62021CJ0157_RES
Case C‑157/21
Republic of Poland
v
European ParliamentandCouncil of the European Union
Judgment of the Court (Full Court), 16 February 2022
(Action for annulment – Regulation (EU, Euratom) 2020/2092 – General regime of conditionality for the protection of the European Union budget – Protection of the Union budget in the case of breaches of the principles of the rule of law in the Member States – Legal basis – Article 322(1)(a) TFEU – Article 311 TFEU – Article 312 TFEU – Alleged circumvention of Article 7 TEU and Article 269 TFEU – Alleged infringements of Article 4(1), Article 5(2) and Article 13(2) TEU, of the second paragraph of Article 296 TFEU, of Protocol (No 2) on the application of the principles of subsidiarity and proportionality and of the principles of conferral, legal certainty, proportionality and equality of the Member States before the Treaties – Alleged misuse of powers)
Legal proceedings – Expedited procedure – Conditions – Circumstances justifying case being dealt with swiftly – Fundamental importance of the case for the EU legal order – Case concerning the EU’s powers to protect its budget and financial interests against effects that may result from breaches of the values contained in Article 2 TEU – Whether permitted to have recourse to such procedure
(Art. 2 TEU; Art. 263 TFEU; Rules of Procedure of the Court, Art. 133(1))
(see paragraphs 27, 28)
Institutions of the European Union – Right of public access to documents – Regulation No 1049/2001 – Exception to the right of access to documents – Protection of legal opinions – Overriding public interest in transparency justifying disclosure of documents – Concept – Obligation on the institution to balance the different interests – Disclosure and production for use in legal proceedings of legal opinions concerning legislative processes – Obligation on the institution to give a detailed statement of reasons for all decisions refusing access – Applicant’s particular interest in the legal opinion in question being produced for use in legal proceeding – No impact
(Art. 10(3) TEU; Arts 15(1) and 298(1) TFEU; European Parliament and Council Regulation No 1049/2001, Art. 4(2), second indent; Council Decision 2009/937, Art. 6(2))
(see paragraphs 47-49, 52, 53, 55-57, 59-61)
Acts of the institutions – Choice of legal basis – Criteria – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Purpose – Protection of the Union budget against effects arising from breaches of the principles of the rule of law in a Member State – Contents – Conditionality mechanism making receipt of financing from the Union budget subject to the respect by a Member State for the value of the rule of law – Adoption on the basis of Article 322(1)(a) TFEU – Whether permissible – Horizontal conditionality mechanism falling within the concept of financial rules within the meaning of that provision
(Arts 2, 5(2) and 49 TEU; Arts 7, 310, 315 to 317 and 322(1)(a) TFEU; European Parliament and Council Regulation 2020/2092, recitals 5 and 13 and Arts 1, 2(a), 3, 4(1) and (2), Arts 5(1) and 6(1))
(see paragraphs 112-115, 121, 122, 124, 125, 128, 130, 132-138, 140, 142-151, 157-159, 162-165, 168-189)
Budget of the European Union – Adoption by the Parliament and by the Council, by means of regulations, of financial rules determining the procedure to be adopted for establishing and implementing the budget and for presenting and auditing accounts – Legal basis – Article 322(1) TFEU – Concept of financial rules – Rules defining how to implement expenditure shown in the budget – Rules determining the control and audit obligations on the Member States in situations where the budget is implemented in cooperation between the Member States and the Commission, and the resulting responsibilities – Included – Rules intended to ensure observance of the principle of sound financial management
(Art. 322(1)(a) TFEU)
(see paragraph 119)
EU law – Principles – Principle of solidarity between Member States – Budgetary solidarity based on mutual trust between Member States – Mutual trust based on compliance by Member States with the values contained in Article 2 TEU, including the rule of law
(Art. 2 TEU; European Parliament and Council Regulation 2020/2092, recital 5)
(see paragraph 147)
EU law – Values and objectives of the European Union – Values – Respect for the rule of law – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Regulation authorising the Commission and the Council to review respect, by the Member States, for the rule of law – Review limited to examining conduct of national authorities relating to the implementation of the Union budget – Regulation making it possible for the Court to review, in the context of an action for annulment, the lawfulness of decisions of the Council taken on that basis – Circumvention, by the adoption of that regulation, of the procedure laid down in Article 7 TEU and the competences conferred on the Court by Article 269 TFEU – None
(Arts 2, 7 and 19 TEU; Arts 8, 10, 19(1), 153(1)(i), 157(1) and 269 TFEU; Charter of Fundamental Rights of the European Union; European Parliament and Council Regulation 2020/2092)
(see paragraphs 192-204, 206-211, 218-229)
EU law – Principles – Principle of subsidiarity – Scope – Applicability in areas falling within the exclusive competence of the European Union – Excluded – Regulation containing financial rules determining the procedure to be adopted for establishing and implementing the Union budget – Regulation falling within the exclusive competence of the European Union
(Art. 5(3) TEU; Art. 322 TFEU; Protocol No 2 annexed to the EU and FEU Treaties; European Parliament and Council Regulation 2020/2092)
(see paragraphs 237, 240, 241)
Acts of the institutions – Statement of reasons – Obligation – Scope – Measures of general application – Acts which are the subject of the action for annulment
(Art. 296, second para., TFEU; European Parliament and Council Regulation 2020/2092)
(see paragraphs 249, 250)
EU law – Values and objectives of the European Union – Values – Respect for the rule of law – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Regulation authorising the Commission and the Council to review respect, by the Member States, for the rule of law – Review limited to examining conduct of national authorities relating to the implementation of the Union budget – Breach of the duty to respect the essential functions of the Member States and failure to respect their national identity – None
(Arts 2, 4(1) and (2), and 5(2) TEU; European Parliament and Council Regulation 2020/2092, Art. 2(a))
(see paragraphs 263-266, 268-270, 282-284)
EU law – Principles – Legal certainty – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Conditions for adopting measures taken in the case of breach of the principles of the rule of law – Commission’s own assessment of the effect or serious risk of effect on the sound financial management of the Union budget or the protection of the financial interests of the Union – Commission responsible for the relevance of the information used and the reliability of the sources used
(European Parliament and Council Regulation 2020/2092, Arts 4, 5(3) and Art. 6(1) to (9))
(see paragraphs 285-288, 326-339, 341, 343, 344)
EU law – Principles – Legal certainty – Union legislation – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Regulation establishing a conditionality mechanism linked to respect by the Member States for the rule of law – Concept of rule of law – Reference to Union value enshrined in Article 2 TEU – Principles of the rule of law having their source in the common values of Member States – Those principles being sufficiently precise
(Arts 2 and 19 TEU; European Parliament and Council Regulation 2020/2092, recitals 3, 8, 9, 10, and 12 and Arts 2(a), 3 and 4(1) and (2))
(see paragraphs 290-292, 323-325, 328)
EU law – Principles – Legal certainty – Union legislation – Requirement of clarity and foreseeability – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Regulation establishing a conditionality mechanism linked to respect by the Member States for the rule of law – Recourse to notions defined in other provisions of the contested norm or in EU law – Discretion afforded to the Commission and to the Council regarding choice of action referred to by the measure for the protection of the Union budget to be adopted – Whether permissible
(Arts 2 and 19 TEU; Art. 310(5), Art. 317, first para., and Art. 325 TFEU; European Parliament and Council Regulations 2018/1046, Arts 2(59) and 63(2), and 2020/2092, Art. 4(1) and (2) and Art. 5(1) and (3))
(see paragraphs 295, 297-299, 302, 303, 319-321)
Action for annulment – Actions by the Member States – Action against a regulation establishing a conditionality regime for the protection of the Union budget – Measures for the protection of the budget envisaged by that regulation which may be adopted by qualified majority, therefore excluding from the vote the Member State involved – Pleas – Plea based on disregard for the principle of equality of Member States before the Treaties – Plea unfounded
(Arts 2, 4(2) and 16(2) and (3) TEU; Art. 238(3) TFEU; European Parliament and Council Regulation 2020/2092, Art. 6(10) and (11))
(see paragraphs 305-309)
EU law – Principles – Proportionality – Scope – Discretion of the EU legislature – Judicial review – Limits – Assessment in the light of the evidence available at the time of adoption of the act
(Art. 5(4); European Parliament and Council Regulation 2020/2092)
(see paragraphs 353-362)
Résumé
Regulation 2020/2092 of the European Parliament and of the Council of 16 December 2020 (
1
) established a ‘horizontal conditionality mechanism’ designed to protect the budget of the European Union in the case of breaches of the principles of the rule of law in a Member State. To that end, that regulation allows the Council of the European Union, on a proposal from the European Commission, to adopt, subject to the conditions defined by it, appropriate protective measures such as the suspension of payments to be made from the Union budget or the suspension of the approval of one or more programmes to be paid from that budget. The contested regulation makes the adoption of such measures subject to the production of evidence relevant to establishing not only the existence of a breach of the principles of the rule of law, but also the impact of that breach on the implementation of the Union budget.
The contested regulation is part of the continuance of a series of initiatives covering, more generally, the protection of the rule of law in Member States (
2
) which are designed to provide a response, at EU level, to growing concerns regarding respect by a number of Member States for the common values of the Union as set out in Article 2 TEU. (
3
)
The Republic of Poland, supported by Hungary, (
4
) brought an action seeking the annulment of the contested regulation. In support of its claim, it argued, in essence, that that regulation, whilst formally presented as an act forming part of the financial rules referred to in Article 322(1)(a) TFEU in actual fact seeks to penalise any interference by a Member State with the principles of the rule of law, the requirements of which are in any event, insufficiently precise. Poland therefore founded its action, inter alia, on the European Union lacking competence to adopt such a regulation, on account of an absence of legal basis and circumvention of the procedure laid down in Article 7 TEU, together with disregard for the limits inherent in the competences of the European Union and disregard for the principle of legal certainty.
Having been called upon to give a ruling on the competences of the European Union to protect its budget and its financial interests against effects which may result from breaches of the values set out in Article 2 TEU, the Court found that the present case is of fundamental importance, justifying it being attributed to the full formation of the Court. For the same reasons, the European Parliament’s request for the case to be dealt with pursuant to the expedited procedure was granted. In those circumstances, the Court dismisses in its entirety the action for annulment brought by Poland.
Findings of the Court
Prior to examining the substance of the action, the Court gives a ruling on the request by the Council for various extracts from Poland’s application to be disregarded, in so far as they are based on material taken from a confidential opinion of the legal service of the Council, thereby disclosed without the necessary authorisation. In that regard, the Court confirms that it is, in principle, permissible for the institution concerned to make production for use in legal proceedings of such an internal document subject to prior authorisation. Nonetheless, in the situation where the legal opinion in question relates to a legislative procedure, as in the present case, consideration must be given to the principle of transparency, since the disclosure of such an opinion increases the transparency and openness of the legislative process. Accordingly, the overriding public interest in the transparency and openness of the legislative process prevails, as a rule, over the interest of the institutions in relation to the disclosure of an internal legal opinion. In the present case, given that the Council did not establish that the opinion concerned was particularly sensitive in nature or particularly wide in scope, going beyond the context of the legislative process at issue, the Court accordingly rejects the Council’s request.
As regards the substance of the matter, in the first place, the Court examines together the pleas alleging that the European Union lacked competence to adopt the contested regulation.
So far as concerns, first of all, the legal basis of the contested regulation, the Court finds that the procedure laid down by that regulation can be initiated only where there are reasonable grounds for considering not only that there have been breaches of the principles of the rule of law in a Member State, but, in particular, that those breaches affect, or seriously risk affecting, in a sufficiently direct way, the sound financial management of the Union or the protection of its financial interests. In addition, the measures which may be adopted under the contested regulation relate exclusively to the implementation of the Union budget and are all such as to limit the financing from that budget according to the impact on the budget of such an effect or serious risk. Accordingly, the regulation is intended to protect the Union budget from effects resulting, in a sufficiently direct way, from breaches of the principles of the rule of law and not to penalise those breaches as such.
In response to Poland’s line of argument that the purpose of a financial rule cannot be to clarify the extent of the requirements inherent in the values referred to in Article 2 TEU, the Court points out that compliance by the Member States with the common values on which the European Union in founded – which have been identified and are shared by the Member States and which define the very identity of the European Union as a legal order common to those States – such as the rule of law and solidarity, justifies the mutual trust between those States. Since that compliance is a condition for the enjoyment of all the rights deriving from the application of the Treaties to the Member State concerned, the European Union must be able to defend those values, within the limits of its powers.
On that point, the Court specifies, first, that compliance with those values cannot be reduced to an obligation which a candidate State must meet in order to accede to the European Union and which it may disregard after its accession. Secondly, the Court states that the Union budget is one of the principal instruments for giving practical effect, in the European Union’s policies and activities, to the fundamental principle of solidarity between Member States and that the implementation of that principle, through the Union budget, is based on the Member States’ mutual trust in the responsible use of the common resources included in that budget.
The sound financial management of the Union budget and the financial interests of the Union may be seriously compromised by breaches of the principles of the rule of law committed in a Member State. Those breaches may result, inter alia, in there being no guarantee that expenditure covered by the Union budget satisfies all the financing conditions laid down by EU law and therefore meets the objectives pursued by the European Union when it finances such expenditure.
Accordingly, a ‘horizontal conditionality mechanism’, such as that established by the contested regulation, which makes receipt of financing from the Union budget subject to the respect by a Member State for the principles of the rule of law, is capable of falling within the power conferred by the Treaties on the European Union to establish ‘financial rules’ relating to the implementation of the Union budget. The Court clarifies that the provisions of the contested regulation which identify those principles, which set out situations which may be indicative of a breach of those principles, which clarify the situations or conduct which must be concerned by such breaches and which define the nature and scope of protective measures are constituent elements forming an integral part of such a mechanism which may, where necessary, be adopted.
Next, as regards the complaint alleging circumvention of the procedure laid down in Article 7 TEU, the Court rejects Poland’s line of argument that only the procedure laid down in Article 7 TEU grants the institutions of the Union the power to examine, determine the existence of and, where appropriate, impose penalties for breaches of the values contained in Article 2 TEU in a Member State. Indeed, in addition to the procedure laid down in Article 7 TEU, numerous provisions of the Treaties, frequently implemented by various acts of secondary legislation, grant the EU institutions the power to examine, determine the existence of and, where appropriate, impose penalties for breaches of the values contained in Article 2 TEU committed in a Member State.
Furthermore, the Court finds that the purpose of the procedure laid down in Article 7 TEU is to allow the Council to penalise serious and persistent breaches of each of the common values on which the European Union is founded and which define its identity, in particular with a view to compelling the Member States concerned to put an end to those breaches. By contrast, the regulation is intended to protect the Union budget, and applies only in the event of a breach of the principles of the rule of law in a Member State which affects or seriously risks affecting the proper implementation of that budget. In addition, the procedure laid down in Article 7 TEU and the procedure established by the contested regulation differ as regards their purpose, conditions for initiation, conditions for adoption and for lifting of the measures envisaged and the nature of those measures. Therefore, those two procedures pursue different aims and each has a clearly distinct subject matter. It follows, moreover, that the procedure established by the contested regulation cannot be regarded as seeking to circumvent the limitation on the general jurisdiction of the Court laid down in Article 269 TFEU, since its wording concerns only the review of the legality of an act adopted by the European Council or by the Council under Article 7 TEU.
In the second place, the Court examines the other substantive complaints put forward by Poland against the contested regulation.
In that context, the Court finds, first of all, that Poland’s claims alleging breach of the principle of conferral and of the duty to respect the essential functions of the Member States are without foundation. The Court points out that the Member States’ free exercise of the competences available to them in their reserved areas is conceivable only in compliance with EU law. For that reason, by requiring that the Member States thus comply with their obligations deriving from EU law, the European Union is not in any way claiming to exercise those competences itself nor is it, therefore, arrogating them.
Next, in the examination of the pleas alleging failure to respect the national identity of Member States, on the one hand, and breach of the principle of legal certainty, on the other, the Court rules that there is no substantive basis for Poland’s line of argument regarding the lack of precision vitiating the contested regulation, both as regards the conditions for initiating the procedure and the choice and scope of the measures to be adopted. In that regard, the Court observes at the outset that the principles set out in the contested regulation, as constituent elements of the concept of the ‘rule of law’, (
5
) have been developed extensively in its case-law, that those principles have their source in common values which are also recognised and applied by the Member States in their own legal systems and that they stem from a concept of the ‘rule of law’ which the Member States share and to which they adhere, as a value common to their constitutional traditions. Consequently, the Court finds that the Member States are in a position to determine with sufficient precision the essential content and the requirements flowing from each of those principles.
As regards, specifically, the conditions for initiating the procedure and the choice and scope of the measures to be adopted, the Court clarifies that the contested regulation requires, for the adoption of the protective measures which it lays down, that a genuine link be established between a breach of a principle of the rule of law and an effect or serious risk of effect on the sound financial management of the Union or the financial interests of the Union and that such a breach must concern a situation or conduct that is attributable to an authority of a Member States and relevant to the proper implementation of the Union budget. In addition, the Court notes that the concept of ‘serious risk’ is clarified in the EU financial legislation and states that the protective measures which may be adopted must be strictly proportionate to the impact of the breach found on the Union budget. In particular, those measures may target actions and programmes other than those affected by such a breach only where that is strictly necessary to achieve the objective of protecting the Union budget as a whole. Lastly, the Court finds that the Commission must comply, subject to review by the EU judicature, with strict procedural requirements involving, inter alia, several consultations with the Member State concerned, and concludes that the contested regulation meets the requirements arising from respect for the national identity of Member States and the principle of legal certainty.
Finally, in so far as Poland disputes the very need to adopt the contested regulation, in the light of the requirements of the principle of proportionality, the Court finds that Poland has not put forward any evidence capable of demonstrating that the EU legislature exceeded the broad discretion available to it in that regard. The Court rejects that final complaint and is, accordingly, entitled to dismiss the action in its entirety.
(
1
)	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 (OJ 2020 L 433I, p. 1, and corrigendum OJ 2021 L 373, p. 94; ‘the contested regulation’).
(
2
)	See, in particular, the 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 of 17 July 2019, ‘Strengthening the rule of law within the Union – A blueprint for action’, COM (2019) 343 final, following from the Communication from the Commission to the European Parliament and the Council of 11 March 2014, ‘A new EU framework to strengthen the Rule of Law’, COM (2014) 158 final.
(
3
)	The founding values of the European Union, common to the Member States, set out in Article 2 TEU, include respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.
(
4
)	Hungary also brought an action seeking the annulment of Regulation 2020/2092 (Case C‑156/21).
(
5
)	According to Article 2(a) of the contested regulation, the concept of ‘the rule of law’ covers ‘the principles of legality implying a transparent, accountable, democratic and pluralistic law-making process; legal certainty; prohibition of arbitrariness of the executive powers; effective judicial protection, including access to justice, by independent and impartial courts, also as regards fundamental rights; separation of powers; and non-discrimination and equality before the law’.