European court rules EU can block funds over rule of law, rejecting Poland and Hungary’s appeals

The European Union’s top court has ruled that the disbursement of funds can be made conditional on respect for the rule of law. It rejected challenges brought by Poland and Hungary, two countries seen as being most at risk of losing out on billions of euros of funding.

The Court of Justice of the European Union (CJEU) was ruling on a mechanism introduced by the EU in December 2020, which linked the disbursement of funds to criteria such as judicial independence and transparency.

The commission has already been delaying around €36 billion in pandemic recovery funds earmarked for Poland and €7 billion for Hungary over rule-of-law concerns. Following today’s CJEU ruling, it can now formally begin the process of invoking its rule-of-law mechanism to withhold the money.

Warsaw and Budapest, however, have argued that the mechanism is a political tool based on subjective criteria, and that it will therefore be used to punish countries – such as theirs – led by governments that the EU disapproves of.

They launched legal action at the CJEU, arguing that the rule-of-law mechanism lacked legal basis in the European treaties and that the EU was therefore exceeding its powers and breaching the principle of legal certainty. Ten other EU member states – including Germany, Spain and the Netherlands – intervened in support of the mechanism.

In its ruling today – which was issued in an expedited procedure – the CJEU rejected Poland and Hungary’s cases. It noted that compliance with the EU’s common values, such as the rule of law, “is a condition for the enjoyment of all the rights deriving from the application of the treaties”.

Therefore, “the European Union must be able to defend those values”, noted the court. That includes through “sound financial management of the [EU] budget…[which] may be seriously compromised by breaches of the principles of the rule of law”.

As such, found the court, a “conditionality mechanism” of the type established “does not go beyond the limits of the powers conferred on the European Union”. It also rejected Poland and Hungary’s argument that the mechanism breaches the principle of legal certainty, noting that “rule of law” is a well established and enshrined concept.

Experts cited by Reuters and the New York Times believe that the European Commission is most likely to use the mechanism against Hungary, possibly as soon as next month, but that the situation is less clear-cut with Poland.

Both Poland’s president, Andrzej Duda, and the ruling Law and Justice (PiS) party have recently proposed legislation that would remove or reconfigure the disciplinary chamber for judges that has been at the heart of recent conflict with Brussels.

Poland and Hungary are among the largest net recipients of EU funds, and the loss of that money could have major political repercussions as well as economic ones. Hungarians are due to go to the polls in parliamentary elections at the start of April, where the ruling Fidesz party is facing a united opposition bloc.

A number of figures from Poland’s justice ministry immediately condemned today’s ruling. Marcin Romanowski, a deputy justice minister, accused the “CJEU of leading a campaign against states that implement a policy other than the European Commission’s leftist ideology”.

Another deputy justice minister, Michał Woś, said that so-called “conditionality” is in reality “a tool for blackmailing sovereign states when they have a different opinion than the Eurocrats”. He warned that a “European Federation with its hegemon in Berlin is being established before our eyes”.

However, a Polish opposition MEP, Sylwia Spurek, welcomed the CJEU’s decision. “The time for the European Commission’s excuses and inactivity is over,” she wrote. “Citizens must be effectively protected against violations of the rule of law and human rights, including through financial santions.”

Main image credit: Guillaume Périgois on Unsplash

Daniel Tilles

Daniel Tilles is editor-in-chief of Notes from Poland. He has written on Polish affairs for a wide range of publications, including Foreign Policy, POLITICO Europe, EUobserver and Dziennik Gazeta Prawna.