19th February 2021

The Act on screening foreign investments entered into force in the Czech Republic on February 2021

The new regulation creates a legal basis for screening investments coming from countries outside the EU that affect the security or strategic interests of the Czech Republic. Investments in certain sectors will be subject to prior approval by the Ministry of Industry and Trade. In some cases the Ministry may prohibit them retroactively. For that reason the act introduces the option of consultations performed by the Ministry of Industry and Trade. Foreign investors will find out in the time frame given in the legislation whether or not the investment is subject to screening by the Ministry.

As mentioned above, the act primarily targets investments from “third countries.” Screening will also apply to investments by Czech and European companies partially or fully controlled by non-EU owners.

For the sake of security and external and internal order, this will affect investments into transport, energy, communications and other infrastructure, data storage and nuclear technologies. These investments must represent a share of more than 10% in the Czech target company. If this company is part of the critical information infrastructure or involved in the manufacture of military materials, selected dual-use goods, the investor will be required to request consent to the capital entry beforehand. Other investments will not be required to seek permission, but state screening will be possible. If a risk is identified with a particular investment, the matter will be passed to the government, which will be able to prohibit that investment.

This gives the state a better position for protecting key Czech companies from unwanted takeover on the part of high-risk foreign investors whose ultimate beneficial owner comes from outside the EU. The act also gives Czech companies easier access to countries that place a high value on supply chain integrity. The Czech economy remains one of the most open to foreign investors in the world. 

Members of the American Chamber of Commerce in the Czech Republic