The EU’s most powerful decision-making body is being taken to court accused of failing to act on an alleged conflict of interest centred on the Czech prime minister, Andrej Babiš.

Lukáš Wagenknecht, a Czech senator, said he had launched legal action at the European court of justice after the European council – the body representing EU leaders – failed to respond to his concerns about the alleged conflict of interest.

The senator said Babiš was able to “personally enrich” himself through his vote at the European council, because he owns a company that receives EU subsidies.

The billionaire prime minister of the Czech Republic was found by EU lawyers in 2018 to have a conflict of interest, because his Agrofert agro-food conglomerate had benefited from at least €82m (£71m) in EU subsidies that year alone.

As a member of the European council, Babiš has a veto over the EU budget, giving him a say over how much money is allocated to farm subsidies compared with research.

Negotiations on the EU’s next seven-year budget are already proving difficult, as the EU27 confront the €12bn-€14bn (£10.3bn to £12bn) annual shortfall caused by Brexit, demands for new spending, as well as the red lines of the “frugal” club of member states that refuse to pay a euro cent more.

Among EU leaders, Babiš is an exception by owning a company that benefits from EU farm payments for poorer regions. Czech transparency campaigners say they have found evidence he remains the ultimate beneficial owner, in breach of EU law.

Agrofert has described the claims as false, while Babiš dismissed them as “lies” and “nonsense”. He has always maintained the company is in a private trust fund and he has not broken any law.

The legal case partly rests on the view of the EU’s in-house lawyers, who concluded in a leaked legal report that the “impartial and objective exercise of his functions as a prime minister” were “compromised”.

Wagenknecht is urging Angela Merkel, Emmanuel Macron and other EU leaders to take the issue seriously. “Yes, I know they have too many other issues … [but] the immediate consequences are also the European level,” he said.

“Babiš will approve principles of EU subsidies and at the same he will be one of the biggest beneficiaries.” The European council – unlike other EU bodies such as the European commission or the European parliament – lacked “any guidance or principles on the conflict of interest”, the liberal senator added.

“Do we have different rules in place for prime ministers, presidents, than other citizens of the European Union? It’s also about the rule of law, European laws should be for all of us or not. If they do not follow the rule of law then what will happen – democracy will decrease,” he said.

The European court of justice has yet to confirm if it will accede to Wagenknecht’s request for a fast-track procedure, to allow a ruling before EU leaders settle the next European budget in 2020.

EU insiders hope for a settlement on the 2021-27 budget by June 2020, but finding a compromise is likely to test EU unity to the limit. The erosion of the rule of law in central European countries that are the largest beneficiaries of EU funds is one reason why the financial settlement will be so hard to agree.

MEPs are also concerned about the use of EU funds in Hungary, as friends, family and supporters of the prime minister, Viktor Orbán, have won EU-funded government contracts facing little competition – a red flag for anti-corruption campaigners.

