Amsterdam: Europe’s Gateway City Leads The Way Forward

Tuesday, April 23, 2013 - 11:38

The Editor interviews Luc Houben, Partner-in-Charge of Jones Day’s Amsterdam office.

Editor: Please tell us about your professional background.

Houben: I completed my law studies in Belgium and then went to Columbia University, where I got a master’s degree and became acquainted with U.S. law. For the next 10 years or so, I was with another U.S. law firm in New York and Brussels; I also worked in the Tokyo office for two years. In 1989, I joined Jones Day when the firm opened the Brussels office.

Editor: What motivated Jones Day to open an office in Amsterdam? How can a law firm’s presence in Amsterdam provide better services for its clients, both U.S. and international?

Houben: The launch of the Amsterdam office is a demonstration of the firm’s full commitment to a full international practice, as well as its confidence in the European Union. This commitment also propelled the opening of the Düsseldorf office last year. In all, Jones Day has 10 offices in 8 countries throughout Europe. The lawyers of Jones Day Amsterdam will focus on corporate matters, M&A, tax, private equity, capital markets, technology transactions, litigation and arbitration, and antitrust. 

Having an Amsterdam office is important for several reasons. First, there is a strong relationship between the Netherlands and the United States. The United States is the largest foreign investor in the Netherlands – ahead of the UK and Luxembourg – and  the Netherlands is the third largest foreign investor in the United States, after the UK and Japan.  Second, the Netherlands is a major and active center for international headquarters and holding companies.  Third, there are quite a number of important and large Dutch corporations that have a global reach.

Interestingly, about 10 years ago, many UK firms – including Magic Circle firms – came to the Netherlands, but since then, the legal market here has seen few new arrivals from abroad.  Furthermore, there is very little U.S. firm presence in Amsterdam – and certainly none with the same integrated “one-firm” structure Jones Day has. I believe that it is really the first time a firm like Jones Day has opened an office in the Netherlands. This is not just an opportunity for Jones Day: I personally believe there is actually a strong need for a global integrated firm like ours in Amsterdam. The vast majority of Amsterdam’s firms, meanwhile, have little or no meaningful presence in the United States, and you can’t be a global player without a significant presence in the most important legal market in the world.

Editor: In February, President Obama called for a free trade agreement between the U.S. and EU. How would such an agreement be beneficial?

Houben: I think such an agreement could be very important for a number of reasons. How this may affect foreign direct investment (FDI) in the EU is not yet entirely clear. The competence of the EU to negotiate trade agreements related to FDI has been only recently introduced in the Lisbon Treaty. The United States has more experience with FDI policy than does the EU.

Some envision this to be a NAFTA-like agreement, but it is too early in the process to have any certainty on this.  The main areas to be addressed are   market access, regulatory issues and non-tariff barriers and rules addressing shared global trade.   In our view, a free trade agreement will make doing business more simple and efficient, not only for newcomers but also for existing companies on both sides of the ocean. The expectation here is that such an agreement will eventually be made, though the timing is still unclear.

Editor: Many international businesses are headquartered in the Netherlands. What advantages can be found there?

Houben: Dutch business culture can claim a long global trading tradition. Hundreds of years ago the Dutch were an impressive colonial power, especially in terms of trade. Don’t forget that the Dutch were the first Europeans to develop formal trade with Japan, in 1609.

The Netherlands continues to boast an open economy with a very competitive tax system for international business. Add to that its strategic location – many people consider the Netherlands the gateway to Europe – and a focused policy to attract foreign investments. 

Another incentive for business is a system of tax rulings that allows companies to map out long-term tax plans. The Dutch Revenue Service has a team that is specifically mandated to accommodate foreign investors and to issue tax rulings. These tax rulings cover all relevant taxes in the Netherlands.  The Dutch Revenue Service is very accessible, and rulings can usually be obtained in a relatively short period, even within weeks when necessary.  For instance, investors who decide to establish operations in the Netherlands can get certainty on the transfer pricing, the availability of certain tax breaks and the exemptions for foreign source income.

I should add that the general feeling in the Netherlands is one of openness to foreigners, and this is especially true in Amsterdam. The welcome we received here was beyond anything I have experienced. The City of Amsterdam helped us with numerous introductions, even assisted us with finding our beautiful premises on the renowned Museumplein – just next door to the U.S. Consulate, and all this with a genuine desire to make us feel at home.

Editor: With the slowed growth prospects for European companies, should U.S. companies be looking for bargains in terms of investing in companies in Europe?

Houben: Personally, I am not convinced that growth will continue to be slow over an extended period.  It is true that Southern Europe is facing difficult times, but I am not sure that the same can be said for a number of other countries such as Germany and the Netherlands. What is true is that many companies are undervalued, so there are indeed some opportunities at this stage, although financing remains a challenge.

Meanwhile, there is a lot of growth currently in various technology sectors – from computers to design, fashion and gaming – with many joint ventures and other financing vehicles in play. The automobile sector is also seeing quite a bit of activity, especially in terms of joint ventures.

As an investor, if you’re not going to participate in a joint venture, it’s beneficial to do a full or partial acquisition – to have some amount of control, which will serve you better over the long term – rather than being a minority participant.

Editor: What is the climate for innovation in the Netherlands?

Houben:  Traditionally, the Netherlands has been home to many regional headquarters and distribution centers, but more recently, the Netherlands is also attracting a substantial number of IP-driven businesses, such as the pharmaceutical, clean tech, and software industries, in large part because of the special five percent tax rate for income from qualifying intangibles under the so-called Innovation Box. Used widely by companies operating in the Netherlands, especially in those fields requiring R&D activities - for example, U.S. pharmaceutical firms – the Innovation Box serves as a powerful incentive for companies to engage in those activities here. But it is still a very powerful tool for innovation incentive. The Dutch government is clearly focused on encouraging the development of new technology.

Editor: Please describe for our readers the current status and importance of the EU common market. Can the Netherlands sustain its economic vitality in the wake of financial distress and volatility within other Eurozone countries?

Houben: The European Union has been and remains an extremely beneficial trading partner for the United States. And as the strongest economic block in the world, I believe the EU will continue to play an increasingly important role.

That said, certainly there are concerns, but these are being addressed. Over the last months, improvements have been made in terms of centralized regulations on banks, so while there is a lot of work to be done, there is absolutely no reason to believe that the EU is in jeopardy. And in my view the Netherlands is less vulnerable than most other countries. First of all, the Netherlands does not have significant positions in Southern Europe, and its main trading partners are Germany and the United States, both of which are financially strong. I believe the Netherlands economy, together with those of countries like Germany and Belgium, will become even stronger in the next few years.

Editor: Please tell us about the EU15 Project.

Houben: The EU15 Project is a partnership between the OECD and the European Commission that is designed to improve efficiency in the regulatory and administrative complexity of the various member states. The underlying thought is that, especially in a time of crisis, one should focus on improving the entire regulatory framework so everyone will benefit.

Editor: What are the major regulatory bodies in the Netherlands, and to what extent do they act independently of the EU?

Houben: There are basically three main regulatory bodies in the Netherlands. First, the Netherlands Authority for the Financial Markets regulates financial services and is comparable to the SEC. Next, the Dutch Central Bank works closely with the European Central Bank but still has meaningful regulatory and discretionary power in the country, for instance, with respect to licensing bankers. Increasingly, monetary policy is set at the level of the European Central Bank, but at the local level, the Dutch Central Bank remains very important. The third body is the recently established Dutch Consumer and Market Authority, which has powers in the area of competition, regulated industries and consumer protection and which should play an important role in regulating the Dutch economy. There are various cooperation mechanisms in place with the EU enforcement authorities, but we are also seeing cooperation and combined initiatives by various national regulators.

Generally, the Netherlands is a well-organized, efficient country, and people speak with great respect for all three of these agencies.

Editor: From your perspective, are these agencies transparent and sufficiently accessible?

Houben: Very much so. Of course, they must do their work, which requires certain confidentiality, but we found these three agencies relatively accessible and willing to be open to working out constructive and reasonable solutions.

Editor: I have read that Amsterdam, with 32 “smart city” projects, leads the pack when it comes to smart cities of the future. Would you care to elaborate on this ongoing sustainability project?

Houben: I believe Amsterdam is ranked amongst the very best in the world in terms of smart cities. This is something the city of Amsterdam is very proud of, and rightfully so! Considering this to be critical in their overall city planning, Amsterdam focuses on various smart city projects in earnest.

For instance, I’ve never seen a city with more car-charging stations; the city is making a deliberate effort to promote electric vehicles. Second, real-time traffic information has resulted in significantly reduced traffic. Starting about a year ago, DIVV, Amsterdam’s Department for Infrastructure, Traffic and Transportation, began releasing all its data on traffic and transportation – including parking, bike paths and live traffic updates across the city. This has resulted in a proliferation of apps that Amsterdammers can use to navigate the city. (While this is not “smart city” technology, the city has preferential policies for cyclists. Everyone bikes everywhere here.)

Another smart city feature, which is being developed in cooperation with Phillips, is a light system that will greatly save on energy, and also integrates cameras, sensors, traffic lights and information. Yet another very sophisticated project involves the generation of energy from waste treatment facilities; my understanding is that the amount of energy that comes from the waste water treatment from the sewage systems exceeds the energy needed to process the waste! And these are just a few of the exciting smart city innovations Amsterdam has introduced.

Please email the interviewee at lhouben@jonesday.com with questions about this interview.