The Foreign Investments Screening Act was passed by the Czech parliament on February 3, 2021 and took full effect on May 1, 2021. It established rights and duties of foreign investors whose ultimate beneficial owner is from non-EU countries. It also set screening requirements in relation to certain target persons or owners of target objects in the Czech Republic, which pose important security or public order concerns for the Czech Republic. The relevant entrusted authority remains the Czech Ministry of Industry and Trade.

Summary of major changes in 2024

• The third Annual Report on Foreign Investments Screening in the Czech Republic was published in December 2024, covering January 2023 to December 2023.
• The report does not share detailed information on specific cases but states that 28 domestic cases were investigated during the review period. In total, eight cases went through a full screening procedure and the rest were dealt with as voluntary consultations. There were no cases in 2023 that would end up with a prohibition or imposition of conditions. In one case, the investor withdrew their application, and the investment was not realized.
• The ministry received 488 notifications of FDIs from EU Member State partners within the EU cooperation mechanism in 2023.
• The most frequent foreign investors in the Czech Republic in 2023 came from the US and Luxembourg, while the ultimate beneficiary behind the foreign investment in the Czech Republic was most often based in the US and Taiwan.
• The ministry has seen an increase of 15 cases compared to 2022, especially in voluntary consultations, which rose from seven to 20. This highlights the growing awareness among investors of the possibility to turn to the ministry as a preventive measure.

Who files?

In general, the FDI investor should be the applicant. Request for approval of FDI or a consultation proposal is to be submitted in a form specified by Government Decree No. 178/2021 Coll., signed by a statutory representative of the applicant. Together with the application for the approval of FDI, the applicant shall submit a questionnaire containing additional information about the foreign investment.

Under administrative procedure legislation, the applicant may be represented in the proceeding of the investment screening by a proxy with power of attorney. The power of attorney needs to be signed by the applicant, but the signature does not need to be officially certified.

Types of deals reviewed

Details or substance of the deals reviewed have not been disclosed. However, based on information available in the public domain, cases that have been reviewed since January 2022 included 29 consultations, three of which proceeded to the full screening procedure. A total of 11 cases were reviewed in the screening regime only.

In seven cases, the case was commenced through a filing by the investor as required by law; in three cases, the screening procedure was initiated following a consultation; and in four cases, the ministry started the screening procedure on its own initiative.

The deals reviewed by the ministry in 2023 were sectorally diverse. Eight cases concerned the electrotechnical industry; four concerned information and communication technology. Three cases concerned the health sector and two related to the arms, aerospace and automotive industries. The ministry also dealt with investments directed into the finance, transport, services and construction sectors.

Scope of the review

Foreign investment into the following targets will require prior approval from the ministry: a target person who performs manufacturing, research, development, innovation or organization of the life cycle of military material, or into a target object through which the said activity is performed; a target person who operates a critical infrastructure element determined by the relevant central administrative authority; a target person who is an administrator of an information system belonging to critical information infrastructure, administrator of a communication system belonging to critical information infrastructure, administrator of an information system belonging to an essential service or operator of an essential service; or a target person who develops or manufactures dual-use goods, or target object through which such goods are developed or manufactured.

Even if an FDI does not require prior approval, the Czech government has the power to start a retrospective review of an FDI if it determines that such FDI may endanger the security or internal or public order of the Czech Republic. These investments can be screened by the ministry retrospectively for up to five years from the date of the investment. When deciding whether the FDI endangers the security of the Czech Republic or its internal or public order, the ministry would usually look at the FDI's potential impact on a number of areas.

These include: infrastructure, including energy, transportation, water management and medical infrastructure; data processing and storing infrastructure; aviation and cosmic infrastructure; defense, and other infrastructure important for the security of the Czech Republic and its internal or public order; as well as access to land and property essential for the usage of such infrastructure.

The impact on access to critical technologies and dual-use goods, including AI, robotics, semiconductor and cybersecurity technologies, aviation and rocket technologies, defense technologies, chemical technologies, energy-storing technologies, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies is also considered.

The ministry would usually also consider access to supplies that are related to energy, raw material or food security; security of access to information that is important for the security of the Czech Republic or its internal or public order, including personal data, or ability to control this information; the possibility of significant influence over public opinion through information spread by the media; critical information infrastructure, important information systems and essential services; non-military objects important for state security; and other technologies, malicious use of which poses a potential threat to the Czech Republic or its internal or public order, or any other factors important from the perspective of security of the Czech Republic or its internal or public order.

Where the foreign investor has an intention to carry out an FDI that does not require prior approval under the act, they may nonetheless ask the ministry for a consultation as to whether it might be considered as endangering security, or the internal or public order of the Czech Republic. If the result of this consultation is negative, the ministry will not screen this investment ex officio. The consultation is voluntary except for FDI directed at a target who owns a nationwide radio or TV broadcast license, or who is a publisher of a periodical that has an overall minimum average circulation of 100,000 prints per day in the past calendar year.

Review process timeline

The screening of FDI that was not found to pose a risk takes 90 days. The screening of an FDI that has been identified as risk-prone, including discussion time required by the government of the Czech Republic, is 135 days.

These dates can be extended by 30 days in complicated cases. In certain cases, such as where the foreign investor has to enter into negotiations with the ministry regarding conditions surrounding the FDI, the above timelines may be paused.

If an investor were to submit a request for consultation, the ministry must respond within 45 days.

How foreign investors can protect themselves

Potential investors are encouraged to take steps to confirm whether they fall under the definition of a foreign investor, or whether the envisaged activity represents an FDI that requires prior review under the Act, before finalizing any transaction document.

If an investor is unsure about whether an FDI may bring security or public policy concerns to the Czech government, the investor may want to consider submitting a request for consultation in order to speed up any potential FDI application process.

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