Investment Screening

The Czech Republic is one of the most open economies in the world and is a desired investment location for foreign investors, who significantly contribute towards the development of Czech companies. One of the important aspects of an attractive investment environment is the existence of effective defensive tools against malign investors, who might endanger the security or public order and disturb the healthy functioning of the economy. As a result, many European states implement or strengthen national systems to screen selected investments on national security grounds and they also take part in the  European cooperation and information exchange mechanism established in  October 2020 in accordance with the Regulation (EU) 2019/452 of the European Parliament and of the Council.

The Czech Republic implements its national screening mechanism in accordance with Act No. 34/2021 Coll. on screening of foreign investments, which has entered into effect on May 1, 2021.

The law is focusing on foreign investors with the ultimate beneficial owner from non-EU countries. At the same time, the investment typically counts for 10% or higher share in targeted Czech company active in sector important for the security, public, or internal order of the Czech Republic. If the company does business in the field of production of military material, selected dual-use goods, or belongs to critical or critical information infrastructure, the investor will have to ask for consent by the Ministry of Industry and Trade (MOIT) with the investment before its completion. Other national security relevant investments could be subject to the ex officio screening up to 5 years after the completion of the investment as well, however, the mandatory permission will not be required before the investment is concluded.

The absolute majority of foreign investors in the Czech Republic does not pose any risk and their investments are not problematic from the security perspective. Foreign investors are welcome in the Czech Republic and the Czech national screening mechanism is designed to limit any substantial administrative burden. To strengthen the transparency of the investment environment, the law introduces a regime of voluntary consultations. By consulting MoIT, foreign investors will gain legal certainty through learning whether their transaction could be subject of a screening procedure. Such a consultation will be concluded in a shortened period of 45 days.