The growing divide in the Visegrad Four


The Visegrad Four (V4), a group of four Central European countries (Czech Republic, Hungary, Poland and Slovakia) were once united in their efforts to overcome their Soviet legacy and integrate into Western institutions. However, as a result of recent elections in the countries, the group has dissolved into two distinct camps. The first camp, Czech Republic and Poland, sees a higher integration in the European Union, a higher respect to the rule of law, and aligns with Western foreign policy priorities, while Slovakia and Hungary are on a rather opposite side of the road.

This split has consequently impacted the investment landscape of the Visegrad group, as there has been a markable change in the countries’ approaches to corruption, compliance and adherence to international standards. For investors, that means it will become more complicated to fully understand the individuals and companies they might want to partner with in these countries. 

Neighbourhood relations of Czechia and Slovakia

Once the same country, Czech Republic and Slovakia have seen very different electoral outcomes following the 2022 Russian invasion of Ukraine. While the Czech Republic elected a former chairman of the NATO Military Committee, Petr Pavel, as its president, Slovakia elected an affiliate of the country’s oligarchs, Peter Pellegrini. Following the different stances of the Czech Republic and Slovakia to the war-torn Ukraine, the Czech prime minister Petr Fiala even cancelled government consultations with his Slovak counterpart, a right-wing political veteran Robert Fico, during the February 2024 V4 summit in Prague. While the Czech Republic expects EU elections as well as elections into the Czech Senate later this year, its intelligence services have proven to be very effective in countering foreign influence on its territory. For instance, they recently exposed the transnational Kremlin-sponsored Voice of Europe outlet which was designed to support pro-Russian MEP candidates in the upcoming EU elections. When it comes to the investment landscape in the country, its institutions have maintained low corruption levels despite the scandals of the country’s former political leaders such as Andrej Babiš, who has been tried by the European Union for a $2 million subsidy fraud case.

As was confirmed this April, in Slovakia, Pellegrini is to succeed the presidency from Zuzana Čaputová, a former environmentalist lawyer. Čaputová served as a counterbalance to the incumbent government, which is led by Fico, a right-wing SMER-SD affiliate who is a known disinformation influencer. Pellegrini is a close associate of Fico as he had also served in SMER-SD, a party infamous for its corruption record, for two decades. Therefore, Pellegrini’s seat will likely further the ability of coalition politicians to grant pardons (a privilege of the head of state) – along with the possibility of carrying out abuses. Fico’s party SMER-SD brought back into the office a guard of other veterans as well as policy changes that are seen to strengthen their impunity, at the expense of the integrity of the Slovak justice system. In early February 2024, the Slovak parliament approved a package of controversial amendments to its Criminal Code which was adopted in mid-March. The reforms include abolishing a specialised prosecutor’s office for cases of high-level corruption and organised crime as well as reducing the statute of limitations and penalties for crimes including corruption, tax fraud and theft. It is expected that the recent political changes in Slovakia will generally lead to increased corruption in the business landscape, which will be less commonly reported.

Redemption in Poland, what next for Hungary?

It was Hungary and Poland which were often classed as one group, due to their disputes with the European Union over their internal rule of law mechanisms. Nevertheless, the countries seem to have embarked on very different trajectories in light of the 2023 parliamentary elections in Poland. 

In October last year, Poland saw the exchange of Mateusz Morawiecki from the Law and Justice party, a close ally to Hungary’s Viktor Orbán, for the pro-Western former European Commission official, Donald Tusk. After coming to power following the 2015 parliamentary elections, the Law and Justice party replaced the Polish Constitutional Tribunal’s judges in a move that the then-new opposition and many experts said was partly illegal. In February, Tusk announced a series of reforms aiming to reconstruct the country’s rule of law mechanisms, including one parliamentary resolution, which would facilitate the operation of the Polish Constitutional Tribunal and ensure its independence from the executive power. The country now presented a plan to exit its application under EU’s Article 7, which was triggered amidst concerns over the status of the rule of law, including the independence of the Polish Constitutional Tribunal, in 2015. While it is difficult to evaluate the success of the reforms at this stage, Poland is increasingly seen as an ally to the West and we will likely see an increased respect for the rule of law in the country.

While Hungary has made attempts to overcome the EU’s integrity concerns, their efficiency is uncertain. In October 2022, Hungary’s parliament passed a package of anti-corruption laws as part of the commitments made by the government to the EU. These include the creation of an Integrity Authority (IA), which is supposed to be a fully autonomous administrative body monitoring all projects and investments implemented in Hungary’s EU-related funds against potential fraud, conflict of interest, or corruption. The IA presents an opportunity for foreign investors to request action on major public procurement projects. While it is a promising step, one thing to note is that the IA relies on Hungary’s incumbent government as it cannot issue indictments on its own, making it reliant on existing state institutions to cooperate. The director and the deputies of the IA are appointed by the president of Hungary. Therefore, while advances are being made in Hungary to fight against corruption, the success of their implementation remains uncertain.

In these changing environments, it is imperative for investors to understand how to mitigate risks of corruption with contextual knowledge and up-to-date insight on policy. Czech Republic and Poland grew closer, amidst their shared support to Ukraine, which has influenced the electoral results in the countries and consequently also improved their commitments to transparency. Slovakia recently elected the country’s infamous oligarchs, which has immediately eroded its anti-corruption policies. And while Hungary has attempted to respond to calls for heightened transparency, its policy measures are of questionable efficiency. Because of the varying records of transparency in these countries, it is advisable to conduct enhanced due diligence checks, particularly in relation to corruption, compliance, and adherence to international standards.

To discuss this article or any other risk and compliance, integrity due diligence, or investigative dispute, please get in touch with one of our experts in our Russia, Eastern Europe & Eurasia team.

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