Legal Analysis of the Nexperia Case in the Netherlands
Armstrong Chen, Xin Wang
The Amsterdam Enterprise Chamber (Netherlands) continues its proceedings in the dispute involving Nexperia, and on February 11, 2026, issued a ruling ordering an official investigation into alleged “ineffective management” at the company. The ruling also upheld the suspension of Nexperia’s Chinese CEO Zhang Xuezheng’s authority and allowed the European interim management team to remain in their positions.
In September 2025, the Dutch government, citing national security concerns, imposed mandatory management measures on the Chinese company Nexperia. These actions not only caused significant disruptions to the global automotive chip supply chain but also brought to the forefront a long-standing debate in international investment law regarding the boundaries of “indirect expropriation.” This incident occurs against the backdrop of a deep restructuring of the global semiconductor industry. On one hand, it tests the effectiveness of existing foreign investment protection mechanisms; on the other, it raises questions about states’ ability to coordinate policies and balance legal interests in managing strategic industries. At the same time, China’s systemic response demonstrates the capacity and strategic composure of emerging economies to use legal instruments to counteract unequal treatment and protect their legitimate rights and interests.
I. Background of the Incident
Nexperia is a Dutch semiconductor company that was formerly the standard products division of NXP Semiconductors and became independent in early 2017. In June 2019, the China Securities Regulatory Commission approved the acquisition of Nexperia by Chinese company Wingtech Technology for RMB 26.8 billion. In September 2025, the Dutch government, based on a “national security risk assessment” under the Goods Availability Act, imposed mandatory control measures on Nexperia, including asset freezes and the removal of Chinese management. This action is not an isolated incident but continues the trend of intensified semiconductor industry control in Western countries, from the U.S. CHIPS and Science Act of 2022 to the European Chips Act.
The Dutch control measures not only disrupted the supply of critical automotive chips, directly impacting Nexperia’s normal operations, but also created a “break” risk in the supply chain for the global automotive industry, forcing manufacturers to halt production. This vividly demonstrates how geopolitical intervention through a single key supplier can rapidly transmit shocks throughout the global automotive value chain and lead to real production stoppages.
II. Legal Nature of the Dutch Government’s Control Measures
In international investment law, indirect expropriation refers to situations where the host state, without formally seizing the foreign investor’s property, effectively deprives the investor of the ability to use and benefit from its investments through regulatory measures. To determine whether a host state’s measures constitute compensable indirect expropriation, a comprehensive assessment of their actual impact and policy objectives is required, carefully weighing the protection of the foreign investor’s property rights against the host state’s legitimate right to regulate in the public interest. Modern international investment practice increasingly tends toward a standard of review that considers both purpose and effect—examining both the legitimate public purposes of government measures and their substantial impact on investments, seeking a balance between the host state’s regulatory space and investor protection.¹ To assess whether the Dutch government’s measures constitute indirect expropriation, the following elements must be considered:
2.1 Substantial Interference
The Dutch government’s direct intervention in Nexperia’s corporate governance, including the removal of lawfully appointed management, exceeds ordinary regulatory oversight. The standard established in the Metalclad Corporation v. United Mexican States² case by the International Centre for Settlement of Investment Disputes (ICSID) adopts a broad definition of expropriation. It holds that not only open, intentional seizure, but also measures that effectively deprive the owner of the fundamental use of its investment or the benefits derived therefrom, constitute actions “tantamount to expropriation” or “indirect expropriation.” The key objective here is the deprivation of the Chinese parent company’s management rights, which has already led to internal division and supply chain chaos. Wingtech Technology’s investment expectations have been seriously undermined, and the management rights obtained through the acquisition have been effectively nullified.
2.2 Frustration of Reasonable Investment Expectations
The standard of reasonable investor expectations is based on the principle of protecting reasonable expectations in administrative law, according to which citizens’ expectations based on government policy, decisions, and promises are entitled to protection.³ When Wingtech Technology acquired Nexperia, the Dutch government approved the transaction, thereby creating legitimate investment expectations. The Dutch government’s current reversal, without sufficient evidence of a real and imminent threat to national security, constitutes a violation of these legitimate expectations. In the International Thunderbird Gaming Corporation v. Mexico⁴ case, the arbitral tribunal established four criteria for recognizing reasonable expectations: (1) the host state’s actions created reasonable and justified expectations for the investor or investment; (2) the investor acted in reliance on these state actions; (3) the host state failed to fulfill these reasonable and justified expectations; and (4) the investor or investment suffered losses as a result.⁵
2.3 Violation of the Principle of Proportionality
Even where national security considerations exist, measures likely violate the principle of proportionality, which requires the state to choose the measure least burdensome to investors’ rights. Measures taken by governments for public purposes, if proportionate to those purposes, fall within the host state’s legitimate regulatory authority, and investors have no right to compensation. Conversely, if the measure is clearly excessive and disproportionate to its objective, it may be considered indirect expropriation, entailing the host state’s obligation to compensate the investor.
The measures taken by the Dutch government appear to lack the necessary proportionality to the stated threat. Their extremity and the apparent absence of less severe alternatives raise serious doubts about their compliance with the proportionality principle in international investment law practice. First, regarding the necessity of the measure: the government apparently did not conduct sufficient consultations with the investor before imposing the measures, nor did it attempt to use less investment-destructive regulatory instruments. Instead, it resorted to extremely harsh intervention, effectively depriving the investor of basic ownership and control rights through mechanisms such as share transfer into trust management. This significantly departs from the “principle of last resort,” which requires the state to choose the least harmful option from those available. Second, questions also arise regarding proportionality in the narrow sense (balancing benefits and losses). The government’s actions resulted in a unilateral veto on important business decisions and the halt of Nexperia’s normal operations, effectively paralyzing the company. This directly contradicts the stated public purpose of “ensuring supply chain security,” as supply chain stability and security actually depend on the continuous and healthy operation of the enterprise. The public interest sought to be protected (supply chain security) was not effectively ensured but instead faced new disruption risks due to the interference with the company’s operations.
III. Boundaries of Regulatory Sovereignty
It is an undeniable principle of international law that states possess regulatory sovereignty over strategic industries. International law does not prohibit host states from expropriating foreign investments in the public interest, provided certain conditions are met. The exercise of this sovereignty must comply with boundaries established by international law, including requirements of “public purpose,” non-discrimination, and the payment of compensation.⁶
3.1 Achievement of Public Purpose
For a lawful taking of property involving foreign investment, the government action must serve a “public purpose.” “Public interest” here refers to the interest of a broad, indefinite group of persons, as opposed to private interest. For lawful indirect expropriation, the key requirement is conformity with public purpose. This means that if the original intent of the action was directed toward the public good, the action itself may be considered lawful, even if the ultimate result did not materially achieve that good.
3.2 Principle of Non-Discrimination
The principle of non-discrimination in international investment law requires host states, when taking measures such as expropriation, not to discriminate against investors on the basis of nationality, including equal treatment between domestic and foreign investors, as well as between foreign investors of different nationalities. This principle aims to prevent discriminatory adverse treatment of specific foreign investors. An investor alleging discrimination typically must prove that the host state’s actions were motivated by discrimination on the basis of nationality.
Under Article XXI (Security Exceptions) of GATT, member states retain the right to act to protect their essential security interests. However, if the Netherlands targets only Chinese enterprises while remaining open to similar investments from other countries, such measures may likely be found to constitute an abuse of the security exception, representing arbitrary or unjustifiable discrimination, and consequently a violation of the Netherlands’ WTO obligations.
3.3 Procedural Fairness
In the expropriation provisions of international investment agreements, contracting parties typically establish due legal procedure as a precondition for lawful expropriation, enhancing the openness and transparency of the process. These agreements generally also provide foreign investors with procedural rights, such as the right to a hearing, judicial review, and the right to appeal. Due legal procedure encompasses two main aspects: (1) whether the foreign investor can obtain review of the expropriation by an impartial and independent third party; and (2) whether the expropriation complies with the procedural requirements of both the host state’s domestic law and generally recognized principles of international law.⁷
The Comprehensive Agreement on Investment between the EU and China (CAI, not yet in force)⁸ explicitly requires contracting parties to ensure Fair and Equitable Treatment (FET) when adopting regulatory measures, including procedural transparency and legal predictability. Article 3 (Commitments on Impartiality, Transparency, and Non-Discrimination of Regulatory Authorities) of Chapter 2 (Investment Liberalization) provides that Parties shall ensure that regulatory authorities treat covered entities and other enterprises in comparable circumstances equally, ensure consistency and non-discrimination in the application of measures, and guarantee the legal independence of regulatory authorities from the entities they regulate. The transparency provisions in Chapter 3 (Regulatory Framework) cover information disclosure, notification, review, and appeal, raising requirements for legal predictability and procedural transparency.
Whether the Dutch government provided adequate notice and an opportunity to be heard before taking measures, and whether it presented a clear legal justification, will affect the legal legitimacy of its actions.
3.4 Compliance with Compensation Standards
Although there is broad consensus regarding the need for compensation for expropriated foreign investors, the standard of payment often becomes a point of dispute in specific expropriation implementations, generating numerous investment claims. While states recognize the obligation to provide appropriate compensation to investors, there is no unified view in the international community regarding the precise standard of compensation.⁹
IV. Netherlands’ Violation of the Bilateral Investment Treaty with China
The Agreement between China and the Netherlands on the Encouragement and Reciprocal Protection of Investments (BIT) explicitly provides that each Contracting Party shall ensure “constant protection and security” for the lawful investments of investors of the other Party and shall not adopt discriminatory or unreasonable measures prejudicing the rights of such investors. Nexperia was lawfully acquired by Wingtech Technology, and the Dutch government had previously repeatedly recognized its ownership structure. However, the sudden seizure of management on “national security” grounds without providing substantial evidence of “technology leakage” constitutes “selective enforcement” against a Chinese enterprise. This violates the BIT’s provisions on “fair and equitable treatment” and the “protection and security obligation.” Furthermore, the Dutch government’s measures and court rulings may also be found to constitute indirect expropriation without compensation, violating the BIT’s provision prohibiting unlawful expropriation. This provision states that measures by one Contracting Party to expropriate, nationalize, or take other similar measures against investments of investors of the other Party must meet the following conditions: (a) in the public interest and in accordance with domestic legal procedure; (b) the expropriation is non-discriminatory or does not violate any obligations undertaken by the Party taking the measures; (c) the expropriation must provide for compensation.
V. China’s Countermeasures
In response to the Netherlands’ actions, China’s Ministry of Commerce characterized the judicial and administrative actions of the Netherlands as infringing upon the rights and interests of Chinese enterprises. In accordance with the authority granted by the People’s Republic of China’s Law on Countering Foreign Sanctions, China imposed countermeasures, including export controls.
On October 4, 2025, China’s Ministry of Commerce issued an export control notice, prohibiting Nexperia China and its subcontractors from exporting certain finished semiconductor components and assemblies manufactured in China. Nexperia stated that it is actively engaging with relevant Chinese authorities to obtain exceptions. This prohibition effectively deprives Nexperia of the ability to supply critical components from its factories in China to its European plants and global customers, directly impacting its global supply chain. The export control measures are based on Article 2 of the People’s Republic of China’s Export Control Law, which permits restrictions on exports of goods “for the purpose of protecting national security and interests,” consistent with common practice in many countries.
VI. Conclusion
From a legal perspective, the mandatory management measures imposed by the Dutch government on Nexperia, substantially depriving the Chinese parent company Wingtech Technology of management rights, violating reasonable investment expectations formed through prior approval, and potentially violating the principle of proportionality, bear the hallmarks of “indirect expropriation” under international investment law. This assessment will directly influence whether the Netherlands bears corresponding state responsibility and compensation obligations. Even if the Netherlands invokes national security and public interests to justify its regulatory actions, the legality of these actions must remain within the established boundaries of regulatory sovereignty, including serving a public purpose, complying with non-discrimination, procedural fairness, and providing compensation in cases of expropriation.
China’s countermeasures in the form of export controls, imposed in accordance with its national legislation, represent a resolute response within the framework of the international legal system to these potentially adverse actions. This is not only a necessary means of protecting the legitimate rights and interests of domestic enterprises but also a clear stance against the politicization of economic, trade, and technological issues and the abuse of the “national security” concept for unilateral protectionism. The final resolution of this matter is likely to have a demonstrative effect on future global investment and trade rules in the technology sector.
The recently concluded open hearings at the Amsterdam Enterprise Chamber were, in essence, a profound judicial confrontation on the issue of corporate governance independence in a multinational company and the boundaries of parent company control. Nexperia’s European management, alleging “ineffective management” and “technology transfer risks” by Wingtech, sought from the court the initiation of a formal investigation to preserve its current independent operational status. In turn, Wingtech contested that the prior judicial intervention lacked factual basis and seriously disrupted the global semiconductor supply chain, demanding that the court immediately terminate the interim management and restore its actual control over the subsidiary. The court is currently in the evidence evaluation stage; its final ruling will determine whether Nexperia moves toward deep division under “independent management” or returns to the existing integrated structure of “administrative unity.”
References
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Original by Armstrong Chen and Xin Wang, Dacheng Shanghai Office, January 23, 2026