EU Vows to Stop Funds to Rule-of-Law Scofflaws This Year

The European Union’s executive body plans to aggressively implement its new rule-of-law sanctioning authority and may trigger the mechanism later this year, raising the possibility that it won’t wait for a legal decision from the bloc’s top court as expected.

Countries that run afoul of the new rules stand to lose out on funds from the EU budget, including disbursements from a new 1.2 trillion-euro ($1.5 trillion) stimulus package. Hungary and Poland are already being investigated by the bloc for democratic backsliding.

Vera Jourova, an EU vice president in charge of values, said that if an ongoing review of the tool by the European Court of Justice takes too long, the commission will proceed ahead of the decision.

EU Vows to Stop Funds to Rule-of-Law Scofflaws This Year

“We don’t have the obligation to wait for the ECJ ruling,” Jourova said in an interview on Tuesday, adding that a ruling next year would be too late. And when asked if the commission was planning to trigger the sanctions process before the court gives its decision, she said, “we will have to if the ECJ ruling comes too late.”

Election Clash

The fast-track process underscores the EU’s commitment to use its new authority to make sure funds don’t end up in the hands of governments that don’t respect democratic values. The mechanism gives the commission the power to withhold payments to member states for the first time, a worrying development for Hungarian Prime Minister Viktor Orban and his Polish counterpart Mateusz Morawiecki, who have flouted EU demands to roll back their power consolidation.

Orban’s government could miss out on as much as 7.2 billion euros of grants from the EU recovery plan, and Jourova’s time line means the process could be well underway before Hungarian elections early next year. Poland, where the next general election is scheduled for 2023, could lose out on as much as 23.9 billion euros of grants.

Until this point, the two main offenders have been able to shield each other from punitive measures because some of the bloc’s sanctions require the assent of 26 of the 27 members.

When deciding whether to sanction a country, the commission will assess if it has a well-functioning judiciary, a capable procurement system and an independent prosecutor, according to Jourova. In an interview earlier this year, Jourova said that the situation in Hungary and Poland had changed “for the worse.”

Officials in Hungary and Poland argue that cutting off EU funding for democratic backsliding would violate a compromise text the bloc’s leaders adopted in December to convince Budapest and Warsaw to lift a veto threat. They also say no action can happen before the EU’s top court has ruled on their challenges to the legality of the mechanism.

“The Hungarian government received guarantees in December that payouts won’t be subject to a rule-of-law witch hunt,” the Hungarian Justice Ministry said in an email. It added that pushing for the ECJ to bring forward its ruling “undermined the rule of law.”

The commission still needs to finalize its guidelines that clarify the procedural steps of the mechanism. And once the commission recommends freezing a member state’s funds, the decision would have to be agreed upon by a qualified majority of EU countries.

©2021 Bloomberg L.P.

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