Estonia orders business agency to repay €1.33 million in EU funds over conflict of interest

Estonia's Ministry of Economic Affairs and Communications (MKM) has ordered the state-run Estonian Business and Innovation Agency (EIS) to repay more than €1.3 million in European Union funds. The reason is a conflict-of-interest risk tied to money paid in 2023 to the Estonian Chamber of Commerce and Industry (EKTK). The agency will not appeal the decision.

The ministry is recovering €1.33 million that went to the chamber for bringing in international experts. Economy and Industry Minister Liina Vahtras (Reform Party) ordered the repayment.

How the conflict arose

EKTK director general Mait Palts submitted winning bids for the contracts while also sitting on EIS' supervisory board, which oversaw the procurement. He also signed the resulting agreements. He stepped down from the board this spring, after the matter came to light.

EIS board chair Ursel Velve disputed the finding of a conflict of interest, saying the EU had identified only the appearance of one. Palts has argued that the arrangement was not a grant but a procurement of services by EIS, intended to help Estonian companies enter foreign markets.

The ministry concluded the risk was indirect, since the money went to a business association and not directly to companies. However, an audit by the Finance Ministry disagreed that there had been no conflict of interest.

'The rules are strict'

Rando Härginen, the ministry's foreign funds chief, said the Finance Ministry audit could not establish whether the perceived risk had actually materialized. But he acknowledged that EU funding rules are strict and leave little room for a different outcome. "Unfortunately, the rules governing this funding source are so strict that this process simply has to end this way," he said.

He added that officials resigning from public positions is a matter of each person's own ethics and conscience. EIS has agreed to repay the €1.33 million. Velve said the agency would cover the cost with savings from efficiency measures introduced this year.