityDesigns, a new and separate system has been created for the protection of designsin the European Community. This system also incorporates an UnregisteredCommunity Design right, which provides protection for three years from the daythe product incorporating the design is made available to the public in the EU.This design right, granted by law without formalities and free of charge, has beenavailable since 6 March 2002. It only allows the owner to oppose the use of identicaldesigns, whereas the Registered Community Design right entitles the owner to alsooppose the use of designs that produce a similar impression. The latter right providesprotection for a five-year period, which can be renewed four times (a total of25 years of protection). Applications for this right are to be filed with the OHIM(Office for Harmonization in the Internal Market) of the EU. The OHIM beganaccepting applications on 1 January 2003.

The Netherlands is a party to the The Hague Agreement for the InternationalRegistration of Designs and Models. This agreement makes it possible to apply for“international registration” in all Member States. Registration is effected with theWorld Intellectual Property Organization in Geneva. Countries that are a party to

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the Paris Treaty can claim priority rights, within six months, to acquire a prioritydate, as of which the owner of the design or model can object to all identical andsimilar design or model applications and registrations.

7. Trade NamesThe Dutch 1921 Trade Name Act (Handelsnaamwet) prohibits the use of names thatare identical or similar to those already being used by another enterprise, if suchuse can cause confusion among the public. A company cannot acquire the right toa trade name merely by registering it with the Trade Register, but must also use it.

8. IP Enforcement Directive 2004/48/ECThe IP Enforcement Directive was adopted on 26 April 2004 by the EU memberstates in order to harmonise the enforcement of intellectual property rights withinthe EU, based on the European Commission’s view of best practice across the EU.As of 1 May 2007 the provisions of the IP Enforcement Directive have beenimplemented into various Dutch IP laws.

The Directive’s provisions include procedures covering evidence and the protectionof evidence and provisional measures such as ex parte injunctions and seizure.Remedies available to intellectual property right holders include the destruction,recall or permanent removal from the market of illegal goods, as well as financialcompensation, injunctions and damages. There is also a right of information allowingjudges to order certain persons to reveal the names and addresses of those involvedin distributing illegal goods or services, along with details of the quantities andprices involved.

9. Anti-counterfeit MeasuresAs a member of the European Union, the Netherlands has implemented measuresto harmonize customs controls with respect to IP rights. Council Regulation (EC)1383/2003 lays down the measures concerning the importation into the EuropeanCommunity and the export or re-export of counterfeit goods from the same.These measures provide an effective tool in protecting most IP rights against thecounterfeit trade.

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Under the Council Regulation, customs can either independently take action bydetaining goods that are suspected of infringing certain IP rights, or customs cantake such action provided that the holder of these IP rights has filed an appropriatenotice with customs. The process for filing a customs notice is relatively simple andstraightforward. Customs charges no administrative costs for processing the filingof such notice. Once customs has detained goods, the right holder is given theopportunity to either settle the matter amicably by having the goods surrenderedafter which the counterfeit goods can be destroyed, or to commence civil orcriminal proceedings. Practice shows that the goods are usually surrendered fordestruction to avoid legal proceedings. Aside from the voluntary surrender of thegoods, it is also possible to obtain the presumed agreement to the destruction ofthe goods, in case the carrier, consignor, or consignee does not oppose a requestfor surrender.

With “BorderWatch” and “BorderResponse,” Baker & McKenzie has introduced globalweb-enabled tools to (cost) effectively fight counterfeit on the customs level on aglobal basis. BorderResponse is a pre-litigation enforcement service on a fixed feebasis, which includes customs recordation of intellectual property rights, preparingcease and desist letters, and dealing with initial responses from the adverse partiesto reach a settlement.

BorderWatch is an online service offering tips on intellectual property protectionthrough customs procedures in 55 countries. BorderWatch features 55 countryreports on customs procedures and enforcement options, including information onfiling customs notices, acting on a detention or seizure, practical tips and advice,customs registration forms, contact details for customs, and local legal assistance.

10. AdvertisingMisleading advertising is primarily addressed under the tort law.The Dutch CivilCode declares it a tort to misrepresent the nature, composition, quantity, quality,characteristics, user possibilities, origin, or price of a product.

Comparative advertising is permitted under Dutch law provided it gives an objectivecomparison of one or more material, relevant, verifiable, and representative featuresor qualities of the products or services being compared. Other trademarks maybe used in such comparisons provided that the advertisement does not harm thereputation of the other trademark.

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In the case of misleading or unlawful advertising, an injunction, a rectification, orcompensation for damages can be sought before the Dutch courts based on therelevant provisions of the Dutch Civil Code.

Furthermore, advertising standards for specific industries are regulated by separatelaws and the industry itself. The Dutch Advertising Code (Nederlandse ReclameCode) is an example of such self-regulation and provides that advertising must bein accordance with the law, the facts, and good taste and that it may not be contraryto the public interest, public order, or common decency. Advertising that misleadsthe public, e.g., the price or origin of a certain product is prohibited. Specificregulations apply to advertising directed at children and to the advertising ofproducts such as alcoholic beverages, pharmaceuticals, and financial products.

The advertisement of tobacco products has been banned in the Netherlands. TheDutch Tobacco Act also restricts the use of tobacco trademarks and distinguishingsigns for non-tobacco products.

In addition to the option of taking legal action, a complaint can be filed with theAdvertising Code Committee and its Board of Appeal. Although decisions of eithergroup are not legally binding, negative decisions are normally respected by theaffiliated media, which will refrain from publishing the advertisement in question.The Advertising Code Committee and its Board of Appeal can render an “individualrecommendation” which is communicated only to the plaintiff and the offenderin question, or it can render a “public recommendation” which is published invarious media.

The advertising of pharmaceuticals is regulated by the Pharmaceuticals Act(Geneesmiddelenwet). The advertising of pharmaceuticals is further regulated bythe self-regulatory codes, such as the Code of Conduct for the Advertising ofPharmaceuticals of the Stichting Code Geneesmiddelenreclame and the Code for theAdvertising of Medicinal Products to the General Public of the Stichting KeuringsraadOpenlijke Aanprijzing Geneesmiddelen (KOAG).

The advertising of pharmaceuticals (including the grant of incentives to healthprofessionals) is strictly regulated. Public advertising of non-prescriptionpharmaceuticals is allowed under certain conditions, but public advertising ofprescription pharmaceuticals is prohibited. Advertising to health professionals isallowed provided that certain requirements are complied with. Strict rules applyto comparative advertising for pharmaceuticals.

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Complaints on misconduct of the Code of Conduct for the Advertising ofPharmaceuticals can be filed with the Code Committee of the Stichting CodeGeneesmiddelenreclame. Complaints on misconduct of the Code for the Advertisingof Medicinal Products to the General Public can be filed with the Code Committeeof the Stichting KOAG. Appeals against the Code Committees decisions can be filedwith the respective Boards of Appeal. It is also possible to initiate court proceedingsagainst competitors based on unfair competition.

The advertising through (promotional) games of chance is strictly regulated bythe Act on Games of Chance (Wet op de kansspelen) and the Code of Conduct onPromotional Games of Chance (Gedragscode promotionele kansspelen). A violation ofthese regulations is an economic offense.

Under the code of conduct, a maximum of one promotional game of chance perproduct, service, or organization per year is allowed. No costs other than the costsof communication may be charged for participation in a prize draw. Furthermore,such costs of communication may not exceed EUR 0.60 per entry and must beclearly communicated before entry. The price of the product or service may not beincreased merely because of the prize draw. The total amount of any winnings mustnot exceed EUR 100,000. In addition, there must be no more than 13 prize drawsin one promotional game of chance.

The organizer of a promotional game of chance must use general terms andconditions which include certain information, such as the name and address of theorganizer, the period during which the prize draw is open, the number, nature andvalue of the prizes, the communication costs, the date of the prize draw, the waythat the tax on games of chance will be paid, and the like.

For “small promotional games of chance,” where the total value of the prizes is lessthan EUR 4,500, the regulations are less strict.

In case a promotional action consists of a performance that can be adjudicated,the promotional action will not qualify as a game of chance but as a prize contest.In that case, the total value of the prizes may not exceed EUR 2,300.

11. Advertising and freedom of expressionArticle 7 of the Dutch constitution regarding the freedom of expression does notapply to commercial advertising. However, the corresponding Article 10 of the

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European Convention on Human Rights (ECHR), which supersedes the nationalconstitutions within the EU, does not exclude commercial advertising. This impliesthat, according to European law, commercial advertising can fall under the scope ofthe right to freedom of expression.

In practice, the scope of protection of Article 10 ECHR for commercial advertisingseems limited. It does not provide advertisers an unrestricted right to advertise fortheir own benefit and at their competitor’s expense. In Dutch and European caselaws, it has been established that in case of a conflict between commercial advertisingand, for instance, the intellectual property rights of a competitor, the court willweigh the interests involved. Generally, the commercial interest of advertising willnot prevail over the interest of protection of intellectual property rights.

12. Unfair CompetitionUnder certain conditions, recourse may be claimed against passing off or unfaircompetition under Dutch tort law. To base a claim against unlawful reproductionor copying of goods on unfair competition, it will generally have to be demonstratedthat the unlawful acts lead to (a danger of) confusion among the public which couldhave been avoided without hampering the reliability and usefulness of the goodsconcerned. Furthermore, it will have to be demonstrated that the unlawful acts inquestion caused damages for the plaintiff.

Other unlawful acts, such as unfairly competing with one’s former employer, theftof trade secrets, or misleading (comparative) advertising claims, can also be redressedon the basis of unfair competition under Dutch tort law.

In December 2003, the possibilities to base legal action against design infringementson unfair competition became less restrictive, by an amendment of the BeneluxDesign legislation.

13. Trade SecretsTrade secrets are generally protected by contract rather than by law. They may,however, also be protected by tort law under certain circumstances (see “UnfairCompetition” above).

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14. Assignment, Licensing, and PledgeFurther to the specific provisions under Dutch intellectual property law, theassignment, licensing, and pledge of certain intellectual property rights are subjectto the general provisions of Dutch property and contract law and European andDutch competition law. No government approval is required. However, in orderfor certain assignments, licenses, and pledges such as patents, trademarks, designand models, topographies, or plant breeders’ rights to be effective against thirdparties, they must be registered with the applicable registration offices.

15. Treaties and General European LegislationIn addition to the treaties mentioned above, the Netherlands is also party to interalia, the TRIPs agreement (effective since 1 January 1996) and the Paris Conventionestablishing the World Intellectual Property Organisation.

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XVIII. Telecommunications

1. Market SituationThe Dutch telecommunications sector has been fully liberalized since 1 July 1997.Various operators are active in all sectors of the electronic communications industry.

2. Basic Legislation and Regulatory AuthoritiesOn 19 May 2004, the new Dutch Telecommunications Act (Telecommunicatiewet, orTW) took effect, replacing the TW of 19 November 1998 and implementing the2002 EU Directives on electronic communications. Like its predecessor, the TW isa framework act, many details of which are further specified in secondary legislation(e.g., governmental and ministerial decrees). Currently, proposed amendments tothe TW are being discussed in parliament. The modification aims amongst other onthe establishment of an antenna register and extension of the prohibition on undesiredelectronical communications. Besides in the current proposal the so-called PolicyDocument on Frequency. In short, this Policy Document strives for a less regulatingattitude of the Dutch government with regard to the use of frequency. Thedistribution of frequencies will preferably take place by means of an auction.

The principal aim of the new TW is to encourage effective competition. It is designedto work more in line with general competition law. The new TW is also moretechnologically neutral compared to the 1998 TW. The independent regulatoryauthority (OPTA) remains responsible for the general supervision of parties operatingon the telecommunications market, for management of numbering and for theregistration of providers, and also has significant jurisdiction with respect to theresolution of interconnection disputes.The Dutch Competition Authority (NMa),affiliated with the Ministry of Economic Affairs, is empowered to monitor theelectronic communications sector for anti-competitive activities and concentrations.OPTA and NMa have strengthened their cooperation since 2004.

3. RegistrationIn order to install or operate public electronic communications networks and toprovide public electronic communications services and conditional access systems(e.g., video-on-demand), a party is required to register with OPTA. OPTA is also

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responsible for certifying service providers for electronic signatures. There arestandard registration forms available for this purpose (in Dutch and English).Registration is intended primarily to give OPTA an overview of market players inorder to ensure effective supervision and is not conditional on meeting any materialqualifications, other than demonstrating to OPTA that the service/network isindeed offered to the general public. The fees OPTA charges consist of a one-timeregistration fee and an annual “supervision” fee, which as of 2006 has been tied toannual turnover.

An individual license under the TW is required, in principle, only for the use offrequencies, for mobile and satellite communications. Depending on the scarcityof the frequencies concerned, licenses for the use of frequencies for commercialelectronic communications are granted in accordance with one of the followingprocedures: (i) in the order in which applications are received (“first-come-firstserved” basis); (ii) by competitive assessment of applicants and applications(“beauty contests”), which may include the requirement of a financial quotation;or (iii) by auction. Details on the allocation and use of frequencies are set out ina National Frequency Plan. Parties can be excluded from a frequency allocationprocedure, if this is necessary to guarantee genuine competition in the relevantmarket.

4. NumbersThe designated use of numbers is indicated in a number plan. Number plans havebeen drawn up for, inter alia: (1) telephone and ISDN services; (2) telex services;(3) packet and circuit-switched data services; (4) international signaling pointcodes; (5) transit network signaling point codes; and (6) identity numbers forinternational mobility (IMSI numbers).

OPTA is charged with the task of granting, reserving numbers, and supervising theuse of such numbers. Numbers may be obtained or reserved by means of standardforms, which are available for: (i) information numbers for free services (0800)and paid services (0900 and 0906); (ii) number blocks; (iii) individual numbers;(iv) carrier (pre)select numbers (a prefix of “16xx”); (v) international signalingpoint codes; and (vi) transit network signaling point codes.

Under the revised TW, the number plans indicate what allocation method appliesto a certain type of number (i.e., auction, lottery, or “first come, first served”).

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Numbers with an exceptional economic value (i.e., short numbers) will be allocatedby auction. Numbers allocated by auction will be assigned for an indefinite period,unless the number plan specifies the duration of the assignment.

Numbers may not be traded as a business activity, but the holder of numbers mayallow third parties the use of its numbers provided this is done in a nondiscriminatoryand transparent manner and on the basis of objective criteria.

In 2004, OPTA established guidelines on number portability requiring mobileproviders to comply with any request for number portability received from endusers within 10 working days, regardless of the contractual provisions between theprovider and the end user (including notice terms and minimum contract periods).In summary proceedings before an administrative court, OPTA’s guidelines wereregarded as unlawful.

5. Rights of WayAll providers of public electronic communications and broadcasting networks areaccorded rights of way. In this respect, the TW provides that, notwithstanding a rightto compensation of certain damages, any party is obliged to tolerate the installation,maintenance, and clearance of cables in and on public grounds by these providers.In the case of regional and international networks, this obligation extends to allother land, with the exception of enclosed gardens and other enclosed grounds thatare integrally connected to private residential premises. For owners and supervisorsof public grounds, the right to compensation of damages is limited to a compensationof actual costs incurred by the landowner in relation to the establishment or removalof the facilities and any additional maintenance costs. Antennas and antenna sitesare not regarded as cables. A mobile network provider therefore, cannot rely ona landlord’s obligation to tolerate the installation of antennas or antenna sites.

Under the TW, the obligation to tolerate the installation, maintenance, and clearanceof cables is extended to empty cable ducts. However, this obligation is limited to10 years. After the expiration of these years, the provider of the network can beobliged to remove the empty ducts. Empty cable ducts that already situated inpublic grounds before 6 December 2006 will be allowed until 1 January 2018.The basic regulation in the TW that the owner of public land does not acquireownership of cables installed in or on the land by accession does not apply to empty

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cable ducts. As a result, an operator that wishes to install empty cable ducts mustmake arrangements with the landowner in order to prevent the ducts frombecoming the property of the landowner.

The municipal authorities are charged with coordinating the work relating to thelaying, maintenance, and clearance of cables within their jurisdictions. At themoment, an Act concerning improvement of exchange of information regardingunderground networks is being prepared.

6. Significant Market PowerKPN Telecom has been designated a party with significant market power (SMP) invarious communications markets, i.e., (i) public fixed telephony; (ii) leased lines,with the exceptions of lines with a capacity greater than 2 Mb/s; and (iii) publicmobile telephony (Vodafone was designated as party with SMP in the public mobiletelephony market, but successfully disputed this designation). This subjects KPNTelecom to the full range of ONP obligations, as described in the followingparagraphs. Under the TW, KPN’s designation as a party with SMP on the marketfor public fixed telephony continues for 12 months after the TW was enforced.In 2006, OPTA completed its market analyses for the various electroniccommunications markets in the Netherlands.

In its Vision on the market OPTA has set forth two extremes: (i) convergence,meaning that a horizontal market structure with multiple providers will exist.In this scenario parties with significant market power are less probable, thus lessregulatory intervention; and (ii) consolidation, already currently happening and if itcontinues, which will mean that only few providers will remain. Therefore, OPTAwill have to stay alert to protect the customer. OPTA is closely following KPN’stransition to providing all its services via the Internet Protocol ( All IP -strategy)in order to make sure that the envisaged competition on the market for broadbandwill continue. Also, OPTA has conducted new market analyses on broadband,broadcasting, and mobile telephony.

7. InteroperabilitySave for certain specified exemptions, all providers of electronic communicationsnetworks and services within the Netherlands that control end-user access tonetwork termination points are generally obliged to enter into negotiations to

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achieve interoperability between their respective end users. OPTA may set a termwithin which an interconnection agreement must be concluded. The distinctionbetween direct and indirect interconnection was left out of the new TW. Moreonerous interconnection obligations apply to providers who have been designatedby OPTA as having SMP in the market sector concerned. The “dominant” providers(i.e., KPN Telecom) are obliged to (i) offer interconnection to their networks onnondiscriminatory conditions; (ii) provide other operators with all necessaryinformation, including all changes in that information scheduled to be introducedin the next six months; (iii) publicise a reference interconnection offer whichdescribed the interconnection facilities and services and which is subject to OPTA’sreview and approval; and (iv) offer interconnection at costoriented and sufficientlyunbundled rates.

8. Universal ServicesPursuant to the TW, certain services and provisions must be available to everyone ataffordable prices and at a specified quality, on the grounds of general and social interest(universal service). These services and provisions currently include fixed voicetelephony service, access to public phone booths (one for every five thousandinhabitants), access to a comprehensive and complete telephone directory offixed and mobile telephony subscribers, and access to a telephone directoryinformation service.

The Minister may oblige a party to provide universal services in a designated areafor five years, if the Minister believes that the provision of services at affordableprices or at a certain quality level is not guaranteed under normal market conditions.The Minister will assign the universal services obligation by conducting a competitivetest between qualified applicants to the party that can provide the services at lowestnet costs. All providers of the services concerned that possess SMP within thedesignated area must participate in the competitive test procedure. The Ministerwill inform the party having the largest end-user database in a specific service areathat he intends to assign to this party the obligation to provide the universal service.Through a notification published in the Dutch State Gazette (Staatscourant), otherparties will be invited to provide a competitive offer. The Minister will assign theuniversal service obligation to the party that can provide the services at the lowestnet cost. The TW contains a description of net cost.

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In 2006, the universal services regulation was amended concerning the duty toinform the customers on the tariffs used, payment options, dialed phone numbers,and the like. At the end of 2006, OPTA has issued new guidelines for providers onhow to abide by these new regulations. These can be found on OPTA’s web site.

9. Privacy and Legal InterceptionIn addition to the general rules for the protection of privacy under Dutch privacyregulation, the TW lays down specific privacy rules with respect to providers ofpublic electronic communications networks and services. In general, providers musttake appropriate organisational and technical measures to protect the privacy oftheir subscribers, the subscribers’ personal data, and the users of their network orservices, taking into account the level of technology and the costs involved.The TWcontains an opt-in regime for SPAM, which includes e-mail and SMS SPAM. Theopt-in regime does not apply to unsolicited e-mail sent for products or servicessimilar to those already purchased by a customer, provided that the customer isgiven the opportunity to object to such use of electronic contact details when theyare collected and on the occasion of each message, if the customer has not initiallyrefused such use. In 2007, OPTA has for the first time imposed a penalty ofEUR 1,000,000 because of unwanted distribution of software.

TheTW contains specific obligations regarding the processing of location data (dataprocessed in an electronic communications network, indicating the geographicposition of the terminal equipment of a user). Location data may be processed onlywhen rendered anonymous to the extent necessary to provide the services, or withconsent of the end user.

All providers of public electronic communications networks and/or services arealso obliged to enable the legal interception of their network or services at theirown cost. In order to enable the authorities to make use of interception, the TWhas been altered recently to the extent that providers of public telecommunicationsnetworks and public telecommunications services are now obliged to store specificuser data for a period of twelve months.

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XIX. Information and CommunicationTechnology (ICT)

1. GeneralThe Netherlands takes a pragmatic approach to ICT legal issues. The regulatorybody provides a basis for IT companies seeking IP protection for their products andservices (see also Chapter XVII). In general, much is left to the agreement betweenthe parties.This chapter contains an overview of specific IP protection availablefor ICT products and addresses a number of contractual and topical issues in thefield of ICT.

2. Computer SoftwareComputer software can be protected under the Dutch Copyright Act (Auteurswet),provided it satisfies the originality requirement (see also Chapter XVII). Theprotection granted under the Copyright Act covers, among other things, preparatorymaterials, source codes, object codes, icons, screens, displays and interfaces.Following the (late) implementation of the 1991 EC Directive on CopyrightProtection for Computer Programs, the Copyright Act contains a special sectiondealing with computer software. No formalities are required in order to obtaincopyright protection for computer software. In 2004, the Dutch Copyright Actwas amended to reflect Directive 2001/29/EG. These changes have not affectedthe protection granted under the Copyright Act to computer software. Unless thesoftware is developed within the framework of an employer-employee relationship(in which case the employer will normally hold the copyright), generally, there is noequivalent to the “work for hire” doctrine as may be applicable in other jurisdictions.Unless the parties agree otherwise, software suppliers will thus retain the copyrightto their software, even if it was specifically developed for a customer.

The Copyright Act offers the owner of a copyright to software both civil and criminalrecourse against third-party infringement.

In a recent court decision in summary proceedings, the court decided on whetherall data and data carriers of an alleged software infringer needed to be disclosed tothe requesting party, enabling the claiming party to verify whether the infringingparty has forfeited any penalties by breaking a previous court order. To safeguard

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the alleged infringer’s trade secrets and know-how, the court limited the type datato be disclosed to the source code and only to an independent party. The possibilityof protecting software by means of a patent is still under discussion, even at theEuropean level.There is not much Dutch case law on patent protection for computersoftware. Foreign companies should at least verify whether their computer softwarequalifies for patent protection in the Netherlands (see Chapter XVII).

3. DatabasesThe Dutch Database Act (Databankenwet) took effect on 21 July 1999.The DatabaseAct is based on the EU Directive on the Legal Protection of Databases.The Dutchlegislature adhered to the two-tier regime prescribed by the EU Directive.Withinthe meaning of the Act, a database is a collection of works, data, or other independentmaterials arranged in a systematic or methodical way, individually accessible byelectronic or other means. The acquisition, verification, or presentation of thecontent must be the result of a qualitatively or quantitatively substantial investment.Original databases, whether a copy of which is printed, or stored using anothermedium, or electronically, will qualify for either copyright or sui generis protection.Recent European and Dutch case laws provide an indication as to how the principlesof qualitatively and quantitatively substantial investment can be interpreted.

4. Topographies of SemiconductorsChips and their topography may be protected against unlawful exploitation by thirdparties, pursuant to the Dutch Original Topographies of Semiconductor ProductsLegal Protection Act (Wet houdende regelen inzake de bescherming van oorspronkelijketopographieën van halfgeleiderprodukten). Registration with the Office of IndustrialProperty is required and will remain valid for 10 years. It concerns a nationalright only.

5. Technology TransferThe 2002 EU Technology Transfer Regulation has a direct effect in the Netherlands.It is concerned mainly with competition law aspects of technology transfer (see alsochapter XVI). Furthermore, in 2004, the Commission has issued an additional/specific Regulation ([EC] No 772/2004) containing certain categories of technologytransfer agreements which, provided certain requirements are met, are allowed fora competition law perspective.

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6. ICT Agreements and Standard TermsAs in many jurisdictions, suppliers and distributors of ICT products use a plethoraof agreements to, for instance, restrict warranties and liability. Both suppliers ofcomputer products/services and end users draft standard terms, which are freelyavailable and which are sometimes used, although their use is by no means mandatory.A number of standard terms are mentioned below.

FENIT ConditionsFENIT, the industry organisation for suppliers of computer products and serviceshas published standard conditions for, e.g., the sale of hardware, the developmentand licensing of software, and the provision of maintenance and computer services.Generally, the conditions are more advantageous to the supplier. The FENITconditions were updated in 2003.The main changes were that: (i) suppliers werebetter protected against the bankruptcy of their customers; and (ii) disputes arisingbetween the parties must be settled through arbitration in accordance with theArbitration Regulations of the Foundation for the Settlement of AutomationDisputes in The Hague.

Purchase ConditionsThe Dutch Ministry of the Interior has published general terms and conditions,covering a range of topics, from the purchase or lease of hardware to complexturnkey projects. These standard conditions are known as “BiZa” contracts. Theyare produced regularly in negotiations by prospective end users and are in their favor.

EDI Model AgreementThe Netherlands has a model EDI Agreement, which is based on the Europeanstandard. The liability of suppliers of ICT goods and services is governed by therules in the Dutch Civil Code on liability (see chapter XX), but a number of caseswith respect to the IT industry have been published. A rule of thumb that may bededuced from those cases is that an IT supplier is under an obligation to inform itscustomers of both anticipated delays in delivery and of problems with respect tothe delivery and installation.

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In addition to recourse to the courts and arbitration in accordance with the rules ofthe Netherlands Arbitration Institute (NAI), a special dispute resolution forum forthe settlement of IT disputes operates in the Netherlands: the Association for theSettlement of Automation Disputes (Stichting Geschillenoplossing Automatisering).

7. Shrink-Wrap License AgreementsMany larger (mostly US) software manufacturers use shrink-wrap or even clickwraplicensing terms in the Netherlands. The new legislation implementing the E-Commerce Directive (EC/2000/31) contains several requirements regarding theuse and/or applicability of electronic general terms and conditions. There is notmuch that case law in the Netherlands that governs the use and/or applicability ofshrink-wrap or click-wrap licensing terms. The applicability of such terms willmainly depend on the manner in which they have been brought to the attention ofthe end user. The principle rule is that an end user must be given a reasonableopportunity to become acquainted with these general terms prior to or at themoment that the agreement regarding the subject matter is entered into.

8. Source Code EscrowSoftware source code escrow is fairly common in the Netherlands, but there is nospecific legislation. Both active and passive escrow agents make use of tripartiteagreements with the supplier and the end user.

9. The Internet and E-businessThe basic principle regarding the Internet is “offline is online” (existing regulationsfor offline activities will be applied similarly to online activities, if possible).

Domain NamesIt is generally felt that, in principle, the rightful owner of a trademark or a trade nameshould be able to act successfully against the use of that trademark or a trade namein a domain name, irrespective of the level on which it is used. In the Netherlands,there is an association for the registration of domain names (“SIDN”). The SIDNhas incorporated Alternative Dispute Resolution for .nl domain names only.In 2006, the .eu domain name was successfully introduced.

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Liability of Service ProvidersGenerally speaking, Internet service providers are exempt from criminal prosecutionwith respect to the disclosure or dissemination through their services of informationthat is punishable on the basis of its content, if (i) they reveal their identity at thetime of the disclosure or dissemination; (ii) the identity of the perpetrator is knownor, once a judicial inquiry is commenced, it is revealed by the service provider uponfirst order by the judiciary; and (iii) the service provider has taken all reasonablemeasures to prevent further dissemination of the contentious information. Underthe new legislation implementing the EU E-Commerce Directive, various principlesfor civil law liability of Internet service providers have been introduced. Furthermore,note that in a Supreme Court decision, a service provider was ordered to disclosethe name and address of an anonymous web site holder to a third party.

Electronic Commerce DirectiveThe Dutch government has implemented the EU E-Commerce Directive intoDutch law. The EU Distance Contracts Directive has been implemented into Dutchlaw as well, and contains provisions protecting consumers in distance, includingonline, transactions. All of the Directives mentioned determine some of the legalparameters for the development and operation of E-Commerce in the EuropeanUnion market.

Electronic SignaturesThe EU Electronic Signatures Directive (Wetsvoorstel elektronische handtekeningen) wasimplemented under Dutch law, effective 21 May 2003. The new law establishesa legal regime for electronic signatures.

Consumer protectionIn 2007, a new authority (Consumentenautoriteit) for the protection of the collectiveinterests of consumers was founded. This new authority has been attributed withcertain public powers to enforce consumer law. How this enforcement will crystallizein practice has yet to be seen. The authority has announced that it will especiallyfocus on internet trade.

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10. EncryptionAlthough in the past, the Dutch government had expressed its intention to introducea bill dealing with the use and availability of encrypted software, (a draft of such abill already circulated in 1994 and which was heavily criticized and never made it asa bill) still, no such bill has been introduced. It does not seem likely that legislativeinitiatives will ensue in this context in the near future.

11. Data ProtectionThe 2001 Data Protection Act (Wet bescherming persoonsgegevens) imposes a numberof obligations on parties that collect and control personal data. What constitutespersonal data is largely a question of fact. It is important to verify whether anotification with the Dutch Data Protection Authority should be filed. Likewise,that transfer outside the EU triggers specific requirements.

12. Computer CrimeThe Dutch 1993 Act on Computer Crime (Wet computercriminaliteit) contains criminalprovisions related to computers. Deletion of data and the addition of worms orviruses that lead to damage may be criminal offences (although the definition ofa virus is somewhat unclear). The Act on Computer Crime is incorporated in theDutch Criminal Code and the Dutch Code of Criminal Procedure. At the end of1996, the Dutch Supreme Court issued a judgment that held that computer dataare not “goods” within the meaning of the Criminal Code. In 2006, the long-debatednew Act on Computer Crime II (Wet computercriminaliteit II) has entered into force.This Act expands the scope of certain computer crimes and also introduces newinvestigative powers for the enforcement agencies.

13. Online GamblingIn principle, to offer games of chance over the Internet in the Netherlands requiresthe government’s permit. In 2006, the Ministry of Justice has successfully undertakena crusade against illegal gambling sites. Most illegal gambling sites in the Netherlandshave shut down.

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14. RetentionRecently, there has been a Dutch proposal to implement a retention period of18 months for Dutch service providers for Internet traffic data. This proposalis currently still under discussion. Likewise, the EU is currently consideringa minimum retention period for Internet traffic data.

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XX. Liability

1. GeneralThe Dutch Civil Code (Burgerlijk Wetboek [BW] in this Chapter referred to as the“Code”) generally distinguishes between two types of liability: contractual liabilityand noncontractual liability. The Code contains several strict liability provisions,which form a separate category within liability based on wrongful acts (for instance,defective goods and premises, dangerous substances, damage caused by animals, andthe like). All liabilities that may arise between parties in any contractual relationshipare essentially governed by the same general provisions of the Code. Outside ofa contractual relationship, liability may be based only on a wrongful act (or strictliability). These two types of liability may coincide, e.g., in a situation in whicha party to a contract causes damage to another party and the event qualifies asa wrongful act if there has been no contractual relationship between the two.

2. Pre-contractual liabilityDutch law is notorious for its pre-contractual liability. This liability may be incurredif one of the parties to ongoing negotiations withdraws from such negotiations at astage when the other party could, for example, reasonably expect that an agreementwill be entered into. Depending on the exact stage of the negotiations, the partywithdrawing from the negotiations may be liable for costs incurred by the otherparty, or even for all lost profits, as if he had an agreement. It is even possiblethat a court orders the party withdrawing from the negotiations to continue thenegotiations in good faith.

3. Contractual liability

Breach of contractA general section of the Code applies to all contractual liabilities, regardless of thetype of contract. The main provision is Article 6:74 of the Code, which stipulatesas a basic rule that a party is liable for all damages resulting from its attributablenonperformance (breach of contract). Such a party may avoid liability if it can

prove that it acted under force majeure, which generally entails proving that thenonperformance cannot be attributed to it on the basis of its actions, the law, thecontract, or generally prevailing public opinion.

Good faithFurthermore, the concept of ‘good faith’ permeates contract law. Both parties toan obligation must behave in their relationship according to what is reasonable andfair. Different to many other jurisdictions, contracts do not only have the effectsexpressly agreed upon, but, according to the nature of the contract, also thosewhich result from the law, trade customs, or the requirements of reasonablenessand fairness.

Damage and performanceIn a contractual relationship, the creditor is not only allowed to claim damages, butin all cases in which the debtor is still able to comply with its obligations, the creditormay also claim specific performance (nakoming). Alternatively, the creditor may beallowed to dissolve the agreement. Upon dissolution, each party must return tothe other what it has received under the dissolved agreement. In addition, in bothsituations, the creditor is entitled to compensation for damages incurred as a resultof the breach.

Several types of contracts are governed by specific statutory provisions, which maycontain specific obligations. For instance, the law on contracts for the sale of goodscontains several specific obligations on the part of the seller. Under those obligations,the seller of certain goods is obliged not only to compensate the buyer for anydamages, but also to repair or replace a defective product, or supply any missingpart, if the buyer so desires.

Limitation of liabilityThe parties to an agreement may deviate from most liability provisions in the Code.Parties are free to exclude or limit their potential liability for damage caused by abreach of contract or a tort by agreeing on an exemption clause. This contractualright to invoke an exemption clause may be limited only by the court in exceptionalcases. In some cases, deviation from the Code is not allowed, e.g., in the case ofagreements with consumers. In addition to those rare cases in which a contractual

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deviation is expressly prohibited in the Code, several other restrictions apply to allcontracts in general and liability provisions in particular. First, provisions that limitor exclude liability for damage caused intentionally or caused by gross negligenceof one of the parties are void, although it is permitted to exonerate for damagesintentionally caused or caused by gross negligence of employees other than seniormanagement. Second, and far more important, a restriction is imposed by theprinciples of reasonableness and fairness.

Generally, in the case of a contract for the sale of goods, only the seller of the goodsmay be held liable by the end user if the goods are not in conformity to the agreement.In principle, the end user can claim damages from the manufacturer or from otherparties in the distribution chain only if the parties are liable on the basis of sometype of noncontractual liability (wrongful act). In practice, this means that it isusually difficult for the end user of defective goods to claim damages from anyparty other than the seller, since it is far more difficult to provide the evidencerequired to obtain damages from a manufacturer or distributor than the seller.In product liability cases however, this is different (see below).

4. Noncontractual Liability (Wrongful Act)

Wrongful actThe basis of all types of liability outside of contractual relationships is Article 6:162of the Code, which stipulates that any party that commits a “wrongful act” towardsanother party, whose act can be attributed to the party committing the wrongfulact is liable for all damages incurred by the injured party. There are three forms ofwrongful acts: (i) infringement of a subjective right; (ii) act or omission violating astatutory duty; and (ii) conduct contrary to the general standard of conductacceptable in society.

Nevertheless, liability is denied if the rule invoked by the injured party does notcover the interests of the injured party, damaged by the liable party.

Strict liabilitySeveral types of strict liability apply with respect to goods. Under Dutch law,“strict liability” means that liability is deemed to exist without the injured partyhaving to prove more than the damage and the causal connection between the

wrongful act and the damages. Essentially, the injured party is not required toprove that the wrongful act or the damage may be attributed to the liable partyon the basis of fault.

Product liabilityProduct liability is an important type of strict liability and was incorporated intothe Code in 1988 as a result of the EC Directive of 25 July 1985. This legislationcreated strict liability on which basis a consumer can hold a manufacturer liable ifthe latter’s defective (unsafe) product causes damages. However, only some formsof damages may be claimed from the manufacturer on the basis of product liabilitylegislation. Depending on the facts of the case, the injured party may also claimdamages from a party other than the manufacturer (e.g., the seller, the importerinto the European Economic Area, or the party that has sold the product under itsown brand name) or may obtain damages that are not recoverable under productliability legislation on other grounds (e.g., the general law on wrongful acts ora breach of warranty). According to the Code, a product is defective if it doesnot provide the safety that one is entitled to expect, taking all circumstances intoconsideration; in particular, (a) the presentation of the product; (b) the reasonablyanticipated use of the product; and (c) the time the product is brought into circulation.

The manufacturer is liable for all damages resulting from physical injury or deathcaused by its defective product. The manufacturer may also be liable for damageto other goods that are normally used by consumers if such damage exceeds EUR500. It is not possible to exclude product liability towards the injured partycontractually. Although there is still some uncertainty in this respect, Dutch lawgenerally allows for a limitation of product liability between companies in adistribution chain.

In a case heard by the Dutch Supreme Court in 1999 (in Hoge Raad, 22 October 1999,Nederlandse Jurisprudentie 2000, no. 159, Rockwool), the Supreme Court held that asa general rule of law, if a party brought a product into the market that had causeddamages, that party would be liable for the damage, if it was used for a purposethat could reasonably have been anticipated. This type of liability exists towardsprofessional buyers, end users, and consumers, and covers all types of damage(including physical injury, property damage, and consequential damage). With thisdecision, the distinction between claims based on wrongful acts and claims basedon product liability appears to have faded.

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For completeness’ sake, in the Consumer Goods Act the EU Directive 2001/95/ECon General Product Safety was implemented on 1 December 2005. Based on thisact, rules may be imposed regarding product safety in the interest of public health,safety, fairness in trade, or proper information about the goods. This act is aimedespecially at protecting further distribution of unsafe goods. The Consumer GoodsAct Decree on “general product safety” (of 29 June 1994) deals with the obligationto launch a product recall.

5. Compensation of DamagesThe sections of the Code that govern the compensation of damages apply to bothcontractual and noncontractual liabilities.

Kinds of damageTwo kinds of damage can be compensated: (i) financial loss (vermogensschade); and(ii) other disadvantages (ander nadeel). Financial loss is the damage to pecuniaryinterests, including damage to goods and economic loss, pure or consequential.The liable party is obliged to compensate the injured party for all these damagesincurred by the injured party as a result of, and that may be attributed to, the eventthat has led to liability (“causal link”). More specifically, such damages may includecompensation for costs incurred as a result of a breach of contract or a wrongfulact, lost profits, costs incurred for assessing and (out-of-court) collection of theamount of damages, and costs incurred in order to limit or reduce the damages.Although in principle the injured party has a right to claim compensation for theexact damages, the courts are free to assess the damage in a more abstract way,if that corresponds better to its nature.

Other disadvantages will be compensated only if these have a legal basis.Compensation of non-pecuniary loss (Article 6:106 of the Code) for instance,is possible only in case of intentional damage, personal injury, and in case theinjured party’s reputation has been damaged.

Kind of compensationNormally, damages will be compensated in money, but the injured party may demandcompensation in any other form. Moreover, if the liable party has made profits as aresult of its breach of contract or wrongful act, the court may calculate the

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damages so as to include all or part of the profit. On the other hand, the court isentitled to reduce the obligation to compensate the damages if it believes that fullcompensation will lead to clearly unacceptable results.

Penalty clausesPenalty clauses are allowed under Dutch law regardless of whether the penalties area genuine estimate of damage incurred or serve as an incentive to perform.Therefore, a penalty does not need to be a reasonable estimate of damage actuallyincurred. Unless otherwise agreed upon, the penalty is the only compensation thatcan be claimed, regardless of the size of the penalty. A party that is obliged to pay apenalty may always request the court to reduce the amount on the ground thatpayment of the full penalty will be unacceptable.

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XXI. Dispute Resolution

1. JurisdictionIn the Netherlands, the civil and criminal judiciary comprises cantonal divisions,district courts, courts of appeal and the Supreme Court.The district courts havegeneral jurisdiction over civil law disputes. Administrative disputes are resolved byseparate administrative branches of the district courts. With a few exceptions,judges are professional judges and are appointed for life. In civil and commercialcases, the cantonal divisions of the courts are concerned with first instance claimsthat do not exceed EUR 5,000, regardless of the cause. The cantonal divisions ofthe district courts also have jurisdiction over employment law issues, agency and(real estate) lease disputes.

District courts essentially hear all other civil and commercial first instance claims.Courts of appeal decide on judgments given by a district court though most cantonaldivision judgments may be appealed before a court of appeal.The administration ofjustice in the Netherlands is essentially limited to two instances. A judgment givenby the court of appeal may, in principle, be submitted for review or cassation beforethe Supreme Court of the Netherlands on issues of law only. The Supreme Courtwill, therefore, not decide any factual issues. A submission for cassation to theSupreme Court may be brought on the grounds of noncompliance with formalrequirements (for instance, if a court fails to give adequate reasons for a judgment)or breach of the law, but not the law of another country. The Dutch Supreme Courtand lower courts have no authority to examine laws for compliance with theConstitution (Grondwet). This prohibition on examining laws against the Constitutionrelates to the manner in which acts of law are established as well as to their substance.On the other hand, acts of law may be tested for compatibility with a provision ofa treaty to which the Netherlands is a party, including any European Communitylegislation.

Some cantonal divisions and district courts, as well as certain courts of appeal, havespecial chambers that deal with particular issues. One such chamber is the EnterpriseChamber of the Amsterdam Court of Appeal. This chamber decides on disputes onfirst instance, for example, concerning (i) annual accounts, (ii) mismanagement,(iii) buyouts of minority shareholders, (iv) the Dutch Works Councils Act and on

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appeal, for example, concerning (a) mandated departure or ejection of shareholders,(b) the revocation of responsibility for a group company, and (c) objections toa reduction of capital, legal merger or split.

2. Course of the ProceedingsMost civil and commercial proceedings are initiated by a writ of summons and takeplace before the district court.The writ requires that the defendant appears in courton a certain date. It is served on the defendant by a bailiff. In district courtproceedings, the defendant must appear through an attorney of record. Unlessthe defendant makes no appearance, the court customarily grants the defendant asix-week extension to submit a written answer. This first appearance is merely foradministration and record purposes and does not take place physically. After thestatement of defense is submitted, additional briefs may subsequently be exchanged,or the court may order the parties to appear in person in order to supply informationto the court or to attempt to reach a settlement.The greater part of the proceedingsis conducted in writing. The briefs are filed at a docket session, which is a districtcourt session held specifically for that purpose. After the briefs have been exchanged,a hearing for oral arguments before the court may be held if either of the partiesso requires.

Appeal proceedings are also initiated by the service of a writ (within three monthsafter the judgment in first instance). Only two briefs are exchanged. In theappellant’s brief, the party filing the appeal explains why it disagrees with thejudgment passed in first instance. The opponent may file an answer, which is oftenfollowed by a hearing for oral arguments. The appellant may contest the judgmentby the district court in whole or in part.

The course of the proceedings may be complicated by accessory actions and ordersto provide evidence, for instance, by examining witnesses.

3. Summary ProceedingsIn urgent cases, the President of the district court may sit in summary proceedings toprovide provisional relief. Summary proceedings have gained substantial importancein recent years. There are far fewer restrictions on the type of dispute that may beheard than in almost all other jurisdictions. Today, they are even used to obtaina payment order for essentially undisputed claims. Summary proceedings have the

advantage of being fast. At the plaintiff’s request, the President will schedule a datefor the summary hearing to take place within a few weeks. In very urgent cases,hearings can be scheduled even on the same day. The plaintiff initiates the summaryproceedings by serving a writ on the defendant. On the date of the summaryproceedings, the parties and their counsel (although a defendant may appear inperson) appear before the President of the court to explain their positions by oralarguments. The President has a great degree of latitude to decide on the procedureat a hearing. Although witnesses cannot be heard in the context of summaryproceedings, the President may hear “informants” if they are present at the hearing.Although no sworn statements are taken, the President usually takes the informationprovided into account when deciding the issue. The President generally handsdown his decision in summary proceedings within 14 days, but may do so earlier ifthe case is urgent. A summary judgment is immediately enforceable and is usuallysanctioned often by a substantial penalty to be forfeited to the plaintiff if the judgmentis not complied with. The judgment may be appealed before the court of appeal(within four weeks after the judgment in first instance is rendered). It is alsopossible to lodge a summary appeal, so that the proceedings before this court areconducted as swiftly as possible. A decision by the court of appeal may be submittedfor cassation to the Supreme Court. After the summary proceedings, the interestedparty may start principal proceedings in which the case is judged on its full merits(since summary proceedings are basically a provisional remedy.) In these proceedings,there is room for formal evidence gathering and witness examination. The court isin no way bound by a judgment given in summary proceedings. Parties rarelyinitiate principal proceedings after summary proceedings. They usually accept thejudgment given in summary proceedings (whether or not on appeal), an indicationof the generally good quality of the summary judgment decisions (and judges).

4. Prejudgment AttachmentTo secure the claim, the plaintiff may levy one or more prejudgment attachments,before or during legal proceedings. The leave of the President of the district courtis required for a prejudgment attachment. The plaintiff must file an “ex parte”petition with the President in which the claim is prima facie demonstrated.Such leave is generally easy to obtain, often on the same day.

The prejudgment attachment is levied by a bailiff. An attachment on movableproperty may be combined with judicial custody. This means that the bailiff turns

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over the attached property to a person appointed by the President to keep theproperty in his custody pending the proceedings. The party subject to attachmentmay object to the attachment in summary proceedings. The President will lift theattachment if the party subject to attachment demonstrates that the asserted claimis nonexistent or frivolous, or that the attachment is unnecessary. The Presidentwill also lift the attachment if the party subject to attachment provides adequatesecurity (generally, a bank guarantee by a first-class Dutch bank), as well as in theevent of noncompliance with formal requirements (which can result in a nullity).If proceedings before the district court are not yet pending at the time of filing thepetition for the President’s leave, the President will set a term within which suchproceedings must be initiated. The usual term is 14 days. This term may beextended at the request of the attaching party. If judgment is eventually renderedagainst the plaintiff, the attachment is wrongful. In that case, the plaintiff is liablefor damages caused by the attachment.

5. ArbitrationParties may also choose to settle their disputes by arbitration, rather than in court.A Dutch court will usually accept this choice. If either party invokes the arbitrationagreement, the Dutch court will find that it has no jurisdiction over the case. If thearbitrators are not authorized under the arbitration agreement to grant provisionalrelief for urgent cases, the President of the district court is competent to grantsuch relief in summary proceedings, and even if they are not, the President maynevertheless assume jurisdiction if he believes the remedy provided in arbitrationis inadequate. The best known Dutch arbitration institute is the NetherlandsArbitration Institute (NAI) in Rotterdam, which has its own arbitration rules thatparties can adopt in their arbitration agreement. The NAI may appoint the arbitrators,or the parties may do so themselves. The NAI has a list of qualified and experiencedarbitrators who are often attorneys. Dutch arbitral decisions can easily be enforcedin the Netherlands. Like many European countries and the United States of America,the Netherlands is a signatory to the New York Convention on the recognition andenforcement of foreign arbitral awards. Thus, arbitral awards given in the territoryof these States can be enforced in the Netherlands and vice versa.

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6. MediationMediation as an instrument for dispute resolution is becoming more popular in theNetherlands. At the start, mediation was mainly used in family law cases. Today,though, we see mediation being used with increasing frequency in other typesof disputes.

7. International EnforcementJudgments passed by the courts of EU Member States can easily be enforced in theNetherlands. With the exception of Denmark, the EU Member States are subjectto the Council Regulation on Jurisdiction and the Recognition and Enforcement ofJudgments in Civil and Commercial Matters. This Council Regulation replaced theBrussels Convention, which now applies only to Denmark. Prior to enforcementof a judgment handed down by a court in an EU Member State, the leave to do somust be obtained from the President of the district court. The procedure to obtainleave generally takes no more than two or three weeks. Similarly, Dutch judgmentsare easy to enforce in EU Member States. The same holds true as regards judgmentshanded down in States that are a party to the Lugano Convention. Judgments issuedby a court of a State with which the Netherlands has an enforcement conventionare also enforceable in the Netherlands, on the condition that the prior leave of thePresident of the district court is obtained. Judgments passed by courts in Stateswith which the Netherlands has no enforcement convention cannot be enforced inthe Netherlands. Such cases must be retried in the Netherlands and settled anew.However, if the judgment is passed by a court of a State with a well-developedcourt system, Dutch courts tend to review the judgment only marginally.

8. European enforcement order foruncontested claims

The European Parliament and Council Regulation of 21 April 2004, creatinga European enforcement order for uncontested claims, was implemented in theNetherlands on 21 October 2005. It lays down minimum standards to ensure thatjudgments, court settlements, and authentic instruments on uncontested claimscan be enforced easily in the Member States. This entails the abolition of anyintermediate proceedings or grounds for refusal of enforcement regardingjudgments handed down in another Member State.

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The Regulation applies in civil and commercial matters. It does not cover revenue,customs, or administrative matters. It is applicable in all Member States with theexception of Denmark.

A judgment on an uncontested claim is certified as a European enforcement orderby the Member State of origin in accordance with certain conditions. Certificationis carried out by means of the standard form. The certification may apply to onlyparts of the judgment, in which case the order will be known as “partial Europeanenforcement order.”

The Regulation lays down minimum standards with regard to the service ofdocuments (the document instituting proceedings and, where applicable, thesummons to a court hearing) to ensure that the rights of the defendant are respected.Only the document service methods listed in the Regulation are allowed if thejudgment is to be certified as a European enforcement order.

The creditor must supply the authorities of the other State responsible forenforcement with:

• a copy of the judgment;

• a copy of the European enforcement order certificate; and

• where necessary, a transcription of the European enforcement order certificateor a translation thereof into the official language of the Member State ofenforcement or into another language accepted by the Member State ofenforcement.

9. International payment ordersOn 30 December 2006, the European Parliament and the Council adopted aRegulation creating a European order for payment procedure.This procedure willallow creditors to recover their uncontested civil and commercial claims before thecourts of the Member States, except Denmark according to a uniform procedurethat operates on the basis of standard forms. Due to the existence of a procedurethat will be common to all Member States, the need for creditors to familiarizethemselves with foreign civil procedures will be reduced to a minimum. Theprocedure does not require presence before the court. It can even be started andhandled in a purely electronic way. The claimant only has to submit its application.

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It does not require any further formalities or intervention on the part of the claimant.This will ensure a swift and efficient handling of the claim, which should substantiallyreduce the length of traditional court proceedings. In addition, since no assistanceby a lawyer is required, the procedure will keep the costs to a minimum.Language problems are minimized due to the availability of standard forms forthe communication between the parties and the court that are available in allEU languages.

The judicial decision obtained as a result of this procedure can be enforced easily inthe other Member States. The creditor will not have to undertake intermediate stepsto enforce the decision abroad. The Regulation will be applicable for 24 monthsfrom 30 December 2006.

10. Collective actionArticles 3:305a and 305b of the Dutch Civil Code allow associations and foundationswith full legal capacity, as well as public law entities, to initiate action with the aimof protecting “interests similar in kind which are held by other persons.” Thearticles of association should stipulate that the foundation or association promotethese interests.

Before filing a claim, the foundation or association is obliged to make sufficientefforts to settle the dispute out of court. The foundation or association files the claimin its own name. The represented parties will not be a party to the proceedings.The judgment is only binding between the foundation or association and the partyor parties responsible for the damages. The individual will not be bound and itkeeps the possibility of filing an individual claim.

The most important limitation of the collective action is that damages may not beclaimed. Possible remedies are declaratory judgments or injunctions. Thoseremedies can be helpful to enable individuals claim damages.

11. Class actionsA new Act on the Collective Settlement of Mass Damages took effect on 27 July 2005.The act facilitates the court-endorsed collective out-of-court settlement agreementsof mass damages between a representative organization and the party or partiesresponsible for the damages.

The procedure to achieve a binding settlement agreement as described in the act isundertaken in three phases.

During the first phase, the representative organization and the responsible partynegotiate as regards a possible settlement agreement. From the articles of associationof the representative organization, it must appear that it acts in the interest of theparties affected. The claims of the affected parties must, to a certain extent, besimilar. In the settlement agreement, the amount of monetary compensation toeach affected party, or a formula to calculate the monetary compensation on thebasis of objective criteria must be specified. The party responsible must providesufficient security for its payment obligations under the settlement agreement.

In the second phase, the representative organization and the responsible party filea joint request to the court of appeal in Amsterdam to declare the settlementagreement binding for all parties affected or a group of affected parties. Pending therequest to the court of appeal, all legal proceedings against the party involved aresuspended. In principle, all affected parties known to the responsible party must beinvited to a settlement hearing of the court of appeal in order to have the opportunityto file objections, if there are any, against the settlement agreement. After thishearing, the court of appeal must assess whether the settlement agreement meetsthe criteria as set out in the act, and more specifically, whether the compensationis reasonable. The court of appeal may either declare the settlement agreementbinding, deny the request, or order the parties to amend the settlement agreement.

The third phase concerns the execution of the settlement agreement. If the courtof appeal declares the settlement agreement binding, the settlement must then bepublished in one or more Dutch newspapers and be sent to all known affectedparties. The affected parties who do not want to be bound by the settlementagreement have the option to “opt out” within three months after the courtdecision. The affected parties not opting out may collect their compensation withina time frame as specified in the settlement agreement. If the responsible party doesnot fulfill its payment obligations in a timely manner, the affected person may thendissolve the settlement agreement as far as it concerns that part of the settlementagreement relating to the compensation of this individual party. Until now, threecourt endorsements of collective settlements have been applied for, namely in theDES, Dexia and Shell cases. These cases refer to pharmaceuticals and securities.

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12. Inspection or taking copies of certain identifiabledocuments instead of full discovery

Dutch law does not provide for full discovery of documents. The legislator and thecourts are wary of “fishing expeditions.” Article 843a Dutch Code of Civil Procedure(“DCCP”), however, does allow a party who is considered to have a justified interestto demand inspection or a copy or extract of identifiable documents that relate to alegal relationship to which it is a party. A contract or alleged wrongful act constitutessuch a legal relationship. By “identifiable,” it is meant that the party that asks forinspection must identify the documents or at least a specified category of documents.The party may demand this information from any party that has these documents atits disposal or in its possession. If necessary, the court will decide the manner inwhich inspection, extract, or copy must be furnished.

A court order pursuant to Article 843a DCCP may be enforced by a penaltyfor noncompliance or attachment of the documents in question. In certaincircumstances, such an attachment may be made even prior to filing the applicationof the court order.

There are restrictions to the application of Article 843a DCCP. First, a party that,because of its duties, profession, or occupation, is bound by secrecy, cannot be forcedto comply with the demand if the documents are solely at its disposal or in itspossession on that account. Bearers of those duties are inter alia attorneys-at-law.Second, the confidentiality of the information may be a compelling reason not tocomply with the demand. Third, the proper administration of justice is guaranteedeven without providing the requested documents. Finally, the interest of notdivulging information outweighs the interest in obtaining it. The court will decideon the validity of these defenses.

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XXII. Real Estate

1. OwnershipA buyer of immovable property becomes the owner of that property after delivery.The transfer of title of immovable property requires a notarial deed, which must beentered in the land register, after which the delivery is complete and the buyer isthe owner of the property. The owner can use the property at his or her owndiscretion, since ownership is the most complete right to a piece of property. Theonly exception is if there are restrictions attached to ownership based on statutoryprovisions or unwritten law.

2. Land RegisterReal estate is registered in land registers, which are publicly accessible. Theinformation recorded includes ownership, mortgages, easements and other in remrights, as well as any court orders relating to real estate and administrativeenforcement decisions. Leases that do not grant in rem rights are not recorded inthe land registers. Purchase and sale agreements can be made without specificformalities if these concern business or office space. Since September 2003, a newlaw has governed purchase and sale contracts for homes when the buyer is a privateindividual. Purchase and sale contracts must be in writing. The buyer (who isa private individual) has the option of dissolving the purchase and sale contractwithin three working days without specifying a reason by informing the sellerthereof. The amendment of the law in September 2003 has also made it possiblefor the buyer (of any immovable property) to register the purchase contract in theland register, which gives the buyer protection within the period that the purchaseand sale contract and the deed of transfer are signed. The transfer of ownership ofreal estate requires the formal execution of a notarial deed by a civil law notary inthe Netherlands. The same applies to the establishment and transfer of in rem rightsin general, including mortgages.

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3. Other Rights and ObligationsIn addition to formally executing the notarial deed, which the buyer of immovableproperty must file with the land register, the buyer should investigate all legalaspects of the property by consulting the land register. It is also sensible for thebuyer to investigate whether the existing zoning plan can change adversely and toask the seller whether he is aware of any of changes.

In the Netherlands, the seller is, by virtue of the law, obliged to transfer theimmovable property without any restrictions or burdens unless the buyer expresslyaccepts these restrictions and burdens. This imposes on the seller the additionalobligation to disclose all information on the immovable property. The seller mustinform the buyer of all rights vested in the immovable property, i.e., the rightsthat are known to him. The rights can be divided into rights attached to a certaincapacity and servitude. Rights attached to a certain capacity are those arising froman agreement and relate to immovable property, for instance, an agreement with aneighbor to refrain from uprooting a tree. An example of servitude is the obligationto tolerate water from the neighbor’s roof falling on one’s own yard. If the sellerhas not informed the buyer of such rights, the buyer can order the seller to havethose rights cancelled or to pay him a lump sum.

4. Construction and RenovationUnder the Dutch Housing Act (Woningwet), municipalities are obliged to adopt abuilding ordinance (bouwverordening) containing building and renovation regulations.A building ordinance does not include technical building regulations. Thoseregulations are included in the Building Decree (Bouwbesluit). Article 8 of theHousing Act stipulates what issues must be regulated, and what issues may beregulated in the ordinance. Municipalities are not permitted to regulate any othermatters. A building ordinance includes regulations prohibiting building on pollutedsoil, regulations regarding building demolition and requirements regarding theexternal appearance of buildings. If an owner of a plot of land wishes to build ahouse or a homeowner wishes to renovate his home, he must consult the HousingAct to determine whether a building permit is required. This Act divides buildingsinto three types: those for which a regular building permit is required, those forwhich a light building permit is required and those that do not require a permit.The buyer should first investigate whether a (light) permit is required as regards

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the construction of the building. In most cases a regular building permit will berequired. The Netherlands is a small and densely populated country. Consequently,the use of space for residential and business purposes is tightly regulated. Thezoning plan sets out specifically how land is to be used and developed. In principle,an application for a building permit is assessed against the zoning plan. Thecoordination rule that applies to the building permit and the environmental permitplays a part in the establishment or expansion of a facility. This means that theissuing of the two permits is harmonized.

Zoning law, in particular as it relates to the zoning plan and the building permit, isenforced by the authorities, which have a wide range of instruments at theirdisposal to ensure observance.

5. Environmental Permits and Soil PollutionBoth in asset (real estate) and share transactions, it is of utmost importance togive sufficient attention to the possible presence of soil pollution, as well as torequirements regarding environmental permits. One of the key elements of theDutch Environmental Management Act (Wet milieubeheer) is the “integratedenvironmental permit.” This permit is an important regulatory instrument linkedto the setup, change and operations of an establishment.

The Dutch Soil Protection Act (Wet bodembescherming) came into force on1 January 1987. The Soil Protection Act is based on the concept of “new” and“historic” pollution.With regard to new pollution, all companies bear a generalliability for maintenance.

Practice has shown that these and other environmental issues can be dealt withsatisfactorily by means of timely due diligence combined with clear contractlanguage and, if appropriate, negotiations with the relevant authorities.

6. Modernization of regulationThe Ministry of Housing, Spatial Planning and the Environment (VROM) iscurrently in the process of modernizing regulations on Spatial Planning and thoseconcerning various permits as regards the construction of structures. At themoment this book was edited, it was expected that the new Spatial Planning Actwill come into force in July 2008.

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Spatial planningThe present Spatial Planning Act came into force in 1965. Since then a large numberof amendments have been passed. The last major alteration involved changingSection 19 to include an independent project procedure for local authorities. Thishas led to the establishment of a law that provides for many eventualities but has alsobecome extremely complicated and confusing in practice. The Council of State haseven compared it to a “patchwork quilt”; the Second Chamber of the Netherlandsparliament concurs with this opinion and because of this, the government hasdecided to fundamentally revise the act.

The relationships between the different layers of government have, for example,become more businesslike. This has led to an increasing entrenchment of opposinginterests. It is becoming more and more common for disputes between governmentbodies to be settled in court. The same is true of the relationship between thegovernment and the public. In addition, the increase in the scale of spatial planning,renewed economic growth and technological developments have all affected theway in which decisions related to spatial planning are made. This often means thatthey have to be better, more integrated and enforced more quickly. This has madethe processes involved more complex. Furthermore, it is not always clear as towho is responsible for doing what.

The aim of the revision is to simplify the system, to have the responsibility sharedproperly among the various layers of government and to have government andprovincial policy implemented throughout the system.

In the new Act, a clear difference has been made between spatial planning policyand its (legal) implementation. The zoning plan occupies a central position. A newelement is the structural concept in which authorities describe their spatial planningpolicy. These new structural concepts replace the current key planning decision(at national level), regional plans (at the provincial level) and structure plans (at theregional and municipal level). One advantage of this is the shorter procedure,which allows parties to quickly take advantage of new possibilities and opportunities.Among other things, the Spatial Planning Act also means:

• a shortened zoning plan procedure, reduced from over a year to 26 weeks;

• zoning plans must be digitalized;

• provincial authorities may no longer approve zoning plans;

• provinces and the State can give indications in the zoning plan procedure;

• a fast construction procedure (project decision);

• a 2% excess for compensation for loss resulting from government planningdecisions;

• the permit-issuing body has the option of coordinating licensing proceduresand of combining them into a single appeal/objection procedure (coordinationscheme); and

• zoning plans must be updated or extended every 10 years.

PermitsThe General Provisions for the Environment Act (Wabo) is an important elementof the Cabinet’s desire to reduce the pressure of regulation on citizens andbusinesses. It involves the amalgamation of around 25 licensing systems, of which11 are decentralized. These range from national regulations for building, housingand the environment to municipal demolition and tree-felling permits. However,due to legislative difficulties, this Act is not expected to come into force any soonerthan 2010.

7. LeasesLeases are subject to various statutory provisions and administrative regulations.With respect to office space, a nonrestrictive system applies, which allows partiesto freely negotiate the rent and other terms of their agreement on the basis ofprevailing market conditions. The rental price is often indexed on the basis ofa price index figure. Upon termination of a lease, the courts can grant protectionfrom eviction to a tenant for a maximum of three years. With respect to retailbusiness space, a complicated semi-restrictive system applies, which reduces thefreedom to execute contracts with respect to the term and termination of the lease(by providing protection from eviction and compulsory renewal). The system alsoallows the courts to control the rental price. Leases for retail business space usuallyhave a five-year term with an option allowing the tenant to renew the contract foranother five years.

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8. Public HousingThe government must ensure that there is sufficient housing for the various socialpopulation groups and must promote a suitable living environment. The HousingAct stipulates the obligations and powers of the different housing authorities andregulates the government’s housing policy. One of the effects of the decentralizationof public housing is that the government provides new regulations under the HousingAct only if housing for a particular population group is under threat. The HousingAct is implemented primarily by municipalities and housing corporations, and to alesser extent by provinces and the Ministry of Housing, Spatial Planning and theEnvironment (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieu). Thesupervision of public housing is assigned to the inspector general of housing, theprovincial inspectors and their civil servants. Due to demographics and planning, theNetherlands suffers a general shortage of housing resources. It is therefore importantthat sparse housing be allocated in a just and fair manner. The government sees tothis by issuing housing permits under certain circumstances. The regulations withrespect to housing allocation are laid down in the Housing Allocation Decree(Huisvestingsbesluit), which is based on the Housing Allocation Act (Huisvestingswet),and on the Housing Allocation Act itself, according to which a person is free todecide where he wishes to reside. This right may only be restricted insofar as it isessential for the balanced and fair allocation of housing. Government interferenceas regards housing is justified only when housing for people with a relatively weakposition on the housing market Municipalities may restrict the right to freedom ofestablishment on the basis of a municipal housing allocation ordinance that regulatesthe time and conditions for granting housing allocation permits.

Summary of the Netherlands’ Bilateral Tax TreatiesThe Netherlands has one of the most extensive tax treaty networks in the EU.The treaties generally provide for substantial reductions of withholding tax ondividends, interest and royalties. Appendices II-V contain lists of the treaties currentlyin force and under negotiation, and the treaty reductions for withholding taxes.Most tax treaties negotiated by the Netherlands relating to income and capital arebased on the draft models published by the Organisation for Economic Co-operation and Development (OECD) in 1963, 1977 and 1992-2000.

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Tax treaties are currently in force in the following countries:

• Albania

• Argentina

• Armenia

• Aruba

• Australia

• Austria

• Bangladesh

• Barbados

• Belarus

• Belgium

• Brazil

• Bulgaria

• Canada

• China (excludingHong Kong andMacau)

• Croatia

• Czech Republic

• Denmark

• Egypt

• Estonia

• Finland

• France

• Georgia

• Germany

• Ghana

• Greece

• Hungary

• India

• Indonesia

• Iceland

• Ireland

• Israel

• Italy

• Japan

• Jersey

• Jordan

• Kazakhstan

• Korea

• Kuwait

• Latvia

• Lithuania

• Luxembourg

• Macedonia

• Malaysia

• Malta

• Mexico

• Moldova

• Mongolia

• Morocco

• Netherlands Antilles

• New Zealand

• Nigeria

• Norway

• Pakistan

• Philippines

• Poland

• Portugal

• Romania

• Russia

• Singapore

• Slovak Republic

• Slovenia

• South Africa

• Spain

• Sri Lanka

• Suriname

• Sweden

• Switzerland

• Taiwan

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• Thailand

• Tunisia

• Turkey

• Turkmenistan

• Uganda

• Ukraine

• United Kingdom

• United States

• Uzbekistan

• Venezuela

• Vietnam

• (former) Yugoslavia

• Zambia

• Zimbabwe

Tax treaties are still in force in the following countries after split or separation fromthe (former) Soviet Union:

• Azerbaijan *

• Kyrgyzstan *

• Tajikistan *

• Turkmenistan

(former) Yugoslavia:

• Bosnia-Herzegovina

• Montenegro (Fed. Republic)

• Slovenia

• Serbia (Fed. Republic)

* Treaty unilaterally applied by the Netherlands.

** Signed on 8 December 2006. Treaty is not yet in force.

* See (b) for application treaties with the former Soviet Union and former Yugoslavia.

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Negotiations are underway or will be held regarding the conclusion of tax treaties with:

• Algeria

• Australia

• Azerbaijan *

• Brazil

• Canada

• China

• Cuba

• Cyprus

• Costa Rica

• France

• Germany

• Hong Kong

• Indonesia

• Iran

• Isle of Man

• Japan

• Kenya

• Kyrgyzstan

• Libya

• Mexico

• Peru

• Saudi Arabia

• Slovakia

• Switzerland

• Tanzania

• Turkmenistan *

• Turkey

• United Kingdom

Tax treaties with regard to the profits from air and/or sea shipping are currently inforce in the following countries:

• Argentine air/sea

• Armenia air

• Albania air

• Azerbaijan air

• Bahrain air

• Barbados air

• Belarus air

• Brunei air

• Canada air

• Cape Verde air

• China (People’s Rep.) air/sea

• Croatia air

• Cuba air

• Czech Republic air

• Egypt air

• Estonia air/sea

• Georgia air

• Hong Kong air/sea

• Hungary air

• Iran air

• Korea sea

• Latvia air/sea

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• Lithuania air/sea

• Macau air

• Macedonia air

• Malawi air

• Maldives air

• Mexico sea

• Oman air

• Poland sea

• Panama air/sea

• Qatar air

• Russia sea

• Saudi Arabia air

• Senegal air

• Seychelles air

• Slovak Republic air

• Slovenia air

• South Africa air

• Sudan air

• Suriname air

• Syria air

• Togo air

• Ukraine air

• United Arab Emirates air

• Uruguay air

• Uzbekistan air

• Venezuela air/sea

• Vietnam air

Negotiations are underway regarding the conclusion and/or amendment of taxtreaties with regard to the profits from air and/or sea shipping with:

• Angola

• Colombia

• Faroe Islands

• Gabon

• Ghana

• Guatemala

• Haiti

• Iran

• Ivory Coast

• Jamaica

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Appendix I - Procedure for Incorporatinga Dutch NV, a BV, or a CooperativeProcedure for the incorporation a Dutch NV (Naamloze Vennootschap met beperkteaansprakelijkheid or public limited liability company), a BV (Besloten Vennootschap metbeperkte aansprakelijkheid or private limited liability company), and a Cooperative(cooperatie).

Procedure(a) Perform trade name research at the Trade Register of the Chamber of Commerce

to investigate whether the proposed or a similar name can be used. Threedifferent names can be examined in one trade name research.

(b) Execute a power of attorney by incorporation.

(c) Submit questionnaires to the Ministry of Justice.

(d) Open a separate bank account in the name of the company in incorporation.

(e) Issue a bank statement to the notary confirming the payment of theincorporation capital.

(f) Execute the notarial deed of incorporation including the Articles of Association.

(g) Register the company’s managing directors and sole shareholder with the TradeRegister of the Chamber of Commerce within eight days after the execution ofthe notarial deed.

Steps c, d, e, and f are not applicable to the incorporation of a Cooperative.

DocumentationThe following information or documentation is required for the applicationprocedure at the Ministry of Justice as described above:

1. Proposed name, statutory seat, and address of the new company;

2. Description of the new company’s activities;

3. Authorized and issued share capital, number, and par value of shares;

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4. A completed and signed Ministry of Justice “form B” in case the incorporatoror managing director is a private individual (full name, place and date of birth,nationality, address, marital status, and employment details);

5. A completed and signed Ministry of Justice “form C” for the incorporator ormanaging director that is a legal entity (name, statutory seat, object, data ofdirectors and shareholders, financial figures, and history);

6. The ultimate beneficial owner, either a private individual or a listed company,should partly complete and sign a Ministry of Justice “form B” or “form C”respectively.

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Appendix II - Overview of Tax Rates InboundIncome Under Dutch Tax Treaties

Appendix Dividends Interest Royalties

CountryN.i.f. Means tax

treaty signed butnot in force yet

Reduced rateunder tax treaty

for qualifyingparticipations


for individuals andcompanies



Albania 0%/5% 15% 0%/5%/10% 10%

Argentina 10% 15% 12% 3%/5%/10%/15%

Armenia 0%/5% 15% 0%/5% 5%

Aruba 5%/7.5% 15% 0% 0%

Australia 15% 15% 10% 10%

Austria 5% 15% 0% 0%/10%

Azerbaijan 15% 15% 0% 0%

Bangladesh 10% 15% 7.5%/10% 10%

Barbados 0% 15% %5% 0%/5%

Belarus 0%/5% 15% 5% 3%/5%/10%

Belgium 0% 15% 0%/10% 0%

Bosnia andHerzegovina

5% 15% 0% 0%

Brazil 15% 15% 10%/15% 15%/25%

Bulgaria 5% 15% 0% 0%

Canada 5% 15% 0%/10% 0%/10%

China 10% 10% 10% 10%

Croatia 0% 15% 0% 0%

Czech Rep. 0% 10% 0% 5%

Denmark 0% 15% 0% 0%

Egypt 0% 15% 12% 12%

Estonia 5% 15% 0%/10% 5%/10%

Finland 0% 15% 0% 0%

France 5% 15% 0%/10% 0%

Georgia 0%/5% 15% 0% 0%

Germany 10% 15% 0% 0%

Greece 5% 15% 8%/10% 5%/7%

Hungary 5% 15% 0% 0%

Iceland 0% 15% 0% 0%

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India 10%/15% 10%/15% 10%/15% 10%20%

Indonesia 10% 10% 10% 10%

Ireland 0% 15% 0% 0%

Israel 5% 15% 10%/15% 5%/10%

Italy 5%/10% 15% 10% 5%

Japan 5% 15% 10% 10%

Jordan 0%/5% 15% 5% 10%

Kazakhstan 0%/5% 15% 0%/10% 0%

Korea 10% 15% 10%/15% 10%/15%

Kuwait 0% 10% 0% 5%

Kyrgyzstan 15% 15% 0% 0%

Latvia 5% 15% 10% 5%/10%

Lithuania 5% 15% 10% 5%/10%

Luxembourg 2,5% 15% 0%/2.5%/15% 0%

Macedonia 0% 15% 0% 0%

Malawi 10% 0% 0% 0%

Malaysia 0% 15% 10% 8%

Malta 5% 15% 10% 0%/10%

Mexico 0%/5% 15% 0%/5%/10%/15% 10%

Moldova 0%/5% 15% 5% 2%

Mongolia 0% 15% 0%/10% 0%/5%

Montenegro 5% 15% 0% 10%

Morocco 10% 25% 10%/25% 10%

NetherlandsAntilles

8,3% 15% 0% 0%

New Zealand 15% 15% 10% 10%

Nigeria 12,5% 15% 12,5% 12,5%

Norway 0% 15% 0% 0%

Pakistan 10% 20% 10%/15%/20% 5%/15%

Philippines 10% 15% 0%/10%/15% 15%

Poland 5% 15% 0%/5% 5%

Portugal 0% 10% 10% 10%

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Romania 0%/5% 15% 0% 0%

Russia 5% 15% 0% 0%

Serbia 5% 15% 0% 10%

Singapore 0% 15% 10% 0%

Slovak Republic 0% 10% 0% 5%

Slovenia 5% 15% 0%/5% 5%

South Africa 5% 15% 10% 0%

Spain 5% 15% 10% 6%

Sri Lanka 10% 15% 5%/10% 10%

Surinam 7.5%/15% 20% 5%/10% 5%/10%

Sweden 0% 15% 0% 0%

Switzerland 0% 15% 5% 0%

Taiwan 10% 10% 0%/10% 10%

Tajikistan 15% 15% 0% 0%

Thailand 5% 25% 10%/25% 5%/15%

Tunisia 0% 20% 7,5% 7,5%

Turkey 5% 20% 10%/15% 10%

Turkmenistan 15% 15% 0% 0%

Uganda 0% 15%/5% 0%/10% 10%

Ukraine 0%/5% 15% 0%/2%/10% 0%/10%

United Kingdom 5% 15% 0% 0%

United States 0%/5% 15% 0% 0%

Uzbekistan 0%/5% 15% 0%/10% 0%/10%

Venezuela 0% 10% 5% 5%/7%/10%

Vietnam 5%/7% 15% 7% 5%/10%/15%

Zambia 5% 15% 10% 10%

Zimbabwe 10% 20% 10% 10%

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Qualifying companies columnThe lower rate in the column generally applies if the recipient is a company thatowns at least 25% of the capital or the voting power in the Netherlands company,as the case may be. There may be special conditions or exceptions.

Interest columnMany treaties provide for an exemption for certain types of interest, e.g., interestpaid to the state, local authorities, the central bank, export credit institutions, orin relation to sales on credit. Such exemptions are not considered in this column.The lower rates generally refer to interest paid by banks or on government bonds.

Royalty columnDifferent rates in the columns generally refer to different types of withholdingtax rates depending upon the type of royalty, e.g., copyright payments, paymentsfor the use of films and computer software, and payments for the use of patents,trademarks, and know-how.

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Baker & McKenzie

Appendix VI - Contact Information

Amsterdam Practice Groups and Teams

Banking and SecuritiesPhillipe SteffensTel.: +31 20 551 7410phillipe.steffens @bakernet.com

Civil-Law NotaryJan Willem SchenkTel.: +31 20 551 7572janwillem.schenk @bakernet.com

Corporate Commercial/M&AEdwin LiemTel.: +31 20 551 [email protected]

Corporate ContractsMarco WallartTel.: +31 20 551 [email protected]

EmploymentKarin BodewesTel.: +31 20 551 [email protected]

Mirjam de BlécourtTel.: +31 20 551 [email protected]

EU and CompetitionMisha lutje BeerenbroekTel.: +31 20 551 [email protected]

Intellectual PropertyReina WeeningTel.: +31 20 551 [email protected]

IT/CommunicationsRobert BoekhorstTel.: +31 20 551 [email protected]

Litigation and Dispute ResolutionRobert van AgterenTel.: +31 20 551 [email protected]

National and International TaxWouter PaardekooperTel.: +31 20 551 [email protected]

Real Property & ProjectsBob BekkerTel.: +31 20 551 [email protected]

VAT/Indirect TaxFolkert IdsingaTel.: +31 20 551 [email protected]

TelecommunicationsPractice leader: Robert BoekhorstTel.: +31 20 5517 [email protected]

Practice Groups

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Fashion & Luxury GoodsTeam leader: Remke ScheepstraTel.: +31 20 5517 [email protected]

FoodTeam leader: Misha lutje BeerenbroekTel.: +31 20 5517 [email protected]

Pharmaceuticals and HealthcareTeam leader: Reina WeeningTel.: +31 20 5517 [email protected]

Real EstateTeam leader: Bob BekkerTel.: +31 20 5517 [email protected]

Employee Benefits Tax GroupTeam leader: Jan-Willem de Tombe Tel.: +31 20 5517 [email protected]

OutsourcingTeam leader: Mirjam de BlécourtTel.: +31 20 5517 [email protected]

PensionsTeam leader: Irene Vermeeren-KeijzersTel.: +31 20 5517 [email protected]

Private EquityTeam leader: Peter van den OordTel.: +31 20 5517 [email protected]

Project FinanceTeam leader: Olav AndriesseTel.: +31 20 5517 [email protected]

ReorganizationsTeam leader:Wouter PaardekooperTel.: +31 20 5517 [email protected]

Risk ManagementTeam leader: Frank KroesTel.: +31 20 5517 [email protected]

Share Based CompensationTeam leader: Maarten van der LandeTel.: +31 20 5517 [email protected]

Team JapanTeam leader:Theo van MaarenTel.: +31 20 5517 [email protected]

Specialist Teams

Industry Groups

www.bakernet.com/amsterdam

Baker & McKenzie Amsterdam N.V.P.O. Box 27201000 CS AmsterdamThe [email protected]

Baker & McKenzie Amsterdam N.V. is a member of Baker & McKenzie International, a Swiss Verein withmember law firms around the world. In accordance with the common terminology used in professionalservice organizations, reference to a “partner” means a person who is a partner, or equivalent, in sucha law firm. Similarly, reference to an “office” means an office of any such law firm.

©2008 Baker & McKenzieAll rights reserved.

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