The Dutch move against Nexperia is a live test of how far a state can go to secure technology without breaking the rules that made Europe investable. What follows is a lawyerly account for professionals who want reasoning and consequences, not slogans.

Last month the Ministry of Economic Affairs placed Nexperia B.V., Europe’s largest dedicated supplier of discrete semiconductors, under what it calls temporary custodial administration. The order was issued under the Goods Availability Act of 1952. It suspends the rights of the Chinese parent Wingtech Technology, removes the chief executive, and installs two administrators with day to day control. The title remains with the shareholder. The substance of ownership does not.

Officials say the step was needed to prevent irreversible damage to Dutch and European technological capacity. That phrase is familiar. What is unfamiliar is the reach. The state now sits inside the company and makes strategic decisions. This is not nationalisation by name. It reads like administration in substance.

1. What the law allows

The Act permits the Minister to intervene when the public interest so requires. It is a Cold War statute drafted to secure production in wartime. To invoke it now over a functioning enterprise is a major constitutional act. The order is broad. It freezes the voting rights attached to Wingtech’s shares. It removes Zhang Xuezheng as managing director. It appoints two Dutch officials with veto power over production shifts, intellectual property transfers, and executive appointments. It runs for twelve months and can be renewed by a further finding.

Jurisdiction is not in question. The state can act. The issue is whether it should have acted this way and whether it did so lawfully on the record available.

2. The legal test a court will apply

A reviewing court will follow four steps. Jurisdiction. Evidence. Proportionality. Fairness. On jurisdiction the Ministry stands on firm ground. Semiconductors qualify as essential goods under European policy and the Act exists. On evidence the state must show a real and imminent risk to continuity or to retention of critical knowledge. The public file mentions governance shortcomings such as the absence of a supervisory board. It does not show concrete acts that prove immediate harm. Suspicion is not evidence.

Proportionality is the fracture line. The Ministry must prove there was no lesser remedy. That means board reform, ring fenced assets, binding undertakings, or targeted vetoes. Instead it reached for full control for a year. In European law the rule from Schecke applies. A restriction must be necessary and strictly proportionate. That requires a reasoned trail which is missing in public.

Fairness comes next. Wingtech received forty eight hours of notice and no chance to make representations before the order was signed. The hearing that followed was ex parte. Under Article 6 of the European Convention on Human Rights and Article 41 of the Charter of Fundamental Rights the essence of the case must be disclosed unless that is objectively impossible. Kadi tells us secrecy is not a default. On the present picture the process is thin.

3. Property rights and indirect taking

European law protects the peaceful enjoyment of possessions. A measure that strips an owner of control, direction, and profit without compensation may amount to indirect expropriation. The state says this is temporary regulation. Yet a renewable twelve month term that blocks dividends, asset sales, and managerial discretion moves toward the Tecmed standard. Has the investor been radically deprived of the economic use of its property. Duration, intensity, and reversibility define the line.

If control is not restored by mid 2026 Wingtech will almost certainly bring a claim under the China Netherlands bilateral investment treaty. The treaty protects against unfair and inequitable treatment and against indirect expropriation. The numbers would be large.

4. The geopolitical undertone

Timeline is evidence. In June United States officials warned Dutch counterparts that Nexperia would face sanctions unless Chinese control was removed. The Dutch order followed in early October. The Ministry denies coordination. The synchrony is loud. Courts do not judge motive as a headline point. They do police misuse of power. When a national decision mirrors foreign policy objectives without a solid domestic rationale it risks being seen as an instrument of another state. That is the definition of detournement de pouvoir. A similar logic felled a French measure in the Innolux litigation. The same risk now hangs in the air.

5. What actually broke in the car industry

Within days of the order Nexperia’s back end operations in China were barred from shipping parts to Europe. Nearly seventy percent of Nexperia devices are packaged and tested in China. That bottleneck choked supply to European carmakers. Volkswagen halted Golf production at Wolfsburg for multiple shifts. Stellantis paused lines in Turin. A missing transistor that costs a few cents can halt output worth a million euros an hour.

Nexperia diode and MOSFET output fell sharply. Tier one suppliers scrambled for substitutes from ON Semiconductor, Infineon, and Vishay. Those plants were already full. Europe tried to assert control and discovered it had less control than it thought. The problem is not only wafers. The problem is the assembly and test chain which sits far from home.

6. The litigation road ahead

The state will argue national security, temporary character, and continuity of essential supply. It will ask the court to accept closed evidence. Courts permit that rarely and with careful limits. The owners will run discrimination by origin, breach of proportionality, and violation of property rights. Damages claims will cite lost value and stranded inventory. An annulment action in The Hague is likely soon followed by interim relief. The court could restore dividend rights and keep a narrow veto on intellectual property transfers while it waits for a fuller record.

If the Ministry fails to publish redacted findings by December it risks partial suspension of its own order. Judges know that investor confidence is not a slogan. It is a number on a term sheet.

7. Counsel to industry and to government

For carmakers the task is simple and urgent. Map the bill of materials and find single source parts that are cheap and vital. Qualify form fit function equivalents now. Build a ninety day buffer on families that stop a line when they disappear. That is not elegant. It is survival in a hard winter.

For technology boards the lesson is governance. Install dual key approvals for cross border transfers. Pre clear relocations with Invest NL. Document any decision that touches equipment, intellectual property, or key teams. The paperwork you do now is the defence you need later.

For the Ministry the remedy is transparency and a plan. Publish a redacted decision by year end. Define exit triggers that are measurable. Create a small continuity facility to help the downstream while governance is repaired. Transparency is cheaper than litigation and better than silence.

8. The unspoken trade off

Europe wants to de risk without reshoring, to control without compensating, to intervene without paying for redundancy. Those aims conflict. The Nexperia case has already cost billions in lost production. Strategic autonomy has a price. If the state wishes to stand inside the boardroom it must underwrite the cost that follows. If it will not, capital will leave.

9. The probable outcome

On jurisdiction the order will stand. On evidence it may survive if the closed file is solid. On proportionality it is weak unless the state shows that no lesser option existed and that restoration is guaranteed. The likely endgame is a surgical judgment. A shorter extension. A mandatory supervisory board. A compensation escrow. A staged return of control. If that balance is not found the decision will fall by spring and compensation claims will follow.

The rule of law is not rhetoric. It is arithmetic. Every act of intervention enters a ledger and the numbers must add up. That is the lesson of Nexperia and it belongs on the law desk, not only on the business page.