Focusing on conflict legacy, this article contributes to the study of domestic mediating conditions as an explanation of “shallow Europeanisation” in the Western Balkans, defined as a disconnect between European rules and local practices. It critiques the prevalent neo-Weberian understanding of state capacity, which highlights rule-enforcement capability of state institutions, but reduces conflict legacy to a question of resources. The article argues that a relational approach to state capacity which attributes its strength to enduring ties among state and non-state actors better captures the challenge to European Union (EU)-driven domestic transformation in a post-conflict context. A case study of the Hercegovina Holding is used to unravel a Bosnian Croat network originating during the 1992–1995 Bosnian war. The empirical evidence of the network’s operation illustrates how key EU benchmarks for private sector development can be undermined, making a case for a more rigorous conceptualisation of conflict legacy as a domestic constraint on the EU’s leverage.