The European court of justice has dismissed complaints from Hungary and Poland against a law that ties EU funds to democratic standards.
In a milestone in the battle for the rule of law in the EU, the bloc’s highest court rejected the cases brought by Hungary and Poland “in their entirety”, confirming that countries can be deprived of EU funds when they fail to meet democratic standards.
The EU’s values, such as the rule of law, “define the very identity of the European Union as a legal order”, the court said in a statement about its keenly anticipated ruling. “The court specifies … that compliance with those values cannot be reduced to an obligation which a candidate state must meet in order to accede to the European Union and which it may disregard after accession.”
The ruling means the European Commission can deny Hungary and Poland EU funds in response to widely perceived democratic backsliding in both countries.
The commission’s president, Ursula von der Leyen, who has been accused of dragging her feet on the issue, came under immediate pressure from across the political spectrum to use the law. “No more excuses for Von der Leyen. It’s time to finally act against the rule-of-law violators in our union,” the German Green MEP Daniel Freund tweeted.
Petri Sarvamaa, a Finnish MEP and spokesperson on budgetary control for the centre-right European People’s party, said: “It is high time to start implementing the regulation. The clock cannot be restarted to play for time. The commission must act really fast.”
In a statement welcoming the ruling, Von der Leyen said the commission would “analyse carefully the reasoning of the judgments and their possible impact on the further steps we will take under the regulation”. She promised the commission would “adopt in the following weeks guidelines providing further clarity about how we apply the mechanism in practice”, adding: “I promised that no case will be lost. And I have kept that promise.”
Hungary, named as only a “partly free” country by the NGO Freedom House, has provoked concerns about the spending of EU funds by friends and family of the prime minister, Viktor Orbán. Poland’s nationalist Law and Justice party, led by Jarosław Kaczyński, has been in a long-running battle with Brussels over the independence of its courts, which raises doubts about its stewardship of public money.
Reacting to the ruling, Hungary’s justice minister, Judit Varga, said the court had made “a political decision because of our upcoming referendum on child protection”, a follow-up to the Hungarian government’s anti-gay law passed in 2021, which has been condemned as the “instrumentalisation” of LGBTQ+ rights. “The ECJ’s latest ruling is an example of how Brussels is abusing its powers,” Varga said.
A spokesperson for Hungary’s ruling Fidesz party said the decision was part of efforts “to help the leftist opposition win elections in Hungary”.
Orbán is facing an unprecedented challenge from a centre-right former Fidesz-supporting mayor, who is backed by six main opposition parties in 3 April elections.
After the ruling, Poland’s prime minister, Mateusz Morawiecki, said: “Poland believes that centralisation, bureaucratic centralisation, federalisation … is a dangerous process.”
Morawiecki, who recently promised to close a disciplinary chamber that is at odds with EU law, is perceived as wishing to dial down the conflict with Brussels. But his room for manoeuvre may be restricted by hardliners in the Polish government.
The deputy justice minister, Sebastian Kaleta, called the ruling “blackmail aimed to deprive us of our right to self-determination” and “an attack on our sovereignty”, according to the Polish Press Agency.
The law is intended to protect from fraud against the EU budget, rather than all rule-of-law violations. The plan received strong backing from governments in western Europe, which are net payers into the EU budget. Belgium, Denmark, Germany, Ireland, Spain, France, Luxembourg, the Netherlands, Finland and Sweden went to court to argue in favour of the law. Hungary and Poland, both net recipients of EU funds, have received billions of euros since joining the EU in 2004 to improve their public infrastructure, fund universities and support farmers.
The commission is refusing to release €36bn (£30bn) in coronavirus recovery funds to Poland and €7.2bn to Hungary, but the current law could affect Warsaw and Budapest’s access to the EU’s seven-year budget worth €1.8tn from 2021- 2027.
Hungary and Poland brought the cases after the EU agreed its “rule-of-law conditionality mechanism” in 2020, a regulation that links EU funds to respect for the rule of law. In an unusual move, EU leaders agreed in December 2020 to wait for the outcome of the legal challenge before the law could be used.
That decision was also criticised by MEPs. The Dutch MEP Sophie in ’t Veld called the decision to delay “another charade”, adding: “We write hundreds of laws every year. Since when does the application of EU law depend on a court ruling?”
