The European Commission is ratcheting up its conflict-of-interest fight with the Czech Republic, threatening to withhold payments involving companies held by trust funds.
The move comes after long-standing concerns that Czech Prime Minister Andrej Babiš may have inappropriately benefited from such arrangements led Brussels to issue recommendations for systemic changes in how the country handles European funding.
In 2017, Babiš placed his massive Agrofert agriculture and chemical conglomerate in two trust funds. But in a 2019 audit, made public earlier this year, the European Commission found the prime minister still had “direct” and “indirect” influence over those trust funds. As a result, it said, “all grants” awarded to Agrofert since February 2017 violated a conflict-of-interest law.
And while the Czech authorities ultimately did not request any EU money in connection to the activities mentioned in the audit, the issue has sparked a broader push for respecting conflict-of-interest rules.
Now, the Commission has sent Prague a letter advising local authorities running EU-funded regional development and social programs not to seek reimbursement for payments to any trust fund-controlled companies in general. The Commission said it won’t make payments in these cases.
The letter, sent last week, urged Prague to adopt the recommendations from the audit, which advised that the Czech Republic “improve the management and control systems in place” to “ensure that no further grants are awarded” in breach of conflict-of-interest rules.
The Commission, a spokesperson confirmed Monday, expects “the Czech authorities to implement all the recommendations that were put forward in the audit report.”
If not, the consequences could be financial.
The Commission “will interrupt any future payment claims in respect of such companies pending the implementation of system improvements to address this risk,” the spokesperson said.
Babiš, who has long rejected any allegation of wrongdoing, did not respond to a request for comment.
In June, the European Parliament called in a resolution for “ensuring that the business entities under Prime Minister Babiš’s control cease to receive any funding from EU funds.”
“Further disbursement of funds, either from the EU or Czech national budget, to the companies ultimately controlled by Prime Minister Babiš or members of the Czech Government must be halted until the cases of conflict of interest are fully resolved,” MEPs said.