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EU: Top Court Approves Linking EU Funds to Rule of Law

Ruling Clears Way for Stronger Action on Backsliding by EU States

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, October 28, 2015. © 2015 Reuters

(Brussels) – The decision on February 16, 2022 by the Court of Justice of the European Union to allow EU institutions to tie funding to EU states to respect for the rule of law clears the way for strong action by the European Commission, Human Rights Watch said today. The EU Court’s ruling dismissed the actions brought by Hungary and Poland against the new conditionality mechanism.

“The EU Court has sent a clear signal that EU funds should be used in ways that uphold rather than undermine Europe’s democratic values,” said Philippe Dam, Europe and Central Asia Advocacy Director at Human Rights Watch. “The EU Commission should now act swiftly and demonstrate that defending the rule of law is at the top of its agenda.”

In December 2020 the EU adopted a regulation creating a new conditionality mechanism to protect the EU budget from rule of law breaches by an EU member state. A last-minute deal among EU member states obliged the Commission to wait for a ruling by the EU Court of Justice before finalizing the guidelines for applying the conditionality mechanism. Hungary and Poland brought legal action before the EU Court seeking to annul the rule of law conditionality mechanism in March 2021, initiating that process.

The European Commission’s slow progress in establishing a conditionality mechanism led the European Parliament in June 2021 to prepare to take the Commission to court in separate proceedings to speed things up. In November the Commission sent letters to the governments of Poland and Hungary indicating it might use this process to curtail their funding, but it hadn’t formally set the process in motion.

The court’s ruling confirms that “compliance by the Member States with the common values on which the European Union is founded (…) such as the rule of law and solidarity, justifies the mutual trust between those States.” The Court added that the EU “must be able to defend those values.”

The European Commission should demonstrate its stated commitment to protect the rule of law and democratic values in the EU by swiftly initiating procedures provided by the regulation, Human Rights Watch said. It should seek to suspend, reduce, or prevent new agreements to provide EU funds to a member state if it finds that the state has failed to respect the rule of law.

In applying the conditionality mechanism, the European Commission should ensure that a broad range of breaches to EU’s democratic values could lead it to recommend cutting funds to EU member states. These should include attacks on the independence of the judiciary, as well as state interference with media and civil society. The Commission should also seek to ensure that EU funding cannot be used to promote intolerance or discriminatory policies, including against women and lesbian, gay, bisexual, and transgender (LGBT) people and other minorities.

The Commission should also ensure that carrying out this procedure does not punish EU citizens for the actions of their governments, including by negatively affecting their economic and social rights. The Commission should conduct human rights impact assessments to determine the risk that people’s rights would be harmed by any decision and should divert rather than cut funding as required, to ensure that beneficiaries’ rights are not affected.

Hungary and Poland, the two EU countries that initiated legal action against the regulation, are already facing scrutiny for their poor rule of law records under the Article 7 procedure – the EU treaty provision dealing with governments that flout EU values, which can ultimately lead to the suspension of their voting rights in the Council. Hungary is among the largest recipients of EU funding per capita, and Poland is the largest overall net recipient.

Poland’s government has eroded judicial independence and ignored recent EU Court of Justice decisions. It also used its politically compromised constitutional tribunal to undermine women’s rights and the binding nature of EU law. LGBT and women’s rights activists face threats and harassment. In Hungary, restrictive laws target civil society groups, and the government or its supporters control most media outlets. A June 2021 law banned discussion on gender identity and sexual orientation, putting health providers, educators, artists, and broadcasters at risk of sanctions.

EU member states also have a serious responsibility to ensure that all member states respect EU’s democratic values and the rule of law. On February 22 they will hold a hearing on the situation of the rule of law in Poland under the Article 7 procedure. But since Article 7 was triggered in 2017 on Poland and in 2018 on Hungary, other EU member states have failed to take further action to hold those two governments to account.

Human Rights Watch has repeatedly urged EU member states to take steps available under Article 7 in response to the continued deterioration of rule of law in Hungary and Poland. Steps should include moving toward adopting rule of law recommendations and setting a vote to determine whether EU values are at risk in both countries. Proceedings under Article 7 should remain the cornerstone of the action against the erosion of EU values in countries like Hungary and Poland.

The EU is equipped with the tools needed to stand up against member states that disregard the EU’s own democratic values, Human Rights Watch said. What has been missing is political will by the EU Commission and by leading EU member states to take decisive action and to hold states responsible for abuses to account.

“The EU Court ruling underscores that EU institutions can fight back against the erosion of the rule of law within the bloc, but much depends on the European Commission quickly building on this momentum,” Dam said. “Tying EU money to EU values and strengthening scrutiny of rule of law abuses should go hand in hand to demonstrate that EU membership and respect for the rule of law are inseparable.”

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