Conflicts of Interest: A Three-Layer Problem with Real Money at Stake

With Andrej Babiš back in the Czech Prime Minister’s Office, the conflict-of-interest question has returned as well: not as a political slogan, but as a compliance and governance issue with concrete consequences for public procurement, subsidies, and the credibility of public decision-making.

Czech law addresses the issue mainly through the Conflict of Interest Act. In practice, it operates on three layers that differ sharply in what they can realistically achieve.

Layer 1 – The general standard: clear in principle, soft in enforcement

The Act sets a broad expectation that public officials must avoid situations where personal interests could influence the performance of public office. This layer matters normatively, but it is often difficult to “enforce into outcomes” without a specific, clearly provable breach tied to a concrete statutory consequence.

Layer 2 – Restrictions on business involvement: not the core pressure point here

A second layer limits certain types of direct business engagement and incompatibilities. In Babiš’s case, however, the most acute exposure is not framed around “a general ban on business” in the abstract, but around what happens when a public official is linked to entities interacting with public money and public contracting.

Layer 3 – The public-money firewall

This is the legally sharpest part and the one that has long been the practical centre of gravity.

Section 4b targets public procurement, requiring exclusion of suppliers tied to a covered public official above the statutory ownership/control threshold (commonly discussed as being 25%).

Section 4c addresses subsidies and investment incentives, prohibiting their award to entities falling under the same logic.

This is why the “Agrofert problem” does not disappear by rhetoric alone. If the relevant ownership or control link remains, the consequences land on contracting authorities, grant providers, and counterparties – and inevitably invite audits, challenges, and litigation risk.

The announced solution – and why it still raises doubts

Babiš has again pointed to moving Agrofert away from himself via a trust-type structure (svěřenský fond). But two concerns keep resurfacing.

First, Czech law does not offer a classic Anglo-American “blind trust” as a straightforward domestic instrument. Any structure that is truly “blind” in the common-law sense typically requires careful design and, often, foreign-law solutions; that is not what has been transparently presented so far.

Second, even in the current debate, attention has turned to what is not being included. Multiple reports indicate that the proposed transfer focuses on Agrofert, while Babiš’s other business interests linked to SynBiol / Hartenberg remain outside the arrangement.

That matters because parts of the Hartenberg portfolio operate in heavily regulated sectors, including healthcare, where revenue streams are significantly shaped by public rules and public reimbursement frameworks. Even if this is not “subsidies” in the narrow sense, it is precisely the sort of environment where perceived conflicts can persist – and where governance optics quickly become governance risk.

Why this will keep resonating

The broader takeaway is uncomfortable but simple: Czech legislation is unevenly “toothed.” The general principles are hard to police, while the public-money firewall is comparatively strict yet operationally complex – particularly for public bodies that must assess ownership/control and defend exclusions or refusals under time pressure.

And this is not only a domestic issue. In February 2026, the European Commission opened a new round of scrutiny through a letter to the Czech Ministry for Regional Development, initiated by senior Commission official Andriana Sukova: it requested detailed information on how the Czech authorities prevent and address potential conflicts of interest linked to Prime Minister Andrej Babiš, asked for confirmation that no EU subsidies have flowed to Agrofert since his appointment, and sought assurances that Agrofert will not receive EU funding (including cohesion-policy subsidies) until the situation is clearly clarified and fully resolved. The Commission explicitly referred to Article 61 of the EU Financial Regulation and to the Czech Conflict of Interest Act (including Section 4c), set a one-month deadline for a response, and signalled that unsatisfactory answers could lead to a formal audit process - again with direct consequences for the reimbursement of funds.

In short: the legal debate is not about whether conflicts of interest are “good politics” or “bad politics.” It is about whether the rules can reliably separate public power from private benefit – especially where public money is involved – and whether the system can enforce that separation in a predictable, rule-of-law manner.

By JUDr. Marie Zámečníková, Ph.D.

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