The Cost of Law: EU to cut funds for violations on rule of law

November 18, 2020

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3 min read

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What's going on here?

The Council of the EU and the European Parliament have agreed to link payments from the EU’s €1.8trn budget-and-recovery package to concerns about the rule of law within Member States.

What does this mean?

On Thursday 5 November, an agreement was reached by EU negotiators to impose sanctions on countries who violate or interfere with the rule of law in their countries. At this stage, this is only “a provisional agreement on a new general regime of conditionality to protect the EU’s budget”. The agreement, if ratified, introduces a mechanism which withholds EU funds from the wrongdoers.

The EU is limited in the scope of its powers; it may only act in accordance with the Treaties. Therefore, sanctions would, initially, be limited to violations of the rule of law which “affect or seriously risk affecting the sound financial management of the EU budget or the protection of the financial interests of the EU”.

The proposed mechanism would allow the European Commission to establish whether there is a breach in a Member State and decide if sanctions are appropriate. Member States would have one month to decide by qualified majority voting (at least 15 countries with 65% of the EU’s population) to adopt the measures proposed.

What's the big picture effect?

The main targets of the mechanism are Hungary and Poland, who have been accused of dubious practices regarding the rule of law, attracting concern from other Member States due to their right-wing populist governments. They are embroiled in proceedings for violations of EU standards regarding judicial independence and journalists’ rights. Current allegations against the countries could see the loss of their EU voting rights.

Poland has been the subject of nationwide protests against a decision of the Constitutional Tribunal which further limited already strict abortion laws. Suggestions that the judiciary was influenced, if not controlled, by the ruling Law and Justice party have brought the ire of fellow EU members.

In Hungary, Prime Minister Viktor Orban is making fellow Europeans nervous as he moves towards authoritarianism, seizing control of institutions and rewriting the constitution. It has received further criticism for loosening rules on the selection process for the Supreme Court; the latest president was elected without the confirmation of the independent National Judicial Council.

Since joining the EU in 2004, both have been net recipients; they have been given more money than they have contributed. They oppose the imposition of barriers between these funds and their fledgling economies based on foreign concepts of the rule of law. Hungary’s justice minister, Judit Varga claims the reason for the mechanism is not protection of the rule of law, but a “pretext” to “hide behind” for countries who “never wanted to give funds”. Germany, a net contributor and current holder of the Council of the EU’s rotating presidency, is strongly in favour of sanctions.

When the mechanism was first proposed, in September, Hungary objected, threatening a joint endeavour with Poland, aimed at assessing other European nations’ rule of law. This, Budapest argued, was necessary so that they “not be taken for fools”.

There is the potential that, if ratified, this mechanism could help facilitate the implementation of the EU’s upcoming seven-year budget, as well as the enormous recovery fund. If it becomes law, it would be a big step towards strengthening democratic principles throughout the bloc.

Report written by Joshua White

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