The new agreement on the rule of law conditionality: a possible solution?

13 November 2020 /

6 min

After years of institutional debate on how to combat rule of law backsliding within the European Union, the European Parliament has reached an agreement with the Council linking EU funds to rule of law compliance. This means that the European Union will stop funding those national governments that threaten the rule of law, with the aim to get them to respect fundamental values listed in Article 2 of the Treaty on European Union. This may not put an end to the problem the EU is currently facing vis-à-vis Hungary and Poland, but it represents a step torwards  triggering further initiatives and maybe future reforms to the Treaties’ acquis

EU’s ‘nuclear option’: Article 7 TEU

Protection of rule of law and democracy through a sanction mechanism is not an exclusive feature of the EU: a significant number of international organizations have developed similar mechanisms in other regions. Article 7 TEU, the so-called ‘nuclear option’ of the European Union, is the mechanism the Union has to prevent Member States from backsliding on European values and the rule of law. It is supposed to be triggered when there is ‘a clear risk’ of an EU member state breaching the fundamental values of the Union (linked mainly to democracy and human rights). A proposal to trigger this procedure can be brought forward by the European Parliament, the European Commission or by one-third of the Member States (which has not yet happened).

The sanction mechanism involves the Commission, the Council and the European Parliament. However, the Commission prefers to resolve these issues through structured dialogue with non-compliant Member States. This has to do with the concept of the ‘compliance dilemma’: the EU is a community of law, lacking real coercive power. Therefore, it relies on voluntary compliance, enforcement and sanctions, which do not guarantee changes in the State’s behavior. In this context, the preventive stage of Article 7 has only been activated on two occasions: in 2017, the Commission triggered it against Poland, and in 2018 the European Parliament called for action towards Hungary. 

The ‘non-compliant’ 

Even though countries acceding to the EU in 2004 had high hopes of leaving behind decades of totalitarian rule, the enthusiasm for European values in certain countries has vanished since then. Illiberal changes in Hungary have been causing alarm since 2011, one year after the populist party Fidesz reached power. Viktor Orbán’s government soon reformed the Hungarian Constitution, excluding the political opposition and civil society organizations from its drafting. The newly introduced provisions limited the power of the Constitutional Court and constrained civil liberties such as freedom of expression. Something similar has been happening in Poland since 2015, when the Eurosceptic and socially conservative party Law and Justice (PiS) won the parliamentary election with a big majority and started implementing sweeping reforms of the judiciary. These laws were often passed overnight during  parliamentary sessions without public scrutiny, seeking to fill the highest Courts in Poland with allies of the party

These issues pertaining to the rule of law in both countries have created an ongoing crisis in the European Union. However, there is a strong political unwillingness to use this kind of ‘radical’ mechanism, even if the assault on the values in Poland and Hungary is now well beyond the ‘threat’ point. Overall, the total disagreement among all the actors involved on how to sort out these issues generates a pressing need to look for alternatives, both within and beyond the existing Treaty framework.

A long-awaited agreement: economic conditionality linked to the rule of law 

Fortunately, after years of debate, the fifth of November the European Parliament and the Council of the EU have reached a provisional agreement on implementing economic conditionality linked to EU’s fundamental values. The mechanism enables the EU to stop funding those national governments that threaten the rule of law, without them being able to apply their veto. The Parliament’s negotiators have also secured a broad scope of the legislation, ensuring that it covers not only cases of corruption and fraud, but also breaches of the fundamental EU values listed in Article 2 TFEU. MEPs have also succeeded in shortening the time that the EU institutions will have for the activation of this procedure to a maximum of 7-9 months (down from 12-13 months as initially requested by the Council).

This is an important achievement, since there is a great chance of sanctions being a more efficient tool than the ones used in previous occasions, such as the rule of law setting created in 2014. Indeed, Hungary and Poland are significant net recipients of EU funds. Poland is by far the largest beneficiary of EU transfers, receiving a 15% of the total funds that are allocated through Cohesion and Common Agricultural policies. Hungary is another great recipient of EU funding, receiving 23 billion euros in Cohesion funding and 12 billion euros from the CAP.

Is this enough? 

But will this form of conditionality really tackle the root of the problem? If passed, the agreement will not enter into force before 2021, giving Orbán plenty of time to make deep changes to the Hungarian political regime. This is already happening in Poland, where abortion in the case of fetal malformation has just been declared unconstitutional. It is also important to keep in mind that both countries can still veto this agreement within the Council, something that Orbán has already threatened to do, according to Hungarian journals

Some also argue that sanctions will penalize innocent citizens and regions of the non-compliant Member States, taking away financial support on which they might depend to survive. In this regard, MEPs have assured that the final beneficiaries, such as students, farmers or NGOs, will continue receiving these funds, being able to claim their due amounts from the Commission.

However, the Union’s legitimacy has already been very much put in question, having suffered many backlashes due to its lack of action in this regard. Perhaps the Commission should be more ambitious and complement this measure with some other mechanisms available to tackle these kinds of breaches of the rule of law, such as involving the Court of Justice in the process. Overall, enhanced monitoring and enforcement of EU’s foundational values is still very much needed. Which mechanisms could the EU institutions use to carry this task is now a highly discussed issue, mainly regarding whether this would need some reforms of the Treaty’s framework. Some argue that a long-term answer to the problem should necessarily involve the reform of the Union as such, making the supranational law more aware of the values it is obliged to respect and protect at the national and supranational levels.  

A great step forward 

Nevertheless, this long-awaited agreement on economic conditionality linked to rule of law represents a great step forward for the Union as a whole and must not be overlooked. The fact that the final beneficiaries of EU money will still be receiving their due amounts of funding is also something to be celebrated. Overall, this means that the EU has not forgotten about this rule of law issue, keeping it in the agenda and slowly making progress on the subject. This may not be enough to tackle the illiberal reforms that are taking place in Hungary and Poland, but it is a step in a long way of agreements and perhaps reforms at the core of the European Union.

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