The rule of law conditionality: opportunities and challenges
Is the regulation that makes access to European funds conditional on respect for the rule of law and other EU values a revolutionary weapon or paper tiger?
Since 2010 in Hungary and 2015 in Poland, we have witnessed repeated attacks on the rule of law, the persistence of which demonstrates the very relative effectiveness, if not inefficiency, of the rule of law protection mechanisms available to the European institutions.
The Article 7 TEU procedures, initiated in 2017 against Poland and in 2018 against Hungary, which no longer deserves to be called “nuclear”, have not led to any tangible results. They set up an enforcement mechanism that is essentially political and requires, depending on the decision to be taken, either a super qualified majority or unanimous voting within the Council.
What has (sort of) worked so far
In practice, the Europen Commission and the Court of Justice of the EU (CJEU) are left with the laborious task of ensuring respect for the rule of law in the EU member states.
Whether by launching infringement proceedings or by adopting judgments based on Articles 258 and 267 TFEU, the Commission and the Court have given content to the rule of law concept and have transformed the ‘vague value contained in Article 2 TEU’ into a genuinely binding one.
Today, the CJEU judgments are the most appropriate means of protecting the rule of law by defining its scope and sanctioning its violations. However, one may question their practical effectiveness insofar as they are not recognised by the courts of the so-called defaulting member states.
On 4 March 2021, the Minister of Justice of Poland Zbigniew Ziobro announced that the judgment delivered two days earlier by the CJEU in case C-824/18 was unacceptable, and that it would be referred to the politicized Polish Constitutional Tribunal because of its potential incompatibility with the Polish Constitution.
It is not the first time that such maneuver has taken place. In case C-791/19, in which the CJEU ordered Poland to suspend the functioning of the disciplinary chamber of the Supreme Court as part of interim measures, the Polish Constitutional Tribunal was asked to establish whether Articles 4(3) TEU and 279 TFEU, insofar as these provisions entail an obligation to comply with interim measures ordered by the Court, are compatible with the Polish Constitution (see P 7/20).
In search of a new mechanism
In light of the relative effectiveness of the above-mentioned mechanisms, a more dissuasive solution has been envisaged. Hungary and Poland share a common characteristic that stimulated the Commission’s creativity: they are among the States that benefit the most from European funds. Fair enough, funds will be suspended if they persist in violating the rule of law.
After several years of work, the Commission issued a proposal for a regulation that makes access to European funds conditional on respect for the rule of law. Heavily criticised by the Hungarian and Polish governments, the Regulation, based among other things on Article 322 TFEU allowing the adoption of rules on the implementation of the budget, moved further along the path of the ordinary legislative procedure until a compromise was reached between the Council and the European Parliament in November 2020.
A political crisis
Hungarian and Polish government’s reactions were immediate. On 26 November 2020, Prime Ministers Mateusz Morawiecki and Viktor Orbán issued a joint declaration in which they asked to “limit the scope of any additional budgetary conditionality to the protection of the financial interests in the Union ” and suggested that “the appropriate procedures” in this area could only consist of a revision of the Treaties. Signing a blood pact, they also announced that “neither Poland, nor Hungary will accept any proposal that is deemed unacceptable by the other “.
Putting their threat into action, Poland and Hungary have thus decided to veto the adoption of the Next Generation EU recovery plan and Multiannual Financial Framework, requiring unanimity, as long as the conditionality mechanism is not revised, thus taking hostage these instruments, which were vital to address the social-economic consequences of the Covid crisis and to adequately finance the EU’s policies until 2027. It resulted in a crisis of a dimension overshadowing the Brexit one.
Although several solutions to the crisis were envisaged, such as opting for enhanced cooperation or purely intergovernmental arrangements, a compromise between the 27 Member States was finally reached, taking the form of a declaration by the European Council on 10 and 11 December, which is supposed to give guarantees to Poland and Hungary regarding the implementation of the conditionality mechanism.
However, because of the content of the conditionality Regulation that was finally adopted and considering the declaration, one may wonder whether the opportunity to provide the EU with a robust mechanism to protect the rule of law was not missed.
The conditionality Regulation: revolutionary weapon or paper tiger?
In article 2, the Regulation sets out criteria for defining the rule of law, silencing criticism concerning the lack of definition.
Thus, it includes “the principles of legality implying a transparent, accountable, democratic and pluralistic law-making process; legal certainty; prohibition of arbitrariness of the executive powers; effective judicial protection, including access to justice, by independent and impartial courts, also as regards fundamental rights; separation of powers; and non-discrimination and equality before the law“.
Furthermore, the Regulation applies where breaches of the principles of the rule of law “affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way“.
The provision has the advantage of allowing the sanction procedure to be applied not only when the budget’s infringement is proven but also when there is a risk to the budget. However, the illusion is short-lived.
The ‘sufficiently’ causal link between the infringement of the EU budget and the violation of the rule of law is very difficult to prove in practice. How can a violation of the rule of law be quantified in monetary terms? One can wonder if the Regulation does not introduce a probatio diabolica (a legal requirement to achieve an impossible proof).
Regarding the procedure, according to Article 6 of the Regulation, it is initiated by the European Commission on “reasonable grounds” . The Commission then assesses the situation on the basis of documents issued by other institutions and by the Member State concerned, establishing a dialogue with the latter. However, if the dialogue with the member state does not lead to a satisfactory solution, the Commission shall adopt a proposal for an implementing decision, which the Council will then adopt by qualified majority.
While this procedure has the advantage of requiring only a qualified majority (as opposed to the unanimity required under the Article 7 procedure), the launching of the mechanism could in practice remain, as it is the case for infringement procedures based on Article 258 TFEU, subject to the discretion of the European Commission, which often seems reluctant to act.
Doubts about the legality of the European Council declaration
One can already raise doubts about the Regulation’s content. Moreover, adopting the European Council declaration – which allowed to “lift” the Hungarian and Polish vetoes – raises concerns about the implementation of the conditionality mechanism.
The compromise, reached during the 10-11 December European Council meeting, intends to offer guarantees to the Hungarian and Polish governments about the application of the conditionality Regulation.
It provides that “the Regulation is to be applied in full respect of Article 4(2) TEU, notably the national identities of Member States inherent in their fundamental political and constitutional structures, of the principle of conferral, as well as of the principles of objectivity, non-discrimination and equal treatment of Member States“.
Is such an addition relevant? These principles are already contained in the Treaties, which have a higher value than the regulations. Nevertheless, a reminder never hurts.
However, other elements are worrying. First, the European Council’s declaration provides that the Commission “intends” to adopt guidelines specifying how it will apply the Regulation.
Second, when a member state brings an action to an annulment of the Regulation, the Commission has to wait for the CJEU judgment before finalizing its guidelines and, consequently, before enforcing the Regulation. This statement, even if accepted by the Commission, complicates and delays the tasks conferred by the Regulation on the Commission, which is in violation of the Treaties.
As pointed out by many experts in European law, such as Professor Alberto Alemanno in his article “To Save the Rule of Law you Must Apparently Break It“, in addition to involving the European Council in the legislative procedure when it has no competence in this area under the Treaties (Article 15 TEU), it also encroaches on the competences attributed to the Commission (Article 17 TEU).
Finally, the Regulation gives suspensive effect to future actions for annulment brought by the Hungarian or Polish governments even though Article 278 of the Treaties provides for the absence of such a suspensive effect.
Is there any hope left for the conditionality Regulation?
According to the case-law (judgment C-5/16 pt. 85), in this situation, the Council declarations cannot have a binding effect in the sense that the Council cannot be granted “the power to interfere directly in the legislative sphere” (see also article 15 (1) TEU). It is therefore conceivable that the Commission might depart from the conclusions.
Moreover, in response to the concerns that arose after adopting the declaration, the Commission announced on 16 December, that “the regulation will apply from 1 January 2021 onwards. And any breach that occurs from that day onwards will be covered. And I can assure you, the Commission will always act in full autonomy, full respect of the law and full objectivity“.
The Parliament also adopted a resolution in which it recalled that “the conclusions of the European Council cannot be made binding on the Commission in applying legal acts “.
Moreover, the Parliament was given the opportunity to challenge the controversial act. However, the European Parliament’s Committee on Legal Affairs – for reasons unknown to the general public – decided not to bring an action for annulment of the European Council’s declaration.
Even though the JURI Committee’s opinion was likely to be of interest to all EU citizens, the procedure, based on Rule 149 of the Parliament’s Rules of Procedure, was only discussed in camera on 23 February 2021. The only trace we have of it is in item 9 of the agenda.
After turbulent negotiations and the close link between budgetary conditionality and post-Covid recovery, there seems to be a political reluctance on the institutions’ part to bring the subject up again.
However, let us hope that the action for the annulment that Poland and Hungary have just introduced will give the EU institutions the impetus to defend and apply this new mechanism with strength and conviction.