Judgment;Abstract — ECLI:EU:C:2022:97
Date: 2022-02-16
Language of the case: Hungarian
Court formation: Full Court
Subject matter: Principles, objectives and tasks of the Treaties
Procedure: Action for annulment - unfounded
Origin: Hungary

summary, that the Member State against which measures are adopted must continue to provide funds to programmes’ final beneficiaries): – is incompatible with the legal basis of the regulation, since the obligation falls on Member States’ budgets; – infringes the provisions of EU law on budget deficits and breaches the principle of equality between Member States. 321. The Parliament and the Council dispute this argument, arguing – as they did in relation to the first plea in law – that Article 5(2) of Regulation 2020/2092 does not impose any obligation over and above existing ones and that it is essential in order to safeguard protection of the rights acquired by recipients. They also stress that responsibility for achieving budget deficit targets lies with the Member State, which must do so in accordance with the legislative options open to it, while continuing to comply with EU rules (including Regulation 2020/2092). 2. Assessment 322. I have already commented on the compatibility of Article 5(2) of Regulation 2020/2092 with the legal basis of Article 322(1)(a) TFEU in my examination of the first plea in law. 323. As for the (in)compatibility of this provision with EU rules on excessive public deficits, I do not share the Hungarian Government’s view. 324. Each Member State (especially if it is not a member of the euro area) is able to draw up and control its budgets, subject solely to the requirement to comply with the limits established by EU law. Regulation 2020/2092 does not interfere with Member States’ freedom, within those limits, to choose their own budgetary options for public revenue and expenditure. 325. It is true that, in exercising this budgetary power, the Member State must assume the cost of financial corrections imposed under Regulation 2020/2092 and, specifically, the costs arising from the obligation to comply with the requirement to continue paying funds to programmes’ final beneficiaries. 326. Turning to the claim that it is easier for large Member States to meet this obligation, equality between Member States is not infringed where Regulation 2020/2092 imposes an identical duty on all Member States to maintain funding for final beneficiaries. 327. Moreover, the funding a Member State receives from the Union budget is, as a general rule, related to the State’s economic weight and population, which are considered significant factors. Member States with less economic weight and smaller populations will benefit from EU programmes in proportion to their particular characteristics. Financial corrections imposed for breach of the principles of the rule of law will therefore have the same proportionate effect on them. 328. Whether the Member State, irrespective of its economic weight and population, is a net contributor to EU funds or a net recipient does not affect that situation. Logically, net recipients of EU budgetary funds will have a proportionally greater exposure to the financial conditionality mechanism than net contributors, but that is inevitable and does not give rise to discrimination between Member States. 329. The sixth plea in law should therefore be dismissed. D. Seventh plea in law: penultimate sentence of Article 5(3) of Regulation 2020/2092 330. In the view of the Hungarian Government, the third sentence of Article 5(3) of Regulation 2020/2092 (which provides that ‘the nature, duration, gravity and scope of the breaches of the principles of the rule of law shall be duly taken into account’) is incompatible with the legal basis of the regulation and with Article 7 TEU. It maintains that the provision is not related to the Union budget or the financial interests of the Union and, moreover, that it lacks the precision required by the principle of legal certainty. 331. These arguments should be rejected for the reasons adduced in the examination of the first and third pleas in law. E. Eighth plea in law: final sentence of Article 5(3) of Regulation 2020/2029 332. The Hungarian Government argues that the final sentence of Article 5(3) of Regulation 2020/2092 (‘the measures shall, in so far as possible, target the Union actions affected by the breaches’) does not ensure the existence of a direct connection between the specific finding of a breach of the principles of the rule of law and the measures taken. In its view, the precept infringes both the principle of proportionality and the principle of legal certainty. 333. This plea should be rejected for the reasons set out in the examination of the first and third pleas in law. F. Ninth plea in law: Article 6(3) and (8) of Regulation 2020/2092 334. The Hungarian Government considers that Article 6(3) and (8) of Regulation 2020/2092 (which requires the Commission to take into account ‘relevant information from available sources, including decisions, conclusions and recommendations of Union institutions, other relevant international organisations and other recognised institutions’) infringes the principle of legal certainty, because it does not adequately define the information and sources to be used. 335. This ground should be rejected for the reasons set out in the examination of the third plea in law. IX. Costs 336. Article 138(1) of the Rules of Procedure establish that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Parliament and the Council have requested that Hungary be ordered to pay the costs and since, in my view, Hungary’s claims should be dismissed, it should be ordered to pay those costs. 337. Pursuant to Article 140(1) of the Rules of Procedure, the European Commission, the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, Ireland, the Kingdom of Spain, the French Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Poland, the Republic of Finland and the Kingdom of Sweden should bear their own costs. X. Conclusion 338. In the light of the foregoing considerations I propose that the Court should: (1) Dismiss the Council’s application on a preliminary issue in which it requests that the passages in Hungary’s application and the annexes thereto, particularly Annex A.3, which refer to, reproduce the content of, or reflect the analysis undertaken in, the opinion of the Council Legal Service (Council document 13593/18) of 25 October 2018 be disregarded. (2) Dismiss the first, second and third pleas in law in the application lodged by Hungary against Regulation (EU, Euratom) 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, in which it seeks the annulment of the regulation. (3) Declare inadmissible the fourth, seventh and eighth pleas in law and dismiss the fifth, sixth and ninth pleas in law in which it requests, in the alternative, the annulment of Article 4(1), Article 4(2)(h), Article 5(2), the penultimate sentence of Article 5(3), the final sentence of Article 5(3), and Article 6(3) and (8) of Regulation 2020/2092. (4) Order Hungary to bear its own costs and to pay the costs of the European Parliament and of the Council. (5) Order the European Commission, the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, Ireland, the Kingdom of Spain, the French Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Poland, the Republic of Finland and the Kingdom of Sweden to bear their own costs. 1 Original language: Spanish. 2 In Case C‑157/21, Poland v Parliament and Council, the Republic of Poland makes the same claim. I deliver my Opinion in both cases today. 3 Regulation 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 (OJ 2020 L 433 I, p. 1). 4 Regulation of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ 2001 L 145, p. 43). 5 Pursuant to the third paragraph of Article 16 of the Statute of the Court of Justice of the European Union, Hungary requested that the case be allocated to the Grand Chamber. 6 Article in Político on 29 October 2018. 7 Document identified by the Council as number ST 13593 2018 INIT. Paragraphs 1 to 8 contain the introduction and a description of the legal framework and the facts, but do not include the legal analysis. They have been in the public domain since 18 December 2020: https://data.consilium.europa.eu/doc/document/ST‑13593-2018-INIT/en/pdf. On this point, see the judgment of the General Court of 21 April 2021, Pech v Council (T‑252/19, EU:T:2021:203, paragraphs 2 to 4). 8 The General Court was required to deal with a similar request. Order of 20 May 2020, Nord Stream 2 v Parliament and Council (T‑526/19, EU:T:2020:210), against which an appeal is pending, on which Advocate General Bobek delivered his Opinion on 6 October 2021, Nord Stream 2 v Parliament and Council (C‑348/20 P, EU:C:2021:831). 9 ‘Any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State, has a right of access to documents of the institutions, subject to the principles, conditions and limits defined in this Regulation.’ 10 Council Decision of 1 December 2009 adopting the Council’s Rules of Procedure (OJ 2009 L 325, p. 35). Article 6(2) provides that ‘the Council or Coreper may authorise the production for use in legal proceedings of a copy of or an extract from Council documents which have not already been released to the public in accordance with the provisions on public access to documents’. 11 Article 5: ‘When a Member State refers a request to the Council, it shall be handled in accordance with Articles 7 and 8 of Regulation (EC) No 1049/2001 and the relevant provisions of this Annex. In the event of a total or partial refusal of access, the applicant shall be informed that any confirmatory application must be addressed directly to the Council.’ 12 Note by the Council of 10 April 2018 on handling of documents internal to the Council, available at https://data.consilium.europa.eu/doc/document/ST‑7695-2018-INIT/en/pdf. 13 Paragraph 20: ‘“LIMITE” documents must not be made public unless a decision to that effect has been taken by duly authorised Council officials, by the national administration of a Member State (see paragraph 21), or, where relevant, by the Council, in accordance with Regulation (EC) No 1049/2001 and the Council's rules of procedure.’ Paragraph 21: ‘Personnel in any EU institution or body other than the Council may not themselves decide to make “LIMITE” documents public without first consulting the General Secretariat of the Council (GSC). Personnel in the national administration of a Member State will consult the GSC before taking such a decision unless it is clear that the document can be made public, in line with Article 5 of Regulation (EC) No 1049/2001.’ Paragraph 22: ‘The content of “LIMITE” documents can only be published on secure internet sites or web-based platforms approved by the Council or with protected access features (e.g. Delegates Portal).’ 14 Judgment of 31 January 2020, Slovenia v Croatia (C‑457/18, EU:C:2020:65; ‘the judgment in Slovenia v Croatia’; paragraph 67), and order of 14 May 2019, Hungary v Parliament (C‑650/18, not published, EU:C:2019:438; ‘the order in Hungary v Parliament’; paragraphs 9, 12 and 13). 15 The judgment in Slovenia v Croatia, paragraph 66, citing the order in Hungary v Parliament, paragraphs 8 and 9. 16 Judgment of 1 July 2008, Sweden and Turco v Council (C‑39/05 P and C‑52/05 P, EU:C:2008:374; ‘the judgment in Sweden and Turco v Council’; paragraph 42). 17 Ibidem, paragraph 36. 18 On this point, see the judgments in Sweden and Turco v Council, paragraphs 38 to 44; and of 3 July 2014, Council v in ’t Veld (C‑350/12 P, EU:C:2014:2039, paragraph 96); and the order in Hungary v Parliament, paragraph 11. 19 Judgment of 4 September 2018 (C‑57/16 P, EU:C:2018:660, paragraphs 73 to 75), and the order in Hungary v Parliament, paragraph 13. 20 The judgment in Slovenia v Croatia, paragraph 70. 21 The order in Hungary v Parliament, paragraph 14, and the judgment in Slovenia v Croatia, paragraph 68. 22 The judgment in Sweden and Turco v Council, paragraph 54. 23 Ibidem, paragraph 59. 24 Ibidem, paragraphs 62 to 66. 25 Ibidem, paragraphs 68 and 69. 26 It was one of those refusals by the Council that was annulled by the General Court in its judgment of 21 April 2021, Pech v Council (T‑252/19, EU:T:2021:203). 27 The order in Hungary v Parliament, paragraph 14, and the judgment in Slovenia v Croatia, paragraph 68. As I have also explained, the Council’s Rules of Procedure and its general guidelines on access to its documents refer to Regulation No 1049/2001. 28 Point 38 of this Opinion. 29 At the hearing, the Council was not required to express a view on the opinion of its legal service. 30 The judgment in Sweden and Turco v Council, paragraph 67. 31 Ibidem, paragraph 59. That same paragraph goes on to say: ‘It is in fact rather a lack of information and debate which is capable of giving rise to doubts in the minds of citizens, not only as regards the lawfulness of an isolated act, but also as regards the legitimacy of the decision-making process as a whole.’ 32 The judgment in Sweden and Turco v Council, paragraphs 68 and 71. 33 Ibidem, paragraph 57. 34 Ibidem, paragraph 69. 35 Ibidem, paragraph 64. 36 See Louis, J.‑V., ‘Respect de l’État de droit et protection des finances de l’Union’, Cahiers de droit européen, 2020, No 1, pp. 3-20; and Baraggia, A. and Bonelli, M., ‘Linking Money to Values: the new Rule of Law Regulation and its constitutional challenges’, German Law Journal, in press. 37 Hungary is one of the main recipients per capita of EU Structural Funds, with EUR 25 424 713 942 in the MFF 2014-2020 (EUR 2 532 per inhabitant) and with a high percentage of the country’s public investment being co-financed by the European Union, according to data from the Commission available at https://cohesiondata.ec.europa.eu/countries/HU. The Republic of Poland is one of the clear principal beneficiaries of EU Structural Funds, having received EUR 89 990 274 817 (EUR 2 262 per inhabitant) in the MFF 2014-2020, according to data from the Commission available at https://cohesiondata.ec.europa.eu/countries/PL. 38 COM(2014) 158 final of 11 March 2014, Communication from the Commission to the European Parliament and the Council: A new EU Framework to strengthen the Rule of Law. 39 The opinion of the Council Legal Service No 10296/14 of 27 May 2014 criticises the Commission communication, stating that respect for the rule of law may be subject to action by the institutions only through the procedure in Article 7 TEU or where another specific material competence exists. 40 COM(2019) 163 final of 3 April 2019, Communication from the Commission to the European Parliament, the European Council and the Council: Further strengthening the Rule of Law within the Union. State of play and possible next steps. COM(2019) 343 final of 17 July 2019, Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: Strengthening the rule of law within the Union A blueprint for action. 41 For 2020 and 2021, see COM(2020) 580 final of 30 September 2020, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: 2020 Rule of Law Report. The rule of law situation in the European Union; and COM(2021) 700 final of 20 July 2021, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: 2021 Rule of Law Report. The rule of law situation in the European Union. 42 COM(2018) 324 final of 2 May 2018, Proposal for a Regulation of the European Parliament and of the Council on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States. 43 See Opinion No 1/2018 of the Court of Auditors concerning the proposal of 2 May 2018 for a regulation of the European Parliament and of the Council on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States (OJ 2018 C 291, p. 1). 44 Document EUCO 10/20, annex, paragraphs 22 and 23, Conclusions of the European Council of 21 July 2020. 45 See Rubio, E., Rule of Law Conditionality – what could an acceptable compromise look like?, Institut Jacques Delors Policy Brief, October 2020; Dimitrovs, A. and Droste, H., ‘Conditionality Mechanism: What’s In It?’, VerfBlog, 2020/12/30, https://verfassungsblog.de/conditionality-mechanism-whats-in-it/. 46 Document EUCO 22/20, paragraph 2, Conclusions of the European Council of 11 December 2020. See the criticism of those conclusions in Beramdane, A., ‘Conditionnalité budgétaire ou conditionnalité de l’État de droit?’, Revue du droit de l’Union européenne, 2021, No 1, p. 155; Scheppele, K.L., Pech, L. and Platon, S., ‘Compromising the Rule of Law while Compromising on the Rule of Law’, VerfBlog, 2020/12/13, https://verfassungsblog.de/compromising-the-rule-of-law-while-compromising-on-the-rule-of-law/; and Alemanno, A. and Chamon, M, ‘To Save the Rule of Law you Must Apparently Break It’, VerfBlog, 2020/12/11, https://verfassungsblog.de/to-save-the-rule-of-law-you-must-apparently break-it/, who maintained that the European Council acted ultra vires. 47 For a detailed analysis, see Editorial Comments, ‘Compromising (on) the general conditionality mechanism and the rule of law’, Common Market Law Review, 2021, No 2, pp. 267-284. 48 This statement follows the approach under which the regulation is seen as an instrument of budget conditionality separate from the mechanism for protecting the rule of law. 49 The Parliament voiced its opposition to this compromise and criticised the Commission for accepting the need for guidelines on the application of Regulation 2020/2092 and for making adoption of the guidelines subject to the judgment of the Court of Justice in any potential actions for annulment of the regulation. See the European Parliament resolution of 8 July 2021 on the creation of guidelines for the application of the general regime of conditionality for the protection of the Union budget (2021/2071(INI)). In December 2021 the guidelines had still not been adopted, and the application of the regulation is therefore, de facto, suspended. 50 On this statement, see footnote 53 to this Opinion. 51 European Parliament resolution of 17 December 2020 on the Multiannual Financial Framework 2021-2027, the Interinstitutional Agreement, the EU Recovery Instrument and the Rule of Law Regulation (2020/2923(RSP), in particular, paragraph 4. 52 Recital 7 of the Council Regulation of 14 December 2020 establishing a European Union Recovery Instrument to support the recovery in the aftermath of the COVID-19 crisis (OJ 2020 L 433 I, p. 23). See also Article 8 of Regulation 2021/241. 53 According to recital 15 of Regulation 2020/2092, ‘breaches of the principles of the rule of law, in particular those that affect the proper functioning of public authorities and effective judicial review, can seriously harm the financial interests of the Union. This is the case for individual breaches of the principles of the rule of law and even more so for breaches that are widespread or due to recurrent practices or omissions by public authorities, or to general measures adopted by such authorities.’ Note, by contrast, that according to the conclusions of the European Council of 11 December 2020, ‘the Regulation does not relate to generalised deficiencies’. This statement is not consistent with the content of the recital, and therefore cannot affect the interpretation of Regulation 2020/2092. 54 On 20 October 2021 the President of the European Parliament asked the Parliament’s legal service to prepare an action against the European Commission for failure to apply Regulation 2020/2092. That request gave rise to the action for failure to act in Case C‑657/21, European Parliament v Commission, currently pending before the Court. 55 For the MFF 2021-2027, the relevant decision is Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom (OJ 2020 L 424, p. 1). 56 See Lenaerts, K. and Adam, S., ‘La solidarité, valeur commune aux États membres et principe fédératif de l’Union européenne’, Cahiers de droit européen, 2021, No 2, pp. 307-417. 57 Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (OJ 2020 L 433I, p. 11). 58 This instrument authorises the Commission, as an exceptional measure, to take out temporary loans on the capital markets on behalf of the European Union up to a maximum value of EUR 750 billion, of which a maximum of 360 billion is to be used to provide loans and a maximum of 390 billion to meet expenditure; both sums are to be used solely to tackle the consequences of the COVID-19 crisis. As I have already remarked in my Opinion of 18 March 2021, Germany v Poland (C‑848/19, EU:C:2021:218, footnote 43), this represents the greatest solidarity initiative undertaken by the European Union in its history. 59 Article 310(5) TFEU reiterates that ‘the budget shall be implemented in accordance with the principle of sound financial management. Member States shall cooperate with the Union to ensure that the appropriations entered in the budget are used in accordance with this principle’. 60 Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ 2018 L 193, p. 1) (‘the Financial Regulation’). 61 Article 63 of the Financial Regulation states that ‘where the Commission implements the budget under shared management, tasks relating to budget implementation shall be delegated to Member States. The Commission and Member States shall respect the principles of sound financial management, transparency and non-discrimination and shall ensure the visibility of the Union action when they manage Union funds. To that end, the Commission and Member States shall fulfil their respective control and audit obligations and assume the resulting responsibilities laid down in this Regulation. Complementary provisions shall be laid down in sector-specific rules’. 62 In the United States, federal institutions have used financial conditionality in their relations with the federated states and local authorities in order to make the grant of funds from the federal budget conditional on acceptance of a prohibition on racial segregation in education and in the workplace, the introduction of a minimum wage, the establishment of an independent public state administration, or the imposition of a national speed limit on motorways, among other issues. The basis for this federal financial conditionality is to be found in Article I, Section 8, Clause 1 of the United States Constitution (the Spending Clause of the Constitution), which gives Congress power ‘to lay and collect Taxes, … to … provide for the … general Welfare of the United States’. The United States Supreme Court has laid down the requirements for use of this conditionality in, among other judgments, South Dakota v. Dole, 483 U.S. 203 (1987), and NFIB v. Sebelius, 567 U.S. 519 (2012). See Yeh, B.T., The Federal Government’s Authority to Impose Conditions on Grant Funds, Congressional Research Service, 2017, at https://sgp.fas.org/crs/misc/R44797.pdf; and Margulies, P., ‘Deconstructing Sanctuary Cities: The Legality of Federal Grant Conditions That Require State and Local Cooperation on Immigration Enforcement’, Wash. & Lee L. Rev. 2018, p. 1507. 63 See Viță, V., ‘Revisiting the Dominant Discourse on Conditionality in the EU: The Case of EU Spending Conditionality’, Cambridge Yearbook of European Legal Studies, 2017, pp. 116-143. 64 See Viță, V., Conditionalities in Cohesion Policy, Research for REGI Committee, European Parliament, Policy Department for Structural and Cohesion Policies, Brussels, 2018. 65 Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy (OJ 2021 L 231, p. 159; ‘the Common Provisions Regulation 2021-2027’). This regulation strengthens the conditionality mechanisms already established for the MFF 2014-2020 in Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ 2013 L 347, p. 320). 66 In addition, Annex IV contains the ‘thematic enabling conditions applicable to ERDF, ESF + and the Cohesion Fund …’. 67 Decision of 26 November 2009 concerning the conclusion, by the European Community, of the United Nations Convention on the Rights of Persons with Disabilities (OJ 2010 L 23, p. 35). 68 Regulation of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ 2011 L 306, p. 25). 69 Council Regulation of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States’ balances of payments (OJ 2002 L 53, p. 1). 70 Regulation of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (OJ 2013 L 140, p. 1). 71 Regulation of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (OJ 2021 L 57, p. 17). 72 Regulation of the European Parliament and of the Council of 7 July 2021 establishing, as part of the Integrated Border Management Fund, the Instrument for Financial Support for Border Management and Visa Policy (OJ 2021 L 251, p. 48). 73 Regulation of the European Parliament and of the Council of 14 July 2021 on the public sector loan facility under the Just Transition Mechanism (OJ 2021 L 274, p. 1). 74 Regulation of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608). 75 For example, receipt of payments from structural funds such as the ERDF or the ESF is conditional on compliance by the Member State with macroeconomic stability requirements. 76 Recital 6 of Regulation 2020/2092. 77 The case-law on environmental conditionality in direct payments to farmers includes the judgments of 27 January 2021, De Ruiter (C‑361/19, EU:C:2021:71, paragraphs 31 to 41), and of 25 July 2018, Teglgaard and Fløjstrupgård (C‑239/17, EU:C:2018:597, paragraph 42 et seq.). The judgment of 7 August 2018, Argo Kalda Mardi talu (C‑435/17, EU:C:2018:637, paragraph 39), states that ‘according to Article 93 of that regulation [No 1306/2013], the standards for good agricultural and environmental conditions are part of the rules on cross-compliance, which, as is provided by Article 91 of that regulation, must be complied with subject to an administrative penalty. Those standards are established at national level, listed in Annex II to that regulation and concern in particular the environment’. 78 Judgment of 27 November 2012 (C‑370/12, EU:C:2012:756, paragraph 69): ‘… the reason why the grant of financial assistance by the stability mechanism is subject to strict conditionality under paragraph 3 of Article 136 TFEU, the article affected by the revision of the FEU Treaty, is in order to ensure that that mechanism will operate in a way that will comply with European Union law, including the measures adopted by the Union in the context of the coordination of the Member States’ economic policies’. 79 Treaty establishing the European stability mechanism between the Kingdom of Belgium, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus, the Grand Duchy of Luxembourg, Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland, concluded in Brussels on 2 February 2012. 80 Judgment of 27 November 2012, Pringle (C‑370/12, EU:C:2012:756, paragraphs 111 and 112). Paragraphs 154 to 156 addressed the actions of the Commission under the ESM Treaty to monitor compliance with the conditionality attached to financial assistance. The same points were made in the judgment of 20 September 2016, Mallis and Malli v Commission and ECB (C‑105/15 P to C‑109/15 P, EU:C:2016:702, paragraph 54). 81 To avoid repetition, in my remaining comments I shall take it as read that the Member States which intervened in the hearing (with the natural exception of Hungary and the Republic of Poland) and the Commission share the arguments advanced by the Parliament and the Council. 82 Judgments of 8 December 2020, Poland v Parliament and Council (C‑626/18, EU:C:2020:1000, paragraphs 43 to 47); of 8 December 2020, Hungary v Parliament and Council (C‑620/18, EU:C:2020:1001, paragraphs 38 to 42); and of 3 December 2019, Czech Republic v Parliament and Council (C‑482/17, EU:C:2019:1035). 83 Judgment of 3 December 2019, Czech Republic v Parliament and Council (C‑482/17, EU:C:2019:1035, paragraph 31). 84 Ibidem, paragraph 32. 85 Ibidem, paragraph 38. 86 ‘Sound financial management can only be ensured by Member States if public authorities act in accordance with the law, if cases of fraud, including tax fraud, tax evasion, corruption, conflict of interest or other breaches of the law are effectively pursued by investigative and prosecution services, and if arbitrary or unlawful decisions of public authorities, including law-enforcement authorities, can be subject to effective judicial review by independent courts and by the Court of Justice of the European Union.’ 87 ‘The independence and impartiality of the judiciary should always be guaranteed, and investigation and prosecution services should be able to properly execute their functions. The judiciary, and investigation and prosecution services should be endowed with sufficient financial and human resources and procedures to act effectively and in a manner that fully respects the right to a fair trial, including respect for the rights of defence. Final judgments should be implemented effectively. Those conditions are required as a minimum guarantee against unlawful and arbitrary decisions of public authorities that could harm the financial interests of the Union.’ 88 See Martín Rodríguez, P., El Estado de Derecho en la Unión Europea, Marcial Pons, Madrid, 2021, p. 131, for whom ‘Article 322 TFEU provides a legal basis that is more than sufficient for establishing this [financial] conditionality which, moreover, has already existed in respect of certain substantive content of the rule of law …’. 89 The European rule of law mechanism, the EU Justice Scoreboard, the infringement procedure and the Article 7 TEU procedure. 90 The wording of the joint declaration is as follows: ‘Without prejudice to the Commission’s right of initiative, the European Parliament, the Council and Commission agree to consider including the content of this Regulation into Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 (the “Financial Regulation”) upon its next revision.’ See the text in the appendix to COM(2020) 843 final of 14 December 2020, Communication from the Commission to the European Parliament pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council on a general regime of conditionality for the protection of the Union budget. 91 On this point, see Opinion No 1/2018 of the Court of Auditors concerning the proposal of 2 May 2018 for a regulation of the European Parliament and of the Council on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States (OJ 2018 C 291, p. 1), paragraphs 10 and 11. 92 Those in subparagraphs (c) (‘the proper functioning of investigation and public prosecution services’), (d) (‘the effective judicial review by independent courts’) and (e) (‘the prevention and sanctioning of fraud, including tax fraud, corruption or other breaches of Union law’). 93 Article 2(59) of the Financial Regulation provides that ‘sound financial management’ means ‘implementation of the budget in accordance with the principles of economy, efficiency and effectiveness’. 94 The judgment of 6 November 2014, Italy v Commission (C‑385/13 P, EU:C:2014:2350, paragraphs 68 and 69), establishes the need for a sufficiently direct link between an alleged breach of EU law by the beneficiary Member State and the measure for which funding was sought, in order for the Commission to order the suspension of structural fund payments to the Member State. 95 Martín Rodríguez, P., op. cit., p. 133, also emphasises that the key to interpreting Regulation 2020/2092 lies in the requirement for the effect to apply ‘in a sufficiently direct way’. 96 The editorial in European Papers, 2020, No 5, pp. 1101-1104, describes the requirement to prove that the breach of the rule of law solely concerns protection of the European Union’s financial interests as a probatio diabolica for the Commission. It adds that the requirement ‘will presumably render inoperative the conditionality mechanism’ and that Regulation 2020/2092 ‘appears to be doomed to fail’ if it applies only to conduct of Member States which affects the sound financial management of the Union budget. 97 Paragraph 2(e) of the conclusions of the European Council of 10 and 11 December 2020 reaffirms that ‘the causal link between such breaches and the negative consequences on the Union’s financial interests will have to be sufficiently direct and be duly established. The mere finding that a breach of the rule of law has taken place does not suffice to trigger the mechanism’. 98 Paragraph 2(h) of the conclusions of the European Council of 10 and 11 December 2020 goes further than the regulation when it states that ‘where such information and findings [on which the Commission bases its assessment], whichever their origin, are used for the purposes of the Regulation, the Commission will ensure that their relevance and use will be determined exclusively in light of the Regulation’s aim to protect the Union’s financial interests’. 99 Article 61(3) of the Financial Regulation provides that, ‘for the purposes of paragraph 1, a conflict of interests exists where the impartial and objective exercise of the functions of a financial actor or other person, as referred to in paragraph 1, is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other direct or indirect personal interest’. 100 Paragraph 2(d) of the conclusions of the European Council of 11 December 2020 declared that ‘the application of the mechanism will respect its subsidiary character. Measures under the mechanism will be considered only where other procedures set out in Union law, including under the Common Provisions Regulation, the Financial Regulation or infringement procedures under the Treaty, would not allow to protect the Union budget more effectively’. 101 See, by analogy, the case-law of the Court which establishes that ‘… the obligation to give back an advantage improperly received by means of an irregularity is not a penalty, but simply the consequence of a finding that the conditions required to obtain the advantage derived from EU rules have not been observed, with the result that that advantage becomes an advantage wrongly received’ (judgments of 1 October 2020, Elme Messer Metalurgs, C‑743/18, EU:C:2020:767, paragraph 64, and of 26 May 2016, Județul Neamț and Județul Bacău, C‑260/14 and C‑261/14, EU:C:2016:360, paragraph 50 and the case-law cited). 102 If the Court does not accept this argument, because of the weakness of the connection with the breach of the rule of law, it should declare void only the qualifying phrase ‘in so far as possible’ in the final sentence of Article 5(3) of Regulation 2020/2092 (which is not material), so that the provision would simply stipulate that ‘the measures shall target the Union actions affected by the breaches’. 103 Reproduced in point 11 of this Opinion. 104 In defence of beneficiaries, the Council invokes protection of their acquired rights and their legitimate expectations, and the principle that the response to breach of an obligation cannot entail another breach. 105 In the case of management of ERDF funds, the Court has stated that this must be so even where amounts cannot be recovered, ‘… when it is established that the loss has been incurred as a result of fault or negligence on the part of that Member State’ (judgment of 1 October 2020, Elme Messer Metalurgs, C‑743/18, EU:C:2020:767, paragraph 71). 106 On the previous legislation and case-law on financial corrections, see Guillem Carrau, J., ‘Las correcciones financieras en materia de fondos estructurales’, Revista Aragonesa de Administración Pública, 2018, No 51, pp. 281-319. 107 Regulation of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549). Article 11 states: ‘Except where otherwise explicitly provided for in Union law, payments relating to the financing provided for in this Regulation shall be disbursed in full to the beneficiaries.’ 108 On this point, see Martín Rodríguez, P., El Estado de Derecho en la Unión Europea, Marcial Pons, Madrid, 2021, pp. 99 to 101. 109 See Rossi, L.S., ‘La valeur juridique des valeurs. L’article 2 TUE: relations avec d’autres dispositions de droit primaire de l’UE et remèdes juridictionnels’, Revue trimestrielle de droit européen, 2020, No 3, pp. 639-657. 110 The Court states that ‘the European Union is composed of States which have freely and voluntarily committed themselves to the common values referred to in Article 2 TEU, which respect those values and which undertake to promote them. In particular, it follows from Article 2 TEU that the European Union is founded on values, such as the rule of law, which are common to the Member States in a society in which, inter alia, justice prevails. In that regard, it should be noted that mutual trust between the Member States and, in particular, their courts and tribunals is based on the fundamental premiss that Member States share a set of common values on which the European Union is founded, as stated in that article’ (on this point, see judgments of 15 July 2021, Commission v Poland (Disciplinary regime for judges), C‑791/19, EU:C:2021:596, paragraph 50; of 24 June 2019, Commission v Poland (Independence of the Supreme Court), C‑619/18, EU:C:2019:531, paragraphs 42 and 43; and of 18 May 2021, Asociaţia ‘Forumul Judecătorilor din România’ and Others, C‑83/19, C‑127/19, C‑195/19, C‑291/19, C‑355/19 and C‑397/19, EU:C:2021:393, paragraph 160). 111 Judgments of 17 December 2020, Openbaar Ministerie (Independence of the issuing judicial authority) (C‑354/20 PPU and C‑412/20 PPU, EU:C:2020:1033, paragraphs 57 and 58), and of 25 July 2018, Minister for Justice and Equality (Deficiencies in the system of justice) (C‑216/18 PPU, EU:C:2018:586, paragraphs 71 and 72). The Court cites protection of the rule of law as an additional ground for refusing to execute this type of warrant. 112 Judgment of 22 June 2021, Venezuela v Council (Whether a third State is affected) (C‑872/19 P, EU:C:2021:507, paragraphs 48 to 50). 113 Judgment of 17 December 2020, Openbaar Ministerie (Independence of the issuing judicial authority) (C‑354/20 PPU and C‑412/20 PPU, EU:C:2020:1033, paragraph 69). 114 Judgments of 15 July 2021, Commission v Poland (Disciplinary regime for judges) (C‑791/19, EU:C:2021:596, paragraph 58), and of 20 April 2021, Repubblika (C‑896/19, EU:C:2021:311, paragraph 51). 115 In the words of the Court, the ‘requirement that courts be independent, which is inherent in the task of adjudication, forms part of the essence of the right to effective judicial protection and the fundamental right to a fair trial, which is of cardinal importance as a guarantee that all the rights which individuals derive from EU law will be protected and that the values common to the Member States set out in Article 2 TEU, in particular the value of the rule of law, will be safeguarded’. Judgments of 15 July 2021, Commission v Poland (Disciplinary regime for judges) (C‑791/19, EU:C:2021:596, paragraphs 51 and 58); of 20 April 2021, Repubblika (C‑896/19, EU:C:2021:311, paragraph 51); and of 18 May 2021, Asociaţia ‘Forumul Judecătorilor din România’ and Others (C‑83/19, C‑127/19, C‑195/19, C‑291/19, C‑355/19 and C‑397/19, EU:C:2021:393, paragraph 162). 116 Such as the procedure for clearing EAGGF accounts or the procedures for suspending or withdrawing structural funds. 117 Judgments of 11 January 2001, Greece v Commission (C‑247/98, EU:C:2001:4, paragraph 13), and of 7 February 1979, France v Commission (15/76 and 16/76, EU:C:1979:29, paragraphs 27 and 28). 118 The procedure for clearing accounts serves to determine not only that the expenditure was actually and properly incurred but also that the financial burdens of the common agricultural policy are correctly apportioned between the Member States and the European Union. See judgment of 11 January 2001, Greece v Commission (C‑247/98, EU:C:2001:4, paragraphs 13 and 14). 119 Judgment of 25 October 2007, Komninou and Others v Commission (C‑167/06 P, EU:C:2007:633, paragraph 52), and order of 11 July 1996, An Taisce and WWF UK v Commission (C‑325/94 P, not published, EU:C:1996:293, paragraph 23). See also judgment of the General Court of 26 February 2013, Spain v Commission (T‑65/10, T‑113/10 and T‑138/10, EU:T:2013:93, paragraph 109). 120 Order of 11 July 1996, An Taisce and WWF UK v Commission (C‑325/94 P, not published, EU:C:1996:293, paragraph 24). 121 Judgments of 2 April 2020, Commission v Spain (C‑406/19 P EU:C:2020:276, paragraphs 49 and 50), and of 15 October 2014, Denmark v Commission (C‑417/12 P, EU:C:2014:2288, paragraphs 81 to 83). 122 A suspension of the approval of one or more programmes or an amendment thereof; a suspension of commitments; a reduction of commitments, including through financial corrections or transfers to other spending programmes; a reduction of prefinancing; an interruption of payment deadlines; and a suspension of payments. 123 According to recital 70 of the Common Provisions Regulation 2021-2027, in taking measures to safeguard the financial interests and the budget of the European Union (interrupting payment deadlines, suspending interim payments and applying financial corrections) ‘the Commission should respect the principle of proportionality by taking into account the nature, gravity and frequency of irregularities and their financial implications for the budget of the Union’. 124 Article 10(4) of Regulation 2021/241 states that ‘the scope and level of the suspension of commitments or payment to be imposed shall be proportionate, respect the equality of treatment between Member States and take into account the economic and social circumstances of the Member State concerned, in particular the level of unemployment, the level of poverty or social exclusion in the Member State concerned compared to the Union average and the impact of the suspension on the economy of the Member State concerned’. 125 In practice, the Member State must either forgo funds from the Union budget or put an end to its breach of the principles of the rule of law which affect implementation of the Union budget. 126 See the final part of Article 63(8) of the Financial Regulation. 127 Article 7(5) TEU provides that ‘the voting arrangements applying to the European Parliament, the European Council and the Council for the purposes of this Article are laid down in Article 354 [TFEU]’. 128 Recital 20 of Regulation 2020/2092. 129 See judgment of 24 October 1989, Commission v Council (16/88, EU:C:1989:397, paragraphs 15 to 18). 130 According to settled case-law of the Court, ‘the Council must properly explain, in the light of the nature and content of the basic instrument to be implemented or amended, why exception is being made to the rule that it is the Commission that, in the normal course of events, is responsible for exercising that power’ (judgment of 1 March 2016, National Iranian Oil Company v Council, C‑440/14 P, EU:C:2016:128, paragraph 60 and the case-law cited). 131 Recital 26 of Regulation 2020/2092 provides that ‘the procedure … should respect the principles of objectivity, non-discrimination and equal treatment of Member States and should be conducted according to a non-partisan and evidence-based approach. If, exceptionally, the Member State concerned considers that there are serious breaches of those principles, it may request the President of the European Council to refer the matter to the next European Council. In such exceptional circumstances, no decision concerning the measures should be taken until the European Council has discussed the matter. This process shall, as a rule, not take longer than three months after the Commission has submitted its proposal to the Council’. 132 The Court has stated on several occasions that the preamble to an EU act has no binding legal force and cannot be validly relied on either as a ground for derogating from the actual provisions of the act in question or for interpreting those provisions in a manner clearly contrary to their wording. See, in this regard, judgments of 4 March 2020, Marine Harvest v Commission (C‑10/18 P, EU:C:2020:149, paragraph 44); of 2 April 2009, Tyson Parketthande (C‑134/08, EU:C:2009:229, paragraph 16); and of 10 January 2006, IATA and ELFAA (C‑344/04, EU:C:2006:10, paragraph 76). 133 Neither does paragraph 2(j) of the European Council’s compromise set out in EUCO 22/20, Conclusions of the European Council of 11 December 2020, have legal effect when it states: ‘In case the Member State concerned submits a request as set out in recital 26 of the Regulation, the President of the European Council will put the item on the European Council agenda. The European Council will strive to formulate a common position on the matter.’ 134 On this point see the judgment of 6 September 2017, Slovakia and Hungary v Council (C‑643/15 and C‑647/15, EU:C:2017:631, paragraph 148), which states: ‘Secondly, Article 78(3) TFEU allows the Council to adopt measures by a qualified majority, as it did when it adopted the contested decision. The principle of institutional balance prevents the European Council from altering that voting rule by imposing on the Council, by means of conclusions adopted pursuant to Article 68 TFEU, a rule requiring a unanimous vote.’ 135 COM(2020) 843 final of 14 December 2020, Communication from the Commission to the European Parliament pursuant to Article 294(6) of the TFEU concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council on a general regime of conditionality for the protection of the Union, p. 3. 136 C‑650/18, EU:C:2021:426, paragraph 30. 137 Judgment of 3 June 2021, Hungary v Parliament (C‑650/18, EU:C:2021:426, paragraph 32). 138 Ibidem, paragraph 33. 139 Ibidem, paragraph 31. 140 Judgment of 29 April 2021, Banco de Portugal and Others (C‑504/19, EU:C:2021:335, paragraph 51). 141 Ibidem, paragraph 52. 142 Judgment of 14 April 2005, Belgium v Commission (C‑110/03, EU:C:2005:223, paragraph 31). 143 Judgment of 20 July 2017, Marco Tronchetti Provera and Others (C‑206/16, EU:C:2017:572, paragraph 42). 144 Judgment of 30 April 2020, Nelson Antunes da Cunha (C‑627/18, EU:C:2020:321, paragraph 45). 145 COM(2014) 158 final, Communication from the Commission: A new EU Framework to strengthen the Rule of Law, Annex I. 146 European Commission for Democracy through Law (Venice Commission) of the Council of Europe. 147 The Commission reported at the hearing that it is preparing draft guidelines to assist in the application of Regulation 2020/2092, following a practice widely used in other spheres (such as State aid, for example). 148 Article 7 TEU addresses the ‘risk of a serious breach … of the values referred to in Article 2’. 149 Italics added. 150 Point 181 of and footnote 102 to this Opinion. 151 Judgments of 11 December 2008, Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707, paragraphs 105 and 106), and of 24 May 2005, France v Parliament and Council (C‑244/03, EU:C:2005:299, paragraphs 12 and 13). 152 Italics added. 153 Judgment of 7 October 2004, Spain v Commission (C‑153/01, EU:C:2004:589, paragraphs 66 and 67).