Czech Republic establishes a framework for screening foreign direct investments

The Czech Republic is establishing a framework for the screening of foreign direct investments made by investors from countries outside the EU and which may endanger Czech security interests. The bill on establishing a framework for screening foreign direct investments is expected to be passed in the first half of 2021 and will allow transactions that could affect security or public order to be blocked.

This bill deals with investments in any form, made by a foreign investor, which enable effective participation in the management or control of a company carrying out an economic activity. It concerns investments in sensitive areas, such as military materials, critical infrastructure systems, agriculture, the energy sector or dual-use technologies.

Before investing in these sectors, the investor must submit a request for a screening. Additionally, if the investment is in the media sector, consultation is required.

The state body responsible for the screening and consultations is the Ministry of Industry and Trade. The investor cannot carry out the transaction before obtaining a permit from the Ministry, which should generally be issued within 90 days. If the permit is not issued in time, it is implicitly confirmed that the investment is safe.

If the screening results give rise to doubts about the investment, the Ministry, after consulting the government, may issue a conditional permit or completely prohibit the investment. This decision may be challenged in court.

An investor who does not comply with obligations stemming from this bill may be fined up to 1 % of the total net turnover achieved in the last completed accounting period or CZK 50,000,000 for failing to request the permit. The fine will be twice as high if the investor disregards the prohibition and goes ahead with the investment anyway.

author: Claudia Bock