European Court of Justice to Make Landmark Decision on Rule of Law Sanctions

The European Court of Justice will soon issue a landmark ruling on whether the European Union has the power to stipulate funding to member states on their ability to keep with the bloc’s values.[1] A decision in favor of this authority has billion-euro implications, particularly for Hungary and Poland, which have both had a continuous stream of rule of law violations.[2]

In December 2020, the EU issued a regulation tying funding from the bloc to states’ respect for the rule of law.[3]  The EU can suspend funding for countries proven to be acting outside the values of democracy or without respect for the rights set forth in the Charter of Fundamental Rights of the European Union.[4] The EU member states were able to unanimously agree to the promulgation of this regulation on the stipulation that it could be challenged in the high court.[5] The European Commission has stated it will refrain from using the mechanism until the Court of Justice has approved it.[6]

The court plans to issue a ruling early this year. If the regulation is upheld, it could result in the withholding of billions in COVID recovery funds.[7] Further suspension of EU funds would be likely considering the systemic mishandling of funds and the persistent violations by Hungary and Poland’s nationalistic governments.[8] A ruling upholding the regulation could cause a considerable stir in the EU. In response to increased pressure from the EU, Poland has threatened a “Polexit”.[9] However, such a ruling would provide an opportunity for the EU to take concrete action in response to the numerous threats to democracy made by the Hungarian and Polish governments. 

This regulation provides more teeth for penalizing states acting in opposition to the ethics of the EU than Article 7 TEU, which provides the EU the ability to initiate proceedings against member states who breach the values of the bloc.[10] The EU has commenced Article 7 TEU proceedings against Poland for reforms that have threatened the independence of the country’s judiciary [11] and against Hungary for Prime Minister Viktor Orbán’s attacks on media, academics, the judiciary, minorities, migrants, and refugees.[12] However, the EU has been unable to issue penalties associated with Article 7, including sanctions and loss of voting rights.[13] The execution of these consequences has proved challenging and requires a unanimous vote by member states.[14]

Hungary and Poland brought an action before the Court of Justice to annul the new regulation, alleging that the regulation has no legal basis and is incompatible with Article 7 TEU.[15] The EU Advocate General, who issues nonbinding but highly influential opinions as an advisor to the Court of Justice, delivered an opinion on December 2, 2020, supporting the legal basis for the regulation.[16] In this opinion, the Advocate General suggests the regulation is justifiable as a mechanism for the proper management of the Union Budget and that the sanctions ensure and safeguard the value of the EU.[17] The regulation would thereby not be incompatible with Article 7 TEU, as it serves a distinct purpose from solely protecting the rule of law and is instead a financial rule. [18]

Celeste Williams is a staff member of Fordham International Law Journal Volume XLV.

This is a student blog post and in no way represents the views of the Fordham International Law Journal.
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[1] See Steven Erlander & Benjamin Novak, How the E.U. Allowed Hungary to Become an Illiberal Model, N.Y. Times (Jan. 3, 2022), https://www.nytimes.com/2022/01/03/world/europe/hungary-european-union.html.

[2] See Stephanie Bodani, EU Renegades Hungary, Poland Slapped Down by Top Court Again, Bloomberg (Nov. 16, 2021), https://www.bloomberg.com/news/articles/2021-11-16/eu-renegades-hungary-poland-slapped-down-by-top-court-again.

[3] See Brussels Bureau, EU’s Top Court Begins Looking at Hungary and Poland Dispute Over Rule of Law Mechanism, euronews (Nov. 10, 2021), https://www.euronews.com/2021/10/11/eu-s-top-court-begins-looking-at-hungary-and-poland-dispute-over-rule-of-law-mechanism.

[4] See Regulation 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget, 2020 O.J. (L 4331) 1 (Euratom).

[5] See EU’s Top Court Begins Looking, supra note 3.

[6] See id.

[7] See Jennifer Rankin, ECJ Adviser Backs Rule-Of-Law Measure in Blow to Poland and Hungary, The Guardian (Dec. 2, 2021), https://www.theguardian.com/law/2021/dec/02/ecj-adviser-backs-rule-of-law-measure-in-blow-to-poland-and-hungary.

[8] See id.

[9] See Malwina Talik & Jack Gill, Polexit: Is Poland on the Way Out of the EU, Fair Observer (Nov. 30, 2021), https://www.fairobserver.com/region/europe/malwina-talik-jack-gill-polexit-pis-poland-eu-news-11018/.

[10] See Court of Justice of the European Union Press Release No 217/21, AG Campos Sánchez-Bordona: The Actions Brought by Hungary and Poland Against the Regime of Conditionality For the Protection of the Union Budget in the Event of Breaches of the Principles of the Rule of Law Should Be Dismissed (Dec. 2, 2021).

[11] See, European Commission Triggers Article 7 Against Poland, Deutsche Welle (Dec. 12, 2017), https://www.dw.com/en/european-commission-triggers-article-7-against-poland/a-41873962.

[12] See Rebecca Staudenmaier, EU Parliament Votes to Trigger Article 7 Sanctions Procedure Against Hungary,  Deutsche Welle (Dec. 9, 2018), https://www.dw.com/en/eu-parliament-votes-to-trigger-article-7-sanctions-procedure-against-hungary/a-45459720.

[13] See Erlander & Novak, supra note 1.

[14] See id.

[15] See [add cite/supra].

[16] See [add cite/supra].

[17] See, Court of Justice of the European Union Press supra note 7.

[18] See id.