The Czech Republic has been screening non-EU foreign investments under the Foreign Investment Screening Act (Act No. 34/2021 Coll., on the Screening of Foreign Investments “FISA”) since 2021. So far, the Ministry of Industry and Trade (MoIT) has published two annual reports on the Ministry's FDI screening activities in the relevant time periods. The first report covered the period from May 2021 to May 2022 and the second report covered solely the year 2022.
A review of foreign investments in the Czech Republic can be initiated in four different ways. First, a voluntary consultation may be initiated by the investor, who is concerned that the investment may later be reviewed by the MoIT on its own initiative (up to 5 years after the investment). Second, a mandatory consultation is required when a target holds a radio- or TV- broadcasting license or is the publisher of a major periodical. The consultation may lead to approval of the investment by the MoIT or to the initiation of a screening procedure by the MoIT if a more in-depth review is required. Third, the investor must initiate a mandatory screening procedure for investments involving military equipment, critical infrastructure and dual-use items. Fourth, the MoIT may initiate a screening procedure ex-officio (on its own initiative) if it is concerned about security of the Czech Republic, or internal or public order with respect to the investment.
In 2022, there were 13 domestic FDI cases in the Czech Republic. Out of these, 9 voluntary consultations were initiated by the investor, 3 mandatory screening procedures were initiated by the investor, and 1 screening procedure was initiated by the MoIT on its own initiative. Two consultations led to a screening procedure. In total, 6 cases went through a screening procedure.
(Graph: MoIT Annual Report 2022)
In 2022 no transaction was prohibited, but three investors reconsidered their investment and did not proceed with the transaction. No investment was approved subject to conditions.
Foreign investors investing in the Czech Republic (ultimate beneficiary owners) were most often based in the USA (4 cases; 30%) and Canada (2 cases; 15%), although the small number
of cases make it difficult to derive a general trend. Other countries included Russia, China, Singapore, Taiwan, Malaysia, the United Kingdom, Saudi Arabia and the United Arab Emirates (some transactions included investors from several different jurisdictions, which explains why the number of jurisdictions exceeds the number of cases). Most of the foreign investments considered by the MoIT were related to the information and communication technology (ICT) sector, followed by the electrotechnical industry (not specified by the MoIT). Other investments concerned healthcare, manufacturing, nuclear energy, the chemical industry and the services.
The Czech MoIT participates in the EU cooperation mechanism. In this context, the MoIT received a total of 423 notifications from other EU Member States in 2022. The figures show that six EU Member States account for more than 90% of EU-wide FDI notifications during the relevant time-period. These are Denmark, France, Austria, Germany, Italy and Spain.
Already in the first full calendar year of the implementation of the Czech screening mechanism, the screening system covered most of the scenarios listed in the FISA, i.e., a voluntary consultation, a mandatory screening procedure and a screening procedure ex-officio. We expect the number of the FDI screening cases to increase as the FDI screening becomes a regular part of international transactions and investors see the benefits of a voluntary consultation process with the Czech MoIT in order to avoid potential complications in the future.