New law on the screening of foreign investments and its impact on real estate investments in Czechia

According to the draft law, the government may screen, through its authorities, investments made in the Czech Republic by persons based in countries outside the European Union. The government may affect the form of risky investments and, as a last resort, prohibit or even retroactively annul such investments.

In connection with an EU Regulation, the Czech Government has presented the Chamber of Deputies of the Czech Republic with a draft law on the screening of foreign investments. It governs obligations relating to the screening of certain types of foreign investments in order to ensure the security of the Czech Republic and internal and public order.

The screening process will cover investments made by so-called foreign investors, i.e. individuals holding citizenship of a non-EU Member State, legal entities based in non-EU countries or persons controlled by the aforementioned. Furthermore, these investments must concern areas defined by law, specifically production, research, and development of military equipment, operation of critical infrastructure elements, administration of critical information infrastructure information systems, and development or production of dual-use items (i.e. items, which can be used for both civil and military purposes).

In terms of real estate investments, the category of the so-called critical infrastructure elements is particularly important. These elements are defined in Act No. 240/2000 Coll. (the “Crisis Act”) as buildings, facilities, resources or public infrastructure determined according to cross-cutting and industry criteria. Such criteria are specified by Government Regulation No. 432/2010 Coll. and include, but are not limited to, elements associated with the energy sector (electricity, oil, gas, and heat), water management (irreplaceable water resources, water treatment facilities, and waterworks), food and agriculture, healthcare sector (newly also including the manufacturing of medicinal products), transportation or communication systems.

In conclusion, the law on the screening of foreign investments should only affect real estate investments marginally – solely in case of investments concerning very specific properties, such as power plants, large waterworks, energy infrastructure, etc. In case of uncertainty as to whether an investment is subject to the screening, a proposal for consultation may be submitted to the Ministry of Industry and Trade. The competent authorities will then express their views as to the need to initiate the foreign investment screening procedure.

Government proposal for the Collective Procedure Act




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