Should Babis remain, the EU should consider the application of Article 7 to deter future breaches and to protect the rule-of-law and core EU democratic values in Czechia, writes Marcus Kolga.

By Marcus Kolga, October 7, 2021

In November 2019, on the 30th anniversary of the Velvet Revolution, 300,000 Czechs took to the streets of Prague to demand an end to corruption and that all Czech politicians respect the rule-of-law. One activist group warned that "justice and the public media are in jeopardy." Nearly two years later, Czech voters will have an opportunity to reject the government of billionaire PM Andrej Babis, which has been inundated with conflict-of-interest charges and allegations of corruption.

In comparison to other European Union members facing similar accusations, the Czech government has escaped relatively unscathed. Both Hungary and Poland are facing serious consequences for undermining the core democratic values outlined in the EU Treaty’s Article 2, which include respect for “human dignity, freedom, democracy, equality, the rule of law and … human rights.” This has led to the triggering of the Treaty’s Article 7, which could lead to the suspension of their EU voting privileges and, in the worst case, the termination of their membership.

The European Parliament voted to trigger Article 7 for the first time in 2018 against Hungary for its alleged breach of core European values, including its failure to uphold judicial independence, corruption, and its efforts to restrict freedom of expression through its ever-tightening control of the Hungarian media. While Hungary’s Article 7 process has temporarily stalled, the EU has withheld billions of Euros in the EU’s COVID recovery stimulus aid until Hungary begins implementing measures to curb corruption.

Poland’s Article 7 proceedings were initiated in 2017 by the European Commission due to the erosion of judicial independence by Poland’s Law and Justice (PiS) party government. The proceedings were based on the Commission’s concerns about political influence in the forced retirement of Polish judges and their replacement with government-friendly successors.

Yet, despite clear evidence of similar violations, Babis and his government have managed to evade similar disciplinary action by the EU. The European Commission’s April 2021 ruling that the Czech Prime Minister breached EU conflict-of-interest rules fits a pattern of ongoing disregard for the rule of law and basic democratic values.  Indeed, the erosion of rule of law, media freedom, and democracy in Czechia is no less significant than the breaches leading to Article 7 proceedings against Poland and Hungary.

In the 1990s, Babis founded Agrofert, a multi-billion-dollar agri-food conglomerate now at the centre of his corruption scandals with the EU. Babis entered politics in 2012, and quickly added major Czech media outlets to his corporate portfolio. Beginning in 2013, he purchased the Mafra media group, which included some of the nation’s largest circulation newspapers – and which have supported his political ambitions. Babis’s net worth is estimated by Forbes to be $3.4 billion, making him one of the richest men in Czechia.

The Stork’s Nest and Conflicts-of-Interest

Czech prosecutors have investigated Babis’s involvement in the use of EU small and medium business subsidies in 2007 to finance a hotel-resort owned by an Agrofert subsidiary named the “Stork’s Nest.” Czech police suspected that Babis inappropriately transferred ownership of the resort from Agrofert to his family in order to access €2 million in EU funding. In April 2019, Czech police requested that charges be brought against Babis in connection with the “Stork’s Nest” affair. The Czech Justice Minister resigned shortly thereafter, replaced by Marie Benesova, who is seen as “sympathetic” to Babis. Five months later, in September 2019, Czech prosecutors decided to halt their investigation.

In May 2021, Czech police once again asked prosecutors to charge Babis with fraud over the case. Czech authorities have since handed it to the new European Public Prosecutor's Office (EPPO).

The “Stork’s Nest” affair provoked a national outcry and a series of massive demonstrations in which hundreds of thousands of demonstrators took to the streets of Prague to demand Babis’ resignation.

In its investigation into subsidies paid to Agrofert since Babis became Prime Minister in 2017, the European Commission ruled in April 2021 that Babis breached EU conflict-of-interest rules. Despite having put his assets into two ostensibly blind trust funds, the Commission found that Babis was able to direct and control Agrofert’s decision-making regarding the EU subsidies. The Czech government has been ordered to repay over €17 million in subsidies to the EU. And, in August 2021, the EU said that subsidies earmarked for Czechia would be suspended until the government fixed its conflict-of-interest laws.

The EU Group of States Against Corruption (GRECO) drew attention to the growing problem of corruption in Czechia in its 2016 report, which stated that “corruption, and weak anti-corruption measures, have been among the more serious public policy problems in the Czech Republic for years.” The GRECO report made several recommendations to curb corruption in Czechia, particularly with regards to legislative transparency and the Czech judicial system. GRECO follow-up reports in February 2019 and March 2020 lamented the Babis government’s “very low level of compliance with the recommendations” made in previous reports and found the Czech government’s failure to act to be “globally unsatisfactory.”

While some effort has been made to improve transparency within government, high-level corruption remains a significant problem within the Czech government. The 2020 European Commission report on the Rule of Law in Czechia stated that “high-level” corruption cases are not pursued sufficiently. The 2021 report notes that while limited progress has been made in improving transparency, “investigations and audits have raised concerns regarding some instances of high-level corruption in the use of EU funds and conflicts of interest.”

Control The Media, To Control The Narrative

Babis can count on his vast Czech media empire to help control the narratives. His significant Czech media holdings include some of the country’s most widely read national newspapers and popular radio stations, posing a significant challenge to Czech media independence and plurality. British researcher Andrew Foxall wrote in 2015 that Babis was contributing to the “oligarchization” of Czech media and that Babis used his media assets to advance his political interests which regularly feature “sympathetic coverage of Babis – and criticism of his opponents.”

Declining media freedom has been cited as a significant problem in the EU’s reports on the rule of law in Poland and Hungary and has been mentioned as a factor in the context of the ongoing Article 7 proceedings.

In 2017, as then Minister of Finance, Babis allegedly discussed the publishing of compromising materials against several of his Social Democratic opponents with a journalist at one of the newspapers owned by Babis’s company. According to a taped conversation, the compromising information came from police files.

Concerns about Czech media independence intensified in spring 2021, when questions about possible political interference in the operations of the country’s public broadcaster, Czech Television (CT), were raised by opposition politicians ahead of the October 2021 election. Nominees to the board of CT were alleged to be politically aligned with Babis. The threat to the independence of the Czech pubic broadcaster was so great that the European Broadcaster Union warned in a public statement that “an increasing number of governments are trying to silence opposition voices by restricting freedom of the press and exerting undue influence on public service media” and that “it has become alarmingly clear that the Czech Republic’s government is trying to exert pressure on that very independence, directly and indirectly.”

During the pandemic, the Czech government subsidized Babis’ Mafra media group, through advertising space purchased by state-owned companies, such as Czech railways. Freedom House’s 2021 Nations in Transit report noted that “state aid [used] to alleviate the pandemic’s negative impacts on cultural institutions disproportionately benefitted Mafra compared to other media groups.”

In addition to their initial clashes with EU values, the populist, far-right governments in Hungary and Poland are now being sued by the EU for enacting anti-LGBTQ laws that severely erode the rights of the LGBTQ community. Czech president Milos Zeman has joined the populist anti-LGBTQ chorus calling transgender people “disgusting,” and Babis has articulated his support for Hungary's legislation, stating that he does “not know why we should meddle in Hungarians’ laws.”

While there is some speculation that Babis could step down after the October election in return for the government dropping its corruption investigations, this would not prevent Babis from seeking the Czech presidency in 2023. There is no reason to believe that a Czech government aligned with Babis would adopt the measures recommended by the EU to address the ongoing issue of corruption and erosion of media freedom.

Should Babis remain, the EU should consider the application of Article 7 to deter future breaches and to protect the rule-of-law and core EU democratic values in Czechia.

Marcus Kolga is a human rights and anti-corruption activist. He is a senior fellow at the Macdonald-Laurier Institute.

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