Pressure from Brussels mounts over Czech PM's alleged conflicts of interest

The European Commission has issued a warning that it may halt the flow of EU subsidies if the Czech Republic does not strengthen its mechanisms preventing conflicts of interests, and if it does not pay closer attention to firms in trust funds during the distribution of subsidies.

The EU threat piles further pressure on Czech Prime Minister Andrej Babiš as the "Stork’s Nest" case returns to the police for further investigation.

The European Commission sent a letter to the Czech ministries of Industry and Trade, Finance, and Regional Development calling on Czech authorities to present a report of measures that have been taken to improve the functioning of the system for distributing EU subsidies.

The Czech Republic and the Commission have been locked in a dispute over Babiš’s alleged conflicts of interest resulting from his continued control of the Agrofert holding. The Commission has said that if the Czech Republic cannot show improved safeguards against misuse of funds, the Commission may partly suspend the payment schedule of subsidies.

An EU audit earlier this year found that despite the transfer of Babiš’s Agrofert holding into trust funds, the Czech Prime Minister continues to exercise control over the company. As such, the Commission is demanding that greater attention be paid to firms transferred into trust funds when judging alleged conflicts of interest.

“We would like to find a solution and to discuss the way in which the EC arrived at its criticisms. Its reservations were mainly addressed to the Industry and Trade Ministry,” she added.

The Regional Development Ministry is to meet with representatives of other ministries to discuss ways in which compliance with EC demands can be ensured. Minister for Industry and Trade Karel Havlíček said the Czech Republic would meet the request to create a stronger system for monitoring and assessment.

Meanwhile, Czech state attorney Jaroslav Saroch has returned the Stork’s Nest case of alleged subsidy fraud by Babiš to the police for further investigaton. The step was taken after new information appeared following the police’s earlier investigation, which concluded in late May. The new stage in the investigation process will see witnesses questioned, with a deadline of mid-September set for the police to secure new evidence.

It is believed Babiš’s son, Andrej Babiš junior, has expressed a desire to testify in the case.

The Stork’s Nest Farm (Farma Čapí hnízdo) company was originally part of Agrofert. In December 2007, it became a joint stock company, and in the summer of 2008, it received a CZK 50 million subsidy from the EU that it would never have received as part of Agrofert. The business was subsequently returned to the Agrofert holding. An investigation was launched into the case by police in late 2017.

Since then, the stop-start nature of proceedings against Babiš has reflected the political sensitivity of the investigation, as Babiš continues to deny any wrongdoing.