Publications

On February 19, 2025, a bill was proposed that limits the compensation scheme for the transition payment in case of dismissal due to long-term disability to small employers. This proposal has significant implications for employers. The compensation scheme, originally intended to relieve employers, will now only be available to small employers. This article discusses the details and implications of this change. Limitation on Compensation for Transition Payment The compensation scheme for the transition payment was introduced to support employers in paying the transition payment after 104 weeks of illness. For many employers, it felt unjust to have to pay a transition payment after two years of continued salary payment. This often led to ‘dormant employment contracts’, where the employment contract was not terminated to avoid payment of the transition payment. With the new bill, the government aims to limit the compensation scheme to small employers. Small employers are defined as those who have been active for less than two years or have a wage bill of no more than 25 times the average taxable wage per employee. In 2025, this threshold was set at a wage bill of no more than € 990,000 per year. Implications for larger employers For medium-sized and large employers, this change means that they will have to pay the transition payment themselves in case of dismissal due to long-term disability. This can have significant financial consequences. The question arises whether employers are still obliged to terminate the employment contract if they are not compensated. The legislator leaves this to the judiciary, but it is likely that existing case law will be maintained. The change is expected to take effect on July 1, 2026. No transitional law is proposed, meaning the new rules will apply immediately. Employers will only be eligible for compensation if the 104-week waiting period ends before the law comes into effect. No specific arrangements have been made for special employers, such as social development companies. Contact Do you have questions about the compensation scheme for the transition payment or would you like to discuss it? Please contact Gerard Zuidgeest, Rose Horstman, or one of our other employment law specialists.

On February 21, 2025, the Supreme Court ruled on the classification of employment relationships, specifically in the context of self-employed workers. As early as 2021, the Amsterdam District Court ruled that Uber drivers are employed under an employment contract, meaning that Uber must comply with the Taxi Transport Collective Labour Agreement (CAO). On appeal, the Amsterdam Court of Appeal asked preliminary questions to the Supreme Court regarding the role of the criteria ‘entrepreneurship’ in assessing the employment relationship. The Supreme Court has now provided answers to these questions. No hierarchy in criteria In the Deliveroo ruling, the Supreme Court ruled that the assessment of whether an agreement constitutes an employment contract depends on all the circumstances of the case. This includes the nature and duration of the work and the way the work and working hours are determined. In the Uber ruling, the Supreme Court clarified that there is no fixed hierarchy among these criteria. This means that all nine criteria must be equally weighed. For employers, this means that the classification of an employment relationship can be more complex, as every aspect of the working relationship must be assessed. This can lead to different outcomes, even if two workers perform the same work under the same conditions. Entrepreneurship: external aspects matter An important aspect emphasised by the Supreme Court is the entrepreneurship of the self-employed worker. The Supreme Court considers that the entrepreneurship criterium is not given more weight than the other criteria. This means that entrepreneurship can be decisive for the classification of the agreement. Not only does the general entrepreneurial situation of the worker in the relationship between the workers and the client play a role (internal entrepreneurship), but circumstances outside the relationship are also important (external entrepreneurship). In terms of external entrepreneurship, one might consider whether the worker is registered with the Chamber of Commerce, the number of clients the worker has outside the specific relationship, or the number of investments the worker makes for its own business. Retaining self-employed workers? Stimulate entrepreneurship! Employers are advised to encourage the external entrepreneurship of their self-employed workers. This can be done, for example, by encouraging them to take on assignments from multiple clients and ensuring that the worker clearly profiles themselves as an entrepreneur, for instance, with their own website. Contact Do you have questions about the classification of employment relationships or would you like to discuss this further? Please contact Gerard Zuidgeest, Rose Horstman, or one of our other employment law specialists.

When should an employee disclose information about chronic physical or psychological complaints during a job application? This was the subject of a recent ruling by the Court of Appeal in ‘s-Hertogenbosch. The disclosure of medical Information in the application procedure An applicant is not required to voluntarily provide medical information. This is only different if the applicant knows at the time of concluding the employment contract that their health condition would significantly and long-term hinder them in performing the job duties. Additionally, an employer may not ask questions about the health condition of a prospective employee, past sick leave, or any limitations during the application process, except in the context of a legally permitted medical examination. Ruling: the facts in the case before the Court of Appeal in ’s-Hertogenbosch The employee in this procedure had suffered from chronic psychological complaints (PTSD and an anxiety disorder) since 2011 following an unsuccessful surgery. The employee applied for a position as a security guard at a courthouse in October 2023 and did not disclose his medical situation during the application process, nor the fact that he was currently unfit for work as a security guard at the Department of Transport and Support (DV&O) of the Ministry of Justice and Security. The employee was hired and was declared fully recovered by the DV&O company doctor at that time. Shortly after starting at the courthouse, the employee fell ill. The employer requested the termination of the employment contract due to gross misconduct, arguing that the employee had failed to disclose his medical situation. The employer’s requests were denied in the first instance. Court’s judgment: no disclosure obligation for employee The Court of Appeal, like the subdistrict court, ruled that there were no grounds to terminate the employment contract. The court ruled that the disclosure obligation only exists if the illness or disability makes the applicant unfit for the position and the applicant knew or should have understood this. In this case, the employee had fallen ill several times at his previous employer, but this was not due to the specific job requirements, and the employee had always fully recovered. The position at the courthouse was less demanding than the position at DV&O, leading the employee to believe that his chronic illness would not be an issue. The employer argued that an applicant must also disclose their illness if the illness does not absolutely prevent the performance of essential job requirements, but the applicant will experience significant hindrances in fulfilling the role. The court dismissed this argument, as it would mean that every chronically ill person would have to disclose their chronic illness during a job application, which is contrary to the protection provided by the Dutch Equal Treatment Act on Grounds of Disability or Chronic Illness (Wgbh/cz). Practical tips As an employer, do not ask questions about the health condition, past sick leave, or any limitations of the applicant during the application process, unless it concerns a legally permitted medical examination. Additionally, ensure that the job requirements are detailed and are clearly stated in the job application and/or job profile. Discuss these requirements during the application process and ensure written documentation. If possible ask the former employer for references. Contact Do you have questions about the disclosure obligation during job applications or would you like to discuss further? Please contact Gerard Zuidgeest, Rose Horstman, or one of our other employment law specialists.

Under the Dutch Working Conditions Act, employers are obliged to provide a safe working environment. In this context, employers sometimes implement a strict alcohol and drugs policy. But how far can that go? Can an employer test an employee for alcohol or drug use? The Limburg District Court recently ruled on this issue. What can employers do in this regard? Ruling Limburg District Court – 20 February 2025 The case concerned SIF Netherlands B.V., a manufacturer of foundations for offshore wind farms, which had introduced a zero-tolerance policy regarding alcohol and drug use. One of its employees, employed since 2008 and responsible for quality inspections, tested positive for cannabis during an unannounced saliva test on 25 September 2024. Several colleagues also reported red eyes and strange behaviour. While the employee admitted to having used cannabis the previous evening, he denied being under the influence while at work. Nevertheless, SIF sought permission to terminate the employment contract on the basis of serious culpable conduct (ground e), a disrupted employment relationship (ground g), or a combination of grounds (ground i). The court rejected the request for termination. Although the question of drug use was considered legitimate, the court ruled that the test did not establish that the employee had been under the influence during work hours. Moreover, the test had been conducted unlawfully, breaching the employee’s right to a private life and privacy. As a result, the test results were excluded. Moreover, the witness statements from colleagues were deemed insufficiently substantiated to justify termination. The Legal Landscape Employers have a legal duty to ensure a safe working environment. The question is under which circumstances they may take a specific measure to test for drugs and/or alcohol. There is ample case law involving employees appearing at work under the influence of drugs or alcohol, where disciplinary actions were upheld. Yet, this employer’s request for termination was not upheld. Why is that? Employment Law Consequences If an employer suspects an employee of being under the influence in a way deemed unacceptable, disciplinary measures may be taken. Although Dutch law does not list exhaustive employment-related sanctions, potential measures include a formal warning, suspension, wage withholding, a fine, or even dismissal (including summary dismissal). The challenge of evidence Any sanction must be justified and proportionate to the alleged misconduct. The employer bears the burden of proving both the conduct and the proportionality of the measure. Courts also assess whether the evidence was lawfully obtained. Unlawfully obtained evidence may be excluded. In the context of alcohol or drug testing, courts will weigh the interest in truth-finding against the employee’s right to a private life and privacy. The Right to private life The right to a private life, protected under Article 8 of the European Convention on Human Rights (ECHR), shields employees from unwarranted intrusions. Alcohol and drug testing constitutes an infringement of this right. Such an infringement is only permitted under strict conditions. The court will assess whether the infringement serves a legitimate goal and is suitable to achieve that goal (necessity criteria), whether the infringement is proportionate (proportionality criteria) and whether there is a less intrusive alternative (subsidiarity criteria). GDPR considerations When an employer processes personal data of a employee, the General Data Protection Regulation (GDPR) applies. The results of alcohol and/or drug testing constitute a special category of data. Processing of such data is in principle prohibited, unless one of the exceptions under the GDPR applies. According to the Dutch Data Protection Authority (AutoriteitvPersoonsgegevens or ‘AP’), processing such data requires a specific legal basis. Currently, such a basis exists only for certain sectors (e.g. aviation and maritime and public transport). Practical recommendations for employers Testing for alcohol or drugs in the workplace is legally complex. Employers should verify whether their sector has a statutory basis allowing testing. Its advisable to consider adopting a written zero-tolerance policy outlining potential disciplinary measures in the case of a breach, including (immediate) dismissal. If you suspect an employee is under the influence during working hours, take them aside privately with a witness present. Ask the employee directly whether alcohol or drug use is involved and stress that this is a safety matter. If you are reasonably convinced that substance use is at play, suspend the employee and send them home. Document the incident and the meeting as thoroughly as possible and confirm your findings to the employee in writing, inviting a response. The appropriate sanction will depend on the specific circumstances. Seek legal advice as soon as possible before initiating further steps. Contact Would you like to introduce or update your alcohol and/or drugs policy? Do you suspect an employee has appeared at work under the influence? Do you have another related question? Please do not hesitate to contact Gerard Zuidgeest, Rose Hortsman or one of our other employment law specialists. We would be happy to assist.

On 14 March 2025, the Dutch Supreme Court (‘Hoge Raad’) issued an important ruling in the context of the Act on the Resolution of Mass Claims in Collective Actions (“WAMCA”) (ECLI:NL:HR:2025:388). One of the key questions the Supreme Court addressed was whether an extension of the so-called three-month period for serving a writ of summons, pursuant to Article 1018d(2) of the Dutch Code of Civil Procedure (“Rv”), has general effect or applies only to the legal entity that requested the extension. The Supreme Court’s decision is clear: an extension of the three-month period does not have general effect—it applies only to the legal entity that requested it. Background of the Case The case concerns collective claims brought by various foundations against Apple. Apple was summoned on October 4, 2021, by the Right to Consumer Justice Foundation (“Stichting RCJ”). Pursuant to Article 1018d(1) Rv, other foundations wishing to file a similar collective claim had three months to do so – until January 4, 2022, in this case. Article 1018d(2) Rv provides that a court may extend this three-month period upon request by another legal entity seeking to initiate collective proceedings. In this case, the court granted an extension of three additional months at the request of another foundation, the App Stores Claims Foundation (“Stichting ASC”), extending the deadline to April 4, 2022. This procedural decision was published in the central register for collective claims on November 29, 2021. Stichting ASC summoned Apple within this extended period. Another foundation, the Consumer Competition Claims Foundation (“Stichting CCC”), also summoned Apple within the extended period – on March 31, 2022. However, this meant that Stichting CCC had issued its writ of summons outside the original three-month period. The question in the proceedings was whether Stichting CCC could be deemed admissible in its collective claims, given that its summons was served after the initial three-month period had expired. At first instance, the court declared Stichting CCC inadmissible because it had not served its writ of summons within the statutory three-month period. The court ruled that an extension of the period under Article 1018d(2) Rv does not have general effect—the extension granted to Stichting ASC applied only to Stichting ASC. Stichting CCC disagreed and an appeal was files directly with the Supreme Court (‘sprongcassatie’). Supreme Court Decision The Supreme Court upheld the lower court’s ruling. It confirmed that an extension of the three-month period under Article 1018d(2) Rv does not have general effect. The Supreme Court noted that, according to the legislative history of the WAMCA, a court’s decision on an extension request must be tailored to the specific circumstances of the legal entity making the request. This, according to the Supreme Court, implies that an extension applies solely to the requesting legal entity and does not have a general effect. The Supreme Court also pointed out that this interpretation aligns with the absence of a requirement for extension decisions to be registered in the central register for collective claims. Conclusion For foundations seeking to initiate similar collective claims, it is crucial to closely monitor the collective claims published in the central register for collective claims. While it is understandable that Stichting CCC also considered the court’s procedural decision granting an extension to Stichting ASC, the publication of a summary of the initial summons in the central register remains decisive for determining the start of the three-month period. If an organization needs more than three months to prepare its case, it must submit a reasoned request for an extension of the three-month period to the court within one month. Organizations cannot rely on procedural decisions regarding extensions granted to other foundations that may be published in the central register for collective claims. Questions about the WAMCA? Please contact Lennart Hoeksema, Arnout Koeman or one of our other WAMCA specialists.

A recent ruling by the Trade and Industry Appeals Tribunal (CBb) highlighted the importance of the notion of an “undertaking” within state aid law. This particularly with regard to the situation where several entities are considered to be one undertaking. In such cases, all aid received by these entities should be added up, as they qualify as one undertaking and thus one aid beneficiary. This may have implications for, for example, application of aid ceilings. The ruling therefore offers important insights for companies that are part of a group and may receive state aid. CBb’s ruling In the judgment of February 20, 2025 (ECLI:NL:CBB:2025:76), the CBb dealt with a case in which a company (hereafter: Company X) appealed against a decision of the Minister of Economic Affairs in which a TVL subsidy (Reimbursement Fixed Costs) of Company X was revised and lowered. Based on this decision, an amount of €333,831.48 of the TVL subsidy received as an advance was recovered from Company X for exceeding the aid ceiling. The Minister reached this decision as Company X was part of a group which until December 1, 2021 consisted of Company X, Company Y and Company Z. Company Z was dissolved on December 1, 2021. All three companies received subsidies under the TVL scheme over different periods. This TVL scheme gave financial support to enterprises with loss of turnover due to COVID measures from June 2020. According to the Minister, in the present case, the TVL subsidy to Company X had exceeded the aid ceiling of €2.3 million applicable until Q1 of 2022. Company X believed that the recovery of part of its subsidy was unlawful, as the subsidies received by Company Z should not be added to the total subsidies received by the group. This is because Company Z had been dissolved as of December 1, 2021, which meant that it was not part of the group at the time of both the award and review of the subsidy given to Company X. The CBb did not follow Company X’s position and upheld the Minister’s judgment. The court ruled that the three companies qualify as one undertaking under state aid law, and that the total aid granted to them may not exceed the aid ceiling. Exceeding the aid ceiling would result in unlawful state aid. The fact that Company Z was no longer part of the group due to dissolution at the time of award and review of the subsidy does not change this. Because Company Z ceased to exist, the TVL subsidies granted to it (earlier) were not withdrawn from the group. They benefit the group (in)directly. This is also the case if the balance of dissolution has been used to pay a tax debt of Company Z. Even then, the subsidy received by Company Z prior to dissolution can provide (in)direct benefit to the rest of the group. In view of the above, the CBb held that the revision and lowering of the subsidy to Company X was justified. Determination of a higher amount would constitute unlawful state aid, according to the CBb. Definition of an enterprise within state aid law Under state aid law, an undertaking is defined as any entity engaged in an economic activity, regardless of its legal form and method of financing. Based on Union law jurisprudence, carrying out economic activities is defined as offering goods and/or services on a market. The concept of undertaking within state aid law is thus very broad, and can include virtually any legal form, regardless of whether the entity in question is profit-making or not. Any provider of a good or service on a market is, in theory, an undertaking within state aid law. Multiple entities as one company Within state aid law, several separate legal entities may be deemed to constitute a single economic entity for the purposes of state aid rules. They then qualify as a single undertaking, for the purposes of State aid reviews. This was also the case for the companies that were part of the group in the CBb ruling. In assessing whether multiple entities qualify as a single undertaking, a number of factors are considered which have been developed in Union law jurisprudence. In particular, the following factors are considered: Economic, organizational and functional links between entities; Degree of say and control; Joint performance on the market. Impact on state aid The classification of multiple legal entities as a single undertaking under state aid law may have negative consequences for the amount of aid granted. In such cases, the aid received by these separate legal entities must be added together to determine whether the aid remains below applicable aid ceilings. In the CBb ruling, this worked out negatively for Company X, which received a lower subsidy due to a past group composition. Indirect aid should also be taken into account in such cases. Conclusion For companies that may receive state aid, it is crucial to carefully analyse the interrelationships between different entities. Failure to pay sufficient attention to this may lead to unlawful state aid and recovery risks. This is the case, for example, when aid ceilings are exceeded because aid granted to different entities must be added together within the frameworks of state aid law. Do you have questions on this topic? Would you like to learn more about the qualification of multiple entities as a single enterprise for state aid purposes? Please feel free to contact Monika Beck or one of our other state aid specialists.

On 11 February 2025, the Court of Appeal of The Hague (“CoA”) rendered its decision in the PI proceedings between Janssen Biotech Inc (“Janssen”) and Samsung Bioepis NL B.V. (“Samsung”). The CoA upholds the decision of the Provisions Judge in first instance and denies the PI claimed by Janssen. Samsung can benefit from the SPC Manufacturing Waiver for production and stockpiling for export of its biosimilar product containing ustekinumab. This case is of particular interest as it is one of the few decisions on the application of the SPC Manufacturing Waiver and, more generally, provides clear answers to various questions raised on when a manufacturer can benefit from said waiver. What preceded In our Pharma Update of 31 January 2024 we have reported on the decision of the Provisions Judge of the District Court of 23 January 2024. In said decision the PI claimed by Janssen was denied as the Provisions Judge was of the preliminary opinion that Samsung could benefit from the production-for-export and stockpiling- for-export exemptions of the SPC Manufacturing Waiver. Facts Janssen holds EP 1 309 692 B1 (“EP 692”) for “ANTI-IL-12 Antibodies, compositions, methods and uses”. The medicinal product of Janssen is marketed under the brand name ‘Stelara’ and contains the active ingredient ustekinumab. EP 692 was granted on 13 May 2009 in, among others, Italy and Denmark. The patent expired on 7 August 2021. After expiration, Janssen was granted an SPC in Italy, Denmark and the United Kingdom (UK – ending on 19 January 2024). Similar Stelara patents in Canada and South Korea have also expired. However, Jansen has filed patent(s) (applications) in these countries that protect the treatment regimen approved for Stelara for ulcerative colitis disease. Samsung has developed a biosimilar of ustekinumab with Stelara as reference called SB17. The Dutch Samsung entity (the defendant) issued a notice to the Danish and Italian authorities respectively that it intended to manufacture and stock its biosimilar in Denmark and Italy for the purpose of exporting it to the UK, Canada and South Korea based on Regulation 2019/933 regarding the SPC Manufacturing Waiver “MW Regulation”) and to market the product in the European Union after expiration of the SPC (stockpile exemption). Samsung mentioned that it would submit the reference numbers of its market authorisations in said countries as soon as publicly available. Samsung additionally undertook towards Janssen that it would not manufacture its biosimilar products for the EU-market until 24 January 2024 in order to avoid discussion on the stockpile exemption in the PI proceedings. Assessment of the CoA In its decision, the CoA considers the full range of arguments put forward by the parties. In general, the CoA considers that the purpose of the SPC Manufacturing Waiver is to create a level playing field for generic and biosimilar manufacturers in the EU vis-à-vis competitors in third countries in order to promote EU competitiveness in global markets where protection expired, while at the same time ensuring protection for SPC holders in the EU. In particular, the CoA answers three legal questions: 1. Does a valid reliance on the production-for-export exemption require that the manufacturer has a MA for the intended country of export at the time of notification, or at least before production commences? The CoA answers this question by first analysing the wording of the MW Regulation and finds that article 5(5)(e) of the MW Regulation only requires that the reference number of an MA is provided in relation to the notice of the SPC Manufacturing Waiver once this is available. There is no obligation for the manufacturer to wait with giving notice or with starting production until the MA for the intended country of export is granted and a reference number is provided. 2. Does a valid reliance on the production-for-export exemption require that at the time of the notification, or at least before the start of production, there are no IP rights in force in the intended exporting countries that could oppose entry into that country’s market? The CoA is of the opinion that the MW Regulation does not contain a requirement that the manufacturer must wait with the production under the waiver until the IP rights have expired in the intended export country. Starting production before those rights have expired is not considered unlawful because manufacturing in the EU under the waiver does not automatically infringe an IP right in the country intended for export. This would only be the case if IP rights still exist when the product is imported into that country’s market. 3. Does a manufacturer have the right to stockpile for the intended export? The CoA considers that under article 5(2)(a)(ii) MW Regulation the EU manufacturer is also entitled to stockpile its products as this is strictly necessary for export to third countries in order to achieve Day 1 entry and for the manufacturer to benefit from the “first mover” effect. The CoA considers that this is in line with the intention of the Union legislator and that Day 1 entry is not only intended for the EU but also for Day 1 entry in third countries, giving the EU manufacturer a first mover effect. The CoA rejects Janssen’s concerns that stockpiling could create a risk that products destined for third countries would eventually enter the EU market. According to the CoA there are sufficient safeguards in the MW Regulation to prevent such products from entering the EU market.

The Authority for Consumers & Markets (“ACM“) recently announced its 2025 agenda (link). This agenda outlines the regulator’s priorities and focus areas for the coming years. Among other things, the ACM wishes to get ready for the challenges of our time and has defined three focus areas in that context. There are also plans to conduct market surveys in certain sectors. In the blog below, you can read what the ACM plans to do in the coming year, and what this could mean for you. Focus points voor 2025 This year, the ACM will focus on three key societal themes. In this way, the ACM wishes to ensure the healthy functioning of the markets concerned, and protect consumers’ interests in these rapidly developing themes. This year’s focus is on: Promoting an open and fair digital economy; Accelerating the energy transition; and Developing a more sustainable economy. The focus points for 2025 are a continuation of the focus work for 2024 (link). The focus from 2024 will be further pursued by more specific and targeted actions in 2025, with a stronger emphasis on digital innovation, energy flexibility and supply chain sustainability. Digital economy The Dutch economy is becoming increasingly digitised. This brings opportunities for economic growth and innovation on the one hand, but also risks on the other. The ACM will therefore pay attention to protecting consumers, especially vulnerable groups such as minors, while promoting economic growth and innovation. Areas of focus include: More oversight of big tech companies to prevent abuse of power; Taking action against abuse, deception and manipulation in online sales and gaming; and Strengthening data protection and consumer privacy rights. Energy transition The ACM is also committed to a rapid energy transition. The ACM aims for a reliable and sustainable energy supply for all people and businesses, now and in the future. In that context, the ACM plans, among other things, to reduce grid congestion and improve flexible grid use in the coming year. In addition, the ACM will promote renewable energy sources and design new regulatory methods for grid operators for future-proof infrastructure. Sustainable economy The ACM supports the development of a sustainable economy. The focus is on ensuring a level playing field between companies and providing clarity for companies when cooperating for sustainability purposes within competition rules. The ACM also wants to ensure that consumers can trust information on sustainability provided by companies. Market research In 2025, the ACM will launch five new general market reviews. Specifically, it will look at (i) veterinary practices, (ii) (digital) learning resources, (iii) computerised consumer prices, (iv) the fixed internet budget segment and (v) the development of the hydrogen market. In this way, the ACM can look at the (dis)functioning of these markets without concrete suspicions of violations. For instance, in the veterinary practice market, the issue is that many practices have become owned by investment funds in recent years, which may have led to sharp price increases. In its market studies, the ACM will use its new “Methodology for market research” published in February 2025 (link). In this document, the ACM describes the reasons for (the selection of) market investigations and the process of market investigations. What does this mean for you? The ACM’s 2025 agenda could be significant for several parties. For companies, it is likely that increased compliance requirements will be introduced, especially in the digital sector. More enforcement can also be expected with regard to dissemination of (online) disinformation on sustainability issues or misconduct related to online sales or gaming. Furthermore, the ACM wishes to encourage a healthy market and create more opportunities for companies to realise sustainability initiatives. Consumers can also expect some change. For instance, protecting consumer rights (especially within the focus areas) is one of the ACM’s priorities, and it intends to achieve healthy markets and price formation for consumers through its market investigations. Companies active in the sectors under investigation by the ACM, can expect to receive questions from the ACM. Do you have any questions on this topic? Or do you, as a company, need support in contacting the ACM? Feel free to contact Monika Beck or one of our other specialists.

In the dynamic world of startups and innovative companies, venture capital (VC) plays a crucial role in funding growth potential. But what exactly is venture capital, how do Venture Capitalists work and what is their role in the investment ecosystem? In this article, I take a closer look at the definitions, processes and strategies behind venture capital, as well as the role VC plays in the Dutch startup economy. This article is the first in our series about venture capital. Definition of Venture Capital Venture capital is a form of financing that focuses on (innovative) start-ups and small companies with high growth potential. These target companies are in their development phase, are generally not yet profitable and depend on external money for their further growth and development ambitions. VC investors invest in these companies to further support their initial development or rapid growth. It is important to note that venture capital usually focuses on companies that have already achieved some degree of validation. This means they would have a working product, an initial customer base, or have demonstrated clear market potential. Venture capitalists rarely invest in completely untested ideas, which sets them apart from earlier funding sources such as angel investors or the 3Fs (family, friends and fools). How Does Venture Capital Work? Investors and Sources of Capital Venture capitalists are professional investors who put their capital into companies with high growth potential but also inherent risk. These investors obtain their capital from various sources, including external investors called Limited Partners (LPs) and sometimes from their own funds. LPs can be pension funds, university endowments, family offices or high net worth individuals. VC parties also often act jointly and, in the Netherlands, regularly with government-funded parties such as Regional Development Companies (Regionale Ontwikkel Maatschappijen). The consortium of collaborating investors then takes a joint position within a start-up. Phases of Investment The process of venture capital investment involves several stages: Investors use their personal networks, recommendations and online platforms to identify interesting young companies (deal sourcing). In the deal screening phase, startups are assessed based on criteria such as market potential, team expertise and innovation. A thorough due diligence is conducted to assess the feasibility and risks of the investment. This process includes a comprehensive audit of the startup to evaluate finances, operations, legal aspects, market position and more. At the investment committee stage, the final investment decision is made (FID) by a group of experts and partners. After due diligence, the venture capital firm generally prepares a term sheet and other relevant documents and structures the deal. Once the necessary documents are signed, funding is provided through capital contributions to the company (capital deployment). In practice, the actual capital investments often take in several rounds/phases, each with specific goals and conditions. The first formal investment round, also known as the seed round, focuses on product development and market validation. The subsequent series A round focuses on refining the business model and accelerating growth. All rounds (series B and beyond) after that focus on scale-up and expansion. Each round typically entails more capital and higher valuations, but often also contains more stringent requirements on the company’s performance. Conditions and Risks In return for their financial investment, venture capitalists receive partial ownership of the company and, often, a say in its operations. This then usually takes the form of a seat in the board, supervisory board or otherwise. Investors may also make other demands, such as the right to future investments, the right to get their investment back on a priority basis or the possibility to sell the company at a profit after a certain period of time. Venture capital is a risky type of investment because the companies are still in the early stages, have little or no revenue and have not yet proven that they will actually be successful. The exit strategy, or how the investor can sell its shares, may therefore be uncertain or unclear. It is crucial to understand that most venture capital investments are not successful. VC firms expect to earn their returns from a small percentage of their investments – often only 10-20% of their portfolio. These ‘winners’ must generate sufficient returns to offset losses on the other investments to still generate an attractive total return. This showcases the high risk-return ratio in the venture capital sector. Exit Strategies The main goal of investors is to earn a return on the money invested. This is usually done by selling the shares after a certain period, on average between 3-7 years, through an initial public offering, merger or acquisition by another company or investor. Although initial public offerings and acquisitions are the most common exit strategies, they depend heavily on market conditions and the performance of the startup. Not every company will achieve such a successful exit though. Venture capitalists consider different scenarios and then adjust their strategies as the company evolves. In some cases, a secondary sale of shares or a recapitalisation can provide an alternative to the usual exit routes. Role in the Startup Economy Venture capital is an essential source of funding for start-ups and innovative companies, especially when traditional bank loans are too difficult to obtain. It helps in the rapid growth and development of these companies and can lead to exponential growth across the startup ecosystem. Networking and relationships play a crucial role in deal flow. VCs often invest in startups with founders they know or through recommendations from trusted sources. A strong network can significantly improve access to high-quality investment opportunities. Networks not only play a crucial role in deal flow, but also influence the quality of due diligence and strategic decisions. Strong networks enable VCs to gather in-depth, reliable information on potential investments. They also facilitate access to industry experts, potential customers and partners, which significantly increases the value a VC can add to a startup. Moreover, good networks can help find suitable executives or board members for portfolio companies. VC firms based in thriving entrepreneurial regions, such as Silicon Valley, New York, Berlin, Stockholm or Tel Aviv and closer to home ‘Brainport Eindhoven’, BioScience Park in Leiden, the Amsterdam region or metropolitan region of The Hague-Rotterdam, generally have better access to deal flow than firms in less active areas. Said regions offer a rich ecosystem of startups, talent and resources. VC firms that specialise in specific sectors or industries are more likely to get a better deal flow as they have deeper understanding of the market and are better able to identify promising startups. Specialisation can also help make due diligence more efficient and make better investment decisions . The main sectors currently attracting VC investment are information technology, healthcare/biotechnology, fintech and consumer products and services. Conclusion To summarise, venture capital is a complex but essential part of the startup economy. By understanding the phases of deal flow, the key players in the VC ecosystem, and the factors that influence deal flow, both entrepreneurs and investors can develop strategies to be more successful. Mitigating challenges such as a limited deal flow, investor competition, time constraints and risk management is crucial to achieving success in the world of venture capital. By using technology, building strong networks, and implementing efficient processes, VC firms and entrepreneurs can effectively navigate the dynamics of deal flow and increase their chances of success. With the right strategies and mitigation measures, both entrepreneurs and investors can benefit from the potentially high returns that venture capital has to offer. Contact Do you have questions about bad leaver or good leaver clauses or want to exchange views? If so, please contact Mathijs Arts, Reinoud van Ginkel or one of our other Mergers and Acquisition (M&A) specialists.  

On 22 January 2025, the District Court of The Hague handed down its judgement in the final relief proceedings initiated by Biogen against Sandoz, Polpharm, Neuraxpharm and Mylan (collectively referred to as “the Generics”). It ruled that EP 2653873 (“EP 873”) of Biogen on dimethyl fumerate (DMF, marketed as Tecfidera®), is invalid. EP873 protects the use of an orally administered pharmaceutical composition containing the active ingredient DMF for treating multiple sclerosis (MS) with an effective daily dose of 480 mg DMF. DMF has been known since the 1990s as a drug for treating psoriasis. Inventive step Shortly after the Generics listed their generic 480 mg DMF products in the G-Standard (pricelist) for October 2022 and after health insurers designated some of these products as preferential in NL, Biogen sued  the Generics for infringement of EP 873. The Generics counterclaimed for revocation of Biogen’s patent, inter alia arguing that EP 837 lacked inventive step or sufficiency of disclosure (G2/21). The Generics relied on a clinical study that demonstrated the efficacy of 720 mg DMF per day and the potential for a lower dose to also be effective for the treatment of MS. The clinical study became part of the prior art through two pre-priority date presentations called ‘Kappos I’ and ‘Kappos II’. In the proceedings, both Biogen and the Generics acknowledge that Kappos I and II are full prior art and disclose the use of DMF as an effective drug for the treatment of MS. Starting from Kappos I or II, the Court found that the only difference between Kappos I or II and EP 837 relates to the 480 mg per day dosage set forth in claim 1. During the oral hearing it was established that both parties found that the administration of DMF to treat MS at a dose of 480 mg per day is as effective as administration of 720 mg per day. Therefore, the Court considered that the objective technical problem that the patent tries to resolve is to find an alternative treatment for MS that is as effective as the state of the art, namely the administration of DMF of a dose of 720 mg per day. Biogen argued that the objective problem was to find an improvement in the oral treatment of MS, but the Court rejected this argument and held that – unlike the apixaban case – the patent application (parent patent) of EP 837 did not describe an improved treatment. In addition, the Court found that the purpose of the patent application was not to find the best dose of DMF, but to screen for potentially MS-active substances similar to DMF. Agreeing with the Generics, the Court is of the opinion (5.39) that the skilled person, starting from Kappos I and/or Kappos II, and the general common knowledge,  knows that the efficacy (and therefore the effectiveness) of DMF is dose-dependent and that lower doses are also effective for the treatment of psoriasis. The skilled person would therefore have a reasonable expectation of success that this problem for an alternative dose could be solved in an obvious way by testing lower doses of DMF. Contrary to Biogen’s argument, the skilled person would then carry out those tests. In this way, with routine testing and thus without inventive effort, the skilled person would find that a dose of 480 mg per day has a therapeutic effect. Therefore, claim 1 of EP 837 is obvious. The two auxiliary requests filed by Biogen are also dismissed by the Court. Sufficiency of disclosure The Court also addresses the ‘squeeze’ that the Generics identified, namely that in case EP 873 would be found inventive (quod non), it lacks sufficiency of disclosure and is (also) invalid for that reason. The Court held that the patent or application must sufficiently disclose the subject matter allowing the skilled person to apply the invention over the whole range claimed by the patent without undue burden. Second medical use claims bring about that it must be tested whether the therapeutic effect of the composition and dosage regimen for the claimed medical indication (in this case MS) is disclosed in the application/patent or, in the absence thereof, is credible. In relation to G2/21, the Court states that if the desired technical effect is part of the claim, but the patent does not prove or at least make plausible that this technical effect is achieved by the teachings of the patent, nor does the person skilled in the art assumes this on the basis of the common general knowledge or the cited literature, then there is insufficient disclosure. The Court found that that the application says nothing about the efficacy of the claimed dosage of DMF in treating MS. Since the Court does not consider any experimental data other than Kappos I and II, EP 873 is lacks sufficiency of disclosure. Parallel proceedings  The decision handed down by the District Court of The Hague is the first decision in final relief proceedings to hold (the NL part of) EP 873 invalid. To date, only Sweden has ruled in final relief proceedings on (the validity of) EP 873. The Swedish Court found EP 873 valid and imposed an injunction on the generic companies. Earlier Biogen commenced several PI proceedings in various European countries. In the Czech Republic, Denmark, Latvia, Slovakia, Estonia, Ireland and Sweden, PI’s were granted. In contrast, in Austria, Belgium, Portugal, Slovenia, Italy, France, Spain, Estonia, Germany, Norway and Hungary, PI’s were rejected because the patent was found invalid on a preliminary basis. Conclusion It remains to be seen if the NL judgement on the invalidity of EP 873 is going to be followed by other European jurisdictions.

On 8 January 2025, the District Court of Midden-Nederland gave judgment in the ‘Essure case’ (ECLI:NL:RBMNE:2025:10). Drug manufacturer Bayer marketed a permanent sterilisation method for women called ‘Essure’, which had to be implanted on the fallopian tubes. The Essure Claims Foundation (‘Foundation’) brought a mass tort action against Bayer. The Foundation claimed that many women became seriously ill from this sterilisation implant. In its judgment, the court ruled on a number of formal points regarding, among other things, the applicability of the WAMCA and the admissibility of the Foundation in the proceedings. The court ruled in favour of the Foundation on all points. Below, we highlight some noteworthy points of the judgment. Temporal application of the WAMCA: no cut-off The WAMCA applies to collective actions that (i) are brought after the WAMCA came into force on 1 January 2020 and (ii) relate to events that took place on or after 15 November 2016. Bayer believes there should be a cut-off in the claims of the Foundation. Bayer argues that with regard to implants placed before 15 November 2016, the old statutory regime (WCAM) should be applied; only with regard to implants placed on or after 15 November 2016 should the WAMCA be applied. The court is of another opinion. The court considers that there is a series of events, as the women have in common that they all had the Essure implanted, but at a different point in time. According to the court, this series of events consists of the same, repetitive event that caused the alleged harm to several individual women who belong to the circle of persons whose interests the collective claim seeks to protect. This series of events did not end until after 15 November 2016. Therefore, the court concluded that the WAMCA applies to all of the Foundation’s claims. The claims for material and non-material damage can be bundled An foundation who can start a mass-litigation case under the WAMCA can only bring an action if it seeks to protect similar interests of the persons involved. This similarity requirement is met if these interests lend themselves to bundling. As a result, the special circumstances of the individual parties need not be considered in the proceedings. In addition to material damages, the Foundation also claims immaterial damages for the women who had Essure surgically removed. The Foundation divided the women into 17 categories and claimed a lump sum of damages for each category. Bayer takes the view that the claims cannot be bundled in this case, as according to Bayer, immaterial damages depend on individual facts and circumstances. In doing so, Bayer also relies on the Supreme Court’s ruling on earthquake damage in Groningen. In this judgment, the Supreme Court ruled that immaterial damage due to impairment of the person cannot be determined on a flat-rate basis, as this is not compatible with the highly personal nature of such damage. Again, the court is of another opinion. The court considers that, unlike in the aforementioned Supreme Court judgment, in the present case, immaterial damages are not claimed for personal impairment. In the present case, immaterial damages are claimed because the women suffered personal injury. As a result, according to the court, immaterial damages are even more logical than for an impairment in person. According to the court, it is not necessary that the women also suffered mental injury. The court concludes by considering that it is therefore possible that it may find that the immaterial damages suffered by the women are at least a certain (lump sum) amount. The court concludes that the Foundation’s claim for compensation for both material and immaterial damages are bundleable. Thus, the Foundation is admissible in all its claims, including those relating to the immaterial damages. Litigation funder’s fee of 28.75% is not unreasonable In the context of the admissibility of the Foundation, it must be assessed whether or not the litigation funder’s fee is prima facie unreasonable. The amount of the litigation funder’s fee should not be such as to disadvantage the women or provide an unacceptable incentive for the litigation funder to push for an adverse outcome for the women. It has been agreed with the litigation funder that it will receive 25% of the potential damages. In addition, it has been agreed that the litigation funder may charge all its incurred costs up to a maximum of 5% on the potential damages. This therefore means that a minimum of (95% minus 25% =) 71.25% of the damages will accrue to the women; the litigation funder can therefore potentially receive 28.75% of the damages. Dutch case law states that a range of 10 to 25% can be considered the maximum fee for a litigation funder. The court finds that the Foundation has sufficiently substantiated why a fee of more than 25% is reasonable. The Foundation has substantiated that it intends to recover the costs of the proceedings from Bayer by means of an actual litigation cost order or an equal agreement in a settlement. The Foundation has further argued that it is still uncertain what costs will be eligible for reimbursement through a (litigation) order or settlement. The amount of costs to be incurred is also still uncertain. In view of this, the court concludes that the Foundation has sufficiently substantiated that the agreed fee is not unreasonably high. Therefore, this does not pose an issue for the admissibility of the Foundation. Conclusion The Foundation’s victory shows that both the applicability of the WAMCA and the admissibility of foundations that are litigating under the WAMCA can be applied practically. Questions about the WAMCA? Please contact Lennart Hoeksema, Arnout Koeman or one of our other WAMCA specialists.

Article 7:653a of the Civil Code dictates that an employer may not prohibit or restrict an employee from performing ancillary activities  unless there is an objective reason for doing so. How does this clause work in practice, specifically when an employee is sick?    The effect of the ancillary activities clause  Ancillary activities are activities that an employee performs outside of his work. In principle, ancillary activities are permitted. In practice, the clause often includes the condition that an employee may only perform ancillary activities with the prior consent of the employer.  The employer may only refuse such consent if he has an objective justification. Examples of such an objective justification included in the law are:  the health and safety of the employee;  the protection of confidentiality of company information;  the integrity of public services;  the avoidance of conflicts of interest; and  the violation of a legal requirement.   The employer does not have to include the objective reason in the employment contract but must provide it when invoking the agreed-upon clause.  Performing ancillary activities during illness  Suppose an employee is sick and the employer finds out that this employee is performing ancillary activities. How does a judge rule in such a situation? In a case before the District Court of The Hague, an employee of the municipality of Amsterdam reports in sick. This employee is receiving  benefits due to occupational disability of 80-100%.   In July 2022, this employee reports in sick for her reintegration work due to a corona infection. The employer submits a termination request to the Netherlands Employees Insurance Agency (UWV) due to  long-term disability, but it is rejected because recovery is considered possible within 26 weeks. In October 2023, the employer again applies for a dismissal permit, which is then rejected because it turns out that the employee has been performing similar work at the Municipality of Rotterdam. An integrity investigation follows which shows that the employee has been working 24 hours a week at the Municipality of Rotterdam , which she did not report as stated in the absence protocol and code of conduct of the Municipality of Amsterdam. The Subdistrict Court ruled that the employee had violated Section 8 of the Civil Servants Act, which constitutes a breach of contract. The employee should have reported her intention to enter the service of the Municipality of Rotterdam. The employee should also explicitly have  asked permission to do so, and should have reported this to the company doctor. What was reported by the company doctor cannot be interpreted in any other way than that there was (a degree of) intent on the part of the employee to mislead the company doctor and therefore also the municipality. The overpaid wages must be repaid by the employee (Section 7:629 (5) of the Dutch Civil Code). The employment contract is terminated, without awarding the transitional compensation.  Practical tips for employers  Although the inclusion an ancillary activities clause employee may be important, an employer can also take steps in the situation where no clause is agreed upon but the employee does perform ancillary activities  during illness. The employer has several options depending on the situation. The employer may have grounds to  dismiss the employee either by instant dismissal or through a termination  procedure in court. In the latter case, the employer can choose to terminate  the employment contract for breach of contract. The options are highly intertwined with the circumstances of the case; in some cases, the employer has to tolerate that the sick employee also performs work elsewhere.  Contact Would you like to know more about ancillary activities? Feel free to contact Gerard Zuidgeest, Rose Horstman or one of our other specialists in employment law. Do you have another question? With expertise in eighteen areas of law, La Gro is happy to assist  you.