62021CJ0156_RES
Case C‑156/21
Hungary
v
European Parliament
and
Council 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 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 – Alleged circumvention of Article 7 TEU and Article 269 TFEU – Alleged infringements of Article 4(1), Article 5(2) and Article 13(2) TEU and of the principles of legal certainty, proportionality and equality of Member States before the Treaties)
Judicial proceedings – Expedited procedure – Conditions – Circumstances justifying that the case be dealt with within a short time – Fundamental importance of the case for the EU legal order – Case concerning the European Union’s powers to protect its budget against effects that may result from breaches of the values contained in Article 2 TEU – Admissibility of the use of that procedure
(Art. 2 TEU; Art. 263 TFEU; Rules of Procedure of the Court of Justice, Art. 133(1))
(see paragraphs 30, 31)
EU institutions – Right of public access to documents – Regulation No 1049/2001 – Exceptions to the right of access to documents – Protection of legal advice – Overriding public interest in openness justifying the disclosure of documents – Concept – Requirement that the institution weigh the opposing interests – Disclosure and production for use in legal proceedings of legal advice relating to legislative procedures – Obligation on the institution to state in detail its reasons for any decision refusing access – Applicant’s own interest in producing for use in legal proceedings the legal opinion at issue – Irrelevant
(Art. 10(3) TEU; Arts 15(1) and 298(1) TFEU; European Parliament and Council Regulation No 1049/2001, Art. 4(2), 2nd indent; Council Decision 2009/937, Art. 6(2))
(see paragraphs 50-52, 55, 56, 58-60, 62-64)
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 resulting from breaches of the principles of the rule of law in the Member States – Content – Conditionality mechanism which makes the receipt of financing from the Union budget subject to 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 98-101, 104, 107, 108, 110, 111, 114, 116, 118-120, 122, 124-133, 139-141, 144-147, 150-153)
EU budget – Adoption by the Parliament and the Council of financial rules which determine 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 which define how expenditure shown in the budget is to be implemented – Rules which determine the control and audit obligations on the Member States when the Commission implements the budget in cooperation with them, and the resulting responsibilities – Included – Rules intended to ensure observance of the principle of sound financial management
(Art. 322(1)(a) TFEU)
(see paragraphs 105, 151, 186)
EU law – Principles – Principle of solidarity between Member States – Budgetary solidarity based on mutual trust between Member States – Mutual trust based on Member States’ compliance with the values contained in Article 2 TEU, which include the rule of law
(Art. 2 TEU; European Parliament and Council Regulation 2020/2092, recital 5)
(see paragraph 129)
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 which allows the Commission and the Council to review whether the Member States respect the rule of law – Review limited to examining conduct of national authorities relating to the implementation of the Union budget – Regulation which allows the Court to review, in an action for annulment, the legality of Council decisions adopted on that basis – Circumvention, by the adoption of that regulation, of the procedure laid down in Article 7 TEU and the powers conferred on the Court by Article 269 TFEU – Institutional balance not undermined
(Arts 2, 7, 13(2) 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 156-164, 167-172, 179-182, 192-197)
EU law – Principles – Legal certainty – EU rules – Requirements 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 – Concept of the rule of law – Reference to the Union value enshrined in Article 2 TEU – Principles of the rule of law having their source in values common to the Member States – Sufficient precision of those principles
(Arts 2, 4(2) and 19 TEU; European Parliament and Council Regulation 2020/2092, recital 3 and Arts 2(a) and 4(1))
(see paragraphs 223-229, 231-237, 240)
EU law – Principles – Legal certainty – 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 – Sufficiently precise link between the provisions of that regulation establishing that mechanism – Use of concepts defined in other provisions of the contested regulation or of EU law – Discretion granted to the Commission and the Council as to the action targeted by the measure to be adopted for the protection of the budget – Whether permissible
(Arts 2 and 4(2) TEU; European Parliament and Council Regulations 2018/1046, Art 63(2)(d), and 2020/2092, Arts 2(a), 3 and 4(2)(h))
(see paragraphs 242, 243, 248-250, 252, 254, 259)
EU law – Principles – Legal certainty – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Measures for the protection of the Union budget – Conditions for the adoption of measures in the event of a breach of the principles of the rule of law – Effect or serious risk of an effect on the sound financial management of the Union budget or the protection of the financial interests of the Union – Sufficiently precise conditions linked to the occurrence of that risk – Sufficiently defined nature and scope of the measures for the protection of the Union budget – Link between the breach of a principle of the rule of law found and the measures adopted not severed – Observance of the principle of proportionality
(Art. 317, first para., TFEU; European Parliament and Council Regulations 2018/1046, Arts 2(59) and 63(2)(d), and 2020/2092, Art. 4(1) and (2), and Art. 5(1) and (3))
(see paragraphs 261-263, 267-275, 277-279, 329-333, 341-345)
EU law – Principles – Legal certainty – Scope – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Conditions for the adoption of measures in the event of a breach of the principles of the rule of law – Commission’s own assessment of the effect or serious risk of an effect on the sound financial management of the Union budget or the protection of the financial interests of the Union – Commission’s responsibility 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 6(1) to (9))
(see paragraphs 280, 282, 284, 287, 289, 354-359)
Action for annulment – Judgment annulling a measure – Scope – Partial annulment of an act of EU law – Condition – Severability of the annullable elements from the contested act – Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget – Non-severability of a provision of the regulation setting out the conditions for the adoption of measures for the protection of the Union budget that may be adopted
(Art. 264 TFEU; European Parliament and Council Regulation 2020/2092, Arts 4(1) and 5(1))
(see paragraphs 293-295)
Action for annulment – Actions of the Member States – Action brought against a regulation establishing a regime of conditionality for the protection of the Union budget – Pleas in law – Plea alleging infringement of the provisions of EU law relating to public deficits and infringement of the principle of equality of Member States before the Treaties – Measures adopted under that regulation not altering the pre-existing obligations of Member States arising inter alia from the applicable sector-specific or financial rules – Regulation not imposing any new obligation on the Member States – Plea unfounded
(European Parliament and Council Regulation 2020/2092, Art. 5(2))
(see paragraphs 312-317)
Résumé
Regulation 2020/2092 of the European Parliament and of the Council of 16 December 2020 (
1
) established a ‘horizontal conditionality mechanism’ intended to protect the budget of the European Union in the event of a breach 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, under the conditions set out in the regulation, 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 submission of specific evidence capable of establishing not only that there has been 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 follows on from a series of initiatives which concern, more generally, the protection of the rule of law in the Member States (
2
) and intended to provide answers, at EU level, to increasing concerns relating to the compliance by several Member States with the common values of the European Union as set out in Article 2 TEU. (
3
)
Hungary, supported by the Republic of Poland, (
4
) brought an action seeking, principally, annulment of the contested regulation and, in the alternative, annulment of certain of its provisions. In support of its claims, it submitted, in essence, that that regulation, although formally presented as an act which falls within the scope of the financial rules referred to in Article 322(1)(a) TFEU, is in fact intended to penalise as such all breaches by a Member State of the principles of the rule of law, the requirements of which are, in any event, insufficiently precise. Hungary therefore bases its action, inter alia, on the European Union’s lack of competence to adopt such a regulation owing to both the lack of a legal basis and the circumvention of the procedure laid down in Article 7 TEU, and on a failure to comply with the requirements of the principle of legal certainty.
The Court, thus called upon to rule on the European Union’s powers to defend its budget and its financial interests against effects that may result from breaches of the values contained in Article 2 TEU, considered that the present case is of fundamental importance which justified it being referred to the full Court. For the same reasons, the Court granted the European Parliament’s request that the case be dealt with pursuant to the expedited procedure. In those circumstances, the Court dismisses Hungary’s action for annulment in its entirety.
Findings of the Court
Prior to examining the substance of the action, the Court rules on the Council’s request that various passages of Hungary’s application be disregarded in so far as they are based on material taken from a confidential opinion of the Council Legal Service which had been disclosed without the required authorisation. In that regard, the Court confirms that it is, in principle, open to the institution concerned to make the production for use in legal proceedings of such an internal document subject to prior authorisation. Nonetheless, where the legal opinion in question relates to a legislative procedure, as in the present case, account should be taken of the principle of openness, since the disclosure of such an opinion increases the transparency and openness of the legislative process. Thus, the overriding public interest in transparency and openness of the legislative process outweighs, in principle, the interest of the institutions as regards the disclosure of an internal legal opinion. In the present case, since the Council did not prove that the opinion concerned is of a particularly sensitive nature or has a particularly wide scope that goes beyond the context of the legislative process in question, the Court therefore refuses the Council’s request.
As regards the substance, the Court, in the first place, examines the pleas relied on in support of the principal claim for annulment of the contested regulation in its entirety, alleging, first, that the European Union lacked competence to adopt that regulation and, secondly, breach of the principle of legal certainty.
As regards, first, the legal basis for the contested regulation, the Court points out 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 the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way. Furthermore, the measures that 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. Therefore, the contested regulation is intended to protect the European Union from effects resulting from breaches of the principles of the rule of law in a sufficiently direct way, and not to penalise those breaches as such.
In response to Hungary’s line of argument that a financial rule cannot have the objective of defining the scope 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 is 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 thus 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, it points out 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 the 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 scope of the power conferred by the Treaties on the European Union to establish ‘financial rules’ relating to the implementation of the Union budget. The Court makes clear that the provisions of the contested regulation which identify those principles, which list cases that may be indicative of breaches of those principles, which specify the situations or conduct that such breaches must concern and which define the nature and scope of the protective measures that may, where appropriate, be adopted, are constituent elements of that mechanism and thus form an integral part of it.
Next, as regards the complaint alleging circumvention of the procedure laid down in Article 7 TEU and the provisions of Article 269 TFEU, the Court rejects Hungary’s line of argument that only the procedure laid down in Article 7 TEU grants 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 in a Member State. 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 observes 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 State concerned to put an end to those breaches. By contrast, the contested regulation is intended to protect the Union budget, and 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 efficient implementation of that budget. Furthermore, the procedure laid down in Article 7 TEU and that established by the contested regulation differ as regards their subject matter, the conditions for initiating them, the conditions for the adoption and lifting of the measures provided for and the nature of those measures. Consequently, 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 intended to circumvent the limitation on the Court’s general jurisdiction, provided for by Article 269 TFEU, since its wording refers only to the review of the legality of an act adopted by the European Council or by the Council under Article 7 TEU.
Lastly, since the contested regulation allows the Commission and the Council to examine only situations or conduct attributable to the authorities of a Member State which appear relevant to the efficient implementation of the Union budget, the powers granted to those institutions by that regulation do not go beyond the limits of the powers conferred on the European Union.
Secondly, in its examination of the plea alleging breach of the principle of legal certainty, the Court holds that Hungary’s line of argument concerning the lack of precision in the contested regulation is wholly unfounded, both as regards the criteria relating to the conditions for initiating the procedure and as regards 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, more specifically, the criteria relating to the conditions for initiating the procedure and the choice and scope of the measures to be adopted, the Court specifies 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 State and relevant to the efficient implementation of the Union budget. In addition, the Court notes that the concept of ‘serious risk’ is clarified in the EU financial legislation and points out that the protective measures that may be adopted must be strictly proportionate to the impact of the breach found on the Union budget. In particular, according to the Court, 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 of the principle of legal certainty.
In the second place, the Court examines the alternative claims for partial annulment of the contested regulation. In that regard, the Court decides, first, that the annulment of Article 4(1) of the contested regulation would cause the substance of that regulation to be altered, since that provision sets out the conditions for the adoption of the protective measures provided for by that regulation, with the result that the claim for annulment of that provision alone must be regarded as inadmissible. Secondly, the Court holds as unfounded the complaints directed against a series of other provisions of the contested regulation, alleging lack of a legal basis and infringements of the provisions of EU law relating to public deficits and of the principles of legal certainty, proportionality and equality of Member States before the Treaties. It therefore rejects all of the alternative claims and therefore Hungary’s 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 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, which are set out in Article 2 TEU, include the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, in a society in which with pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.
(
4
)	The Republic of Poland also brought an action for annulment of Regulation 2020/2092 (Case C‑157/21).
(
5
)	Under Article 2(a) of the contested regulation, the concept of ‘the rule of law’ includes ‘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’.