EU court decision opens way for EU to withhold funds from Hungary

The European Court of Justice delivered a historic ruling this week that ties EU fund payments to the rule of law. The decision allows Brussels to withhold funds from Hungary and Poland, two countries that Brussels has accused of failing to uphold democratic standards.

Hungary has long been at loggerheads with the European Union over various issues, including the state of democratic checks and balances that Brussels claims the Hungarian government has systematically weakened over the past decade. In an effort to prompt Budapest to adhere more strictly to democratic standards, the bloc proposed introducing a rule-of-law mechanism that would enable the EU to penalize member states that fail to uphold the rule of law. Hungary, together with Poland, objected to the proposal and took the issue to the Court of Justice of the European Union (CJEU).

Historic decision
In a ruling issued earlier this week, the CJEU turned down the challenges by Hungary and Poland concerning the conditionality mechanism.
"That [conditionality] mechanism was adopted on an appropriate legal basis, is compatible with the procedure laid down in Article 7 TEU and respects, in particular, the limits of the powers conferred on the European Union and the principle of legal certainty," the CJEU said in a press release on the ruling.
The court added that the principles set out in the conditionality mechanism regulation, as "constituent elements" of the concept of the rule of law, have been "developed extensively" in its case law.
The decision in effect opens the door for Brussels to withhold much-needed development funds from Hungary and Poland after Brussels repeatedly voiced concerns about judicial independence, press freedom, and civil society. Both countries are beneficiaries of significant EU subsidies that over the years have helped prop up their economies.
The court noted that when joining the bloc, member states sign up to respect its "common values…such as the rule of law and solidarity," and the EU "must be able to defend those values.
The final ruling by the Luxembourg-based court cannot be appealed.
Officials in Brussels welcomed the court’s decisions with Commission President pledging that the Commission “will act with determination” to “defend the Union’s budget against breaches of the principles of the rule of law.”
The Commission will adopt in the following weeks guidelines that provide further clarity about how we apply the mechanism in practice, the politician said.
“After today’s decision of the European Court of Justice it has become clear that every single Hungarian citizen will have to pay a heavy, concrete, and monetizable price for the undemocratic functioning of the Orbán government,” Hungary’s united opposition alliance said in a statement.

Historic blackmail
Hungary and Poland argued in the cases submitted to the CJEU that the EU Treaties do not provide a legal foundation for the mechanism and said the EU had exceeded its powers and pointed to a breach of the principle of legal certainty as the mechanism neither defines the concept of the rule of law nor its principles.
Unsurprisingly, officials in Warsaw and Budapest took a rather harsh stance on the court ruling. Hungarian Justice Minister Judit Varga called it “living proof that Brussels is abusing its power.” “Brussels has a problem with the child protection law,” Varga said. “This is not a matter concerning rule of law.”
Sebastian Kaleta, Poland’s deputy minister of justice, said the ruling amounted to “historic blackmail.” Polish Justice Minister Zbigniew Ziobro tweeted, “This is a gloomy date that will be written in history textbooks, but it is not the end of the battle for Polish freedom and freedom in the EU.”
Analysts believe that Brussels will likely tread with caution when putting the mechanism to test in practice as even the timing of such an announcement could have political implications. Hungary is gearing up for general elections on April 3 and polls suggest that the race between Prime Minister Viktor Orbán’s Fidesz party and the united opposition alliance is rather tight.

One chance to do it right
The Commission, the EU’s executive arm, can trigger the mechanism with some conditions. One such conditions is that at least 15 of the 27 member states of the bloc need to endorse it. This offers some leeway for Poland and Hungary to find allies to bloc the mechanism. Some countries are keen to have the EU’s core values - democracy, human rights, the rule of law - upheld vigorously in all member states. Other countries, led by Poland and Hungary, have resisted such efforts.
The Commission needs to build a rock-solid case — otherwise the mechanism could wind up becoming a dead letter, like previous attempts to tackle rule of law violations in Europe, John Morijn, a law and politics professor at the University of Groningen, told EUobserver. "The commission has one chance to do this right, it will be fatal if the commission's proposal is voted down in council," Morijn said, referring to the body where EU governments have their say.