The negotiations for the Rule of Law Conditionality Regulation were not an easy task. In November 2020, tensions over the rule of law surfaced in the discussions on the Multiannual Financial Framework (MFF) and the Recovery and Resilience Facility (RRF), with the governments of Poland and Hungary moving to veto them just a few days after the Council reached an agreement with the European Parliament on the inclusion of a conditionality clause.
The clause would, it was hoped, enable the Commission to withhold EU budgetary funds from member states deemed to have violated key elements of the EU’s requirements on the rule of law (judicial independence, free media, and so on).
Passing the MFF and the RRF before her term chairing the Council came to an end was top of Angela Merkel’s agenda. Moreover, some member states urgently needed the funds to recover from the pandemic.
In this context, the German presidency of the Council brokered a compromise and the Commission agreed not to apply the conditionality regulation until the ECJ had ruled on its legality, and until the Commission itself had developed guidelines on its application.
The decision promoted much criticism. The sequencing was clearly the result of German negotiations with the backsliding governments, with conditionality not coming into force until their desires were fulfilled. The Parliament fiercely contended the Commission’s decision, and sued it before the ECJ for inaction.
Despite all the obstacles faced, it appears that the regulation is about to be finally enforced. On 5 April 2022, the Commission decided to send a formal letter of notification to the government of Hungary.
The Commission could have activated the conditionality regulation long ago (EU regulations are binding since the day they enter into force, in this case 1 January 2021). Indeed, in July 2021 a group of legal experts drafted a legal case on Hungary to serve the Commission as formal letter of notification.
In November 2021, the Commission sent letters to the Polish and Hungarian governments warning them of cuts to funding if shortcomings in judicial independence were not properly resolved.
Nevertheless, the Commission may have had its reasons for delaying.
The ECJ ruling of 16 February 2022 confirmed the legal legitimacy of the regulation. The ECJ dismissed Hungarian and Polish claims in their entirety, stating that the regulation is built upon a solid legal basis and reinforcing the idea of solidarity as essential for the Union’s budget.
It is undeniable that the Commission risked much in terms of public image, relations with the Parliament, and democratic deterioration in these member states. However, the regulation’s legality is now unquestionable and any doubts about its overlap with Article 7 dispelled.
Furthermore, by complying with all the requirements of the EU Council conclusions, the mechanism has greater legitimacy vis-à-vis member states’ governments, which have the final say on the funding cut.
In the meantime, the Commission has not remained unmoved, but rather has played its leverage through the RRF. By keeping the Hungarian and Polish plans under evaluation and not disbursing the funds, the Commission has begun to turn the tables on Warsaw, as Polish President Andrej Duda announced his intention to follow some of the Commission’s requests.
The problem is, following this explanation, the Commission could have activated the regulation since 16 February. But instead it waited until the Hungarian elections were held on 3 April. No doubt this was a risky move. The Commission ceded to Orbán exactly what he wanted: nothing would happen until after the elections.
Given that Orbán has been re-elected and the Commission has now decided to activate the new conditionality policy against his government, it is difficult to justify the delay.
But two logics may explain the decision. On the one hand, the Commission may have preferred to avoid all possible speculation about its interference in Hungarian elections.
Other EU institutions have previously acted following the same reasoning: while the 2019 Finnish Presidency of the Council included protecting the rule of law among its top priorities, its actions were targeted towards Hungary and not Poland. Experts attributed this behaviour to a Finnish aim not to be accused of interfering with the Polish elections in October 2019.
Alternatively, perhaps the Commission wanted to see what might happen if the Hungarian opposition won the election. Although many of Orbán’s reforms are difficult to reverse due to the two-thirds majority required in Parliament to amend the constitution, the opposition could probably have succeeded in improving the rule of law situation in Hungary.
Consequently, the Commission could have got by without having to activate the mechanism, arguing that the Hungarian government would be addressing EU concerns. In doing so, it would have avoided all the risks of a rally-round-the flag effect (namely an increase of popular support to the government) that sanctions can trigger.
Is it now time to launch it against Poland?
The Commission is activating the regulation against Hungary and not against Poland for the moment.
The Ukraine war is a game changer, and it may be adding to Hungary’s isolation. The ruling Fidesz party is no longer protected by the umbrella of the European People’s Party in the Parliament (it abandoned the group in March 2021).
This fact, together with the change of government in Germany (Angela Merkel has often been accused of being too protective of Orbán), leaves the Hungarian government in an uncomfortable position: without allies that protect its misdeeds in exchange for political benefits.
Orbán’s sympathy for Putin and his reluctance to take a tough stance against the invasion of Ukraine may also have broken the Budapest-Warsaw axis and thus further weakened the already weak Visegrád group – from which the Czech and Slovak parts have drifted some time ago due to differences with Hungary and Poland over the rule of law.
Poland is currently at the forefront in welcoming refugees. The costs of the refugee crisis are making it evident that Poland needs EU help, hence the possibility that the Polish RRF will be approved and the funds disbursed has increased. Even Dutch PM Mark Rutte admitted the necessity to provide Warsaw with financial support.
Nonetheless, EU money will not be completely unprotected even if it reaches Polish hands. The threat of the conditionality mechanism is now real, and the Polish government might take more care in meeting the EU’s rule of law demands if it wants funds to continue flowing.
As a result, it might be the case that further isolation of Hungary, and cuts in funds, make the government in Poland rethink how far it wants to take its rule of law dispute with the EU.
By Gisela Hernández, PhD candidate researching rule of law enforcement in the EU at the IPP-CSIC.