I'm not clear on what you mean by "forced to choose which side to take."
You (or anyone else) don't have to have an account on that instance. In fact IIUC, the site linked in the submission only has accounts for the Dutch government and elected officials of that government.
Folks other than that can follow individual accounts on the Dutch government instance, but aren't subject to any moderation decisions made by the site. Only those with accounts on that instance would be affected by blocks/bans of specific users or instances.
And even if the Dutch government instance wants to block other instances from their users, there's nothing stopping Dutch government officials (and/or agencies) from creating accounts on other instances.
As such, please explain what you mean by "choosing a side." I'd expect that this site is on the side of The Netherlands, its government and citizens. Isn't that the way it should be for a site like this?
As such, please explain what you mean.
Edit: Clarified prose. Fixed typo.
They can (and probably should) only show their federated feed to users of their instance, and they can silence other instances to prevent posts from making it into their federated feed even if someone follows accounts there, but defederation would likely be an extreme last resort for a government server.