Where an entity outside the Czech Republic deals with a client or a counterparty located in the Czech Republic, those activities will typically be subject to Czech laws and regulations. The service provider will need to consider whether they are triggering local Czech licensing, registration or notification obligations, as applicable, and also whether they are complying with Czech marketing rules.

Until recently, European laws have not sought to harmonize the approach of member states to non-EEA entities. This has meant that access to the markets of member states has had to be considered on a case-by-case basis. However, the trend in European legislation is now towards harmonizing the approach across all member states to non-EEA entities. On the one hand, this approach is likely to create a barrier to entry to European markets. On the other hand, firms who become compliant with the new EU standards will be able to access the whole EEA market as opposed to having to consider the market on a country-by-country basis.

Under Czech law, offering and provision of financial and investment services or products (collectively “Services”) in the Czech Republic may only be carried out by Czech-licensed entities (such as banks or investment firms), Czech-licensed branches of foreign non-EEA entities, or foreign EEA entities on the basis of the EEA single license, directly or via a Czech branch, as applicable. Czech investment intermediaries, tied agents and insurance intermediaries offering or providing financial or investment Services in the Czech Republic must be registered with the CNB.

Subject to exceptions, financial and investment Services are offered/provided in the Czech Republic in the following cases:

• Both the customer and an employee of the entity offering/providing the Services are physically present in the Czech Republic. This also generally applies where an intermediary of such entity, instead of its employee, is present in the Czech Republic.
• The offering of the Services by means of distance communication (e.g., over the internet, telephone, mail, email) is aimed at the Czech Republic and the Services may be used in the Czech Republic; the offering of the Services is aimed at the Czech Republic in case the Services are advertised in the Czech Republic with the intention to be provided in the Czech Republic, that is, advertised in Czech communication media over the internet, via directed mail, email, telephone calls, business introducers or intermediaries to customers in the Czech Republic.

However, if the customer independently and proactively contacts the foreign entity by means of distance communication (customer reverse solicitation), the financial and investment Services are not considered provided in the Czech Republic and thus are not subject to Czech laws.

Where foreign investment intermediaries, tied agents or insurance intermediaries engage in offering or providing financial or investment Services in the Czech Republic from outside the Czech Republic, they must be registered with the CNB, unless they provide such Services on an incidental basis only.

Additionally, any advertisement of financial and investment Services to persons in the Czech Republic must comply with the Czech rules on advertising. EEA entities operating in the Czech Republic under the EEA single license may freely advertise financial and investment Services to persons in the Czech Republic as long as they adhere to the applicable Czech rules. However, non-EEA entities operating in the Czech Republic (and EEA entities not complying with the EEA single license requirements) may advertise their financial and investment Services in the Czech Republic without setting up a branch and obtaining a banking license from the CNB only if the advertising does not overlap into provision of financial or investment Services.

Please note that advertising and providing financial and investment Services on web pages where the Czech language is an option may be considered as advertising in the Czech Republic and thus be subject to Czech laws, regardless of where the company or the servers are situated.

As mentioned above, recent EU legislation limits the ability of foreign firms to do business in the Czech Republic, particularly as follows:

• The Alternative Investment Fund Managers Directive imposes limitations on non-EEA persons marketing fund interests to persons in the Czech Republic (and other European jurisdictions).
• MiFID II results in greater restrictions on non-EEA entities doing business in the Czech Republic.