Petr Dubinsky

Czech Parliament Passes Foreign Investment Reform

The Chamber of Deputies has approved a law on examining foreign direct investments to help the state protect key Czech companies from unwanted takeovers by risky foreign investors.

Today, MEPs rejected the Senate’s amendment, which proposed that the review should also cover nuclear equipment supply from companies from outside NATO and the EU. The design was related to the construction of new units at the Dukovany nuclear power plant. The President will now sign the approved law in the House version.

Amendments in the Senate were presented last December by pirate senator Lukáš Wagenknecht. According to him, a foreign investor from countries outside the EU and NATO should submit and document information about its real owners. He would have to ask for a check by the National Security Office. The verification would also apply to Czech companies bought by foreign investors from third countries in the past five years. The verification would also apply to subcontractors.

The Minister of Industry, Karel Havlíček, rejected the Senate proposal. It would harm those interested in foreign investment that would not meet the required obligation.

The Act on the Examination of Foreign Investments is based on a European Parliament regulation and is adopted by other EU countries. The law is intended to give the state tools in defense against risky investors from third countries who could endanger the country’s security or internal order.

According to the government, foreign investors may also pose other than economic risks. Such as investments in strategic sectors in terms of security will allow third parties to gain control or at least sufficient influence over key elements of these sectors or access crucial and sensitive information.

The law is intended to control foreign direct investment carried out by entities from countries outside the European Union. Suppose the examined investment is evaluated as risky. In that case, the state will influence its form by setting the conditions under which it can be made or prohibit or cancel this investment retroactively. The office in charge of the inspection will be the Ministry of Industry.

Investments in the most sensitive sectors, such as the armaments industry, critical infrastructure, or the development and production of the most sensitive dual-use goods, will need to be notified in advance and authorized by investors. All other investments can be made without a permit, but the state will also review them going back five years.