CJEU dismisses Polish complaint over rule of law conditionality

The Court of Justice of the European Union (CJEU) threw out on Wednesday complaints brought by Poland and Hungary concerning a mechanism linking EU funding to respect for the rule of law by a member state.

"The Court dismisses the actions brought by Hungary and Poland in their entirety," the CJEU said in a ruling.

The court said that the mechanism had been adopted on the appropriate legal basis, was consistent with the procedure laid down in Article 7 of the EU Treaty, did not exceed the limits of the competences conferred on the European Union, and respected the principle of legal certainty.

While asserting the conditionality mechanism's legal soundness, the CJEU also outlined the circumstances under which the European regulator could launch a procedure to cut EU funding in response to breaching a rule of law.

". . . the procedure laid down by the regulation can be initiated only where there are reasonable grounds for considering not only that there have been breaches of the principles of the rule of law in a Member State, but, in particular, that those breaches affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way," the judgement read.

But each time a conditionality mechanism is implemented to protect the EU budget, a "genuine link" between a breach of a principle of the rule of law and an "effect or serious risk of effect on the sound financial management of the Union or the financial interests of the Union" must be established, the CJEU said.

Additionally, "such a breach must concern a situation or conduct that is attributable to an authority of a Member State and relevant to the proper implementation of the Union budget."

Meanwhile, Poland's Constitutional Tribunal, which was due on Wednesday to hear a case brought by Poland's Justice Minister and Prosecutor General Zbigniew Ziobro regarding whether tying EU funds to respecting the rule of law is constitutional, has decided to adjourn its hearing.

The mechanism, which ties access to EU funds to compliance with rule-of-law principles, was agreed upon by negotiators from the European Parliament and the German presidency of the EU in November 2020, and then approved by the ambassadors of the member states.

After a heated debate at an EU budget summit in Brussels in December 2020, the EU decided to introduce a conditionality mechanism into the 2021-2027 budget. Poland and Hungary were the only two countries in the 27-member European bloc to oppose this clause.

Ultimately, both countries agreed to the inclusion of the rule-of-law mechanism and won some concessions from the EU, including a statement that the funds may not be frozen arbitrarily and can only be withheld if damage or a serious risk to the EU budget is ascertained.

The Rule of law conditionality mechanism entered into force on January 1, 2021.

But the Polish prime minister, Mateusz Morawiecki, said Poland would ask the CJEU whether its measures are legal under EU law. In March 2021, Poland and Hungary did send such motions to the EU's top court.

Lodging its case, Poland said it wanted the CJEU to check if the "conditionality" mechanism is in line with EU treaties.

The Polish government argued that Poland could be financially punished by "arbitrary" political decisions from European officials critical of its conservative government.

In early June, following a request from the European Parliament, the CJEU decided to fast-track procedures in connection with a complaint by Poland and Hungary.