COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of 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
Date: 2024-01-12
Institutions: Directorate-General for Budget, European Commission
Subjects: EU Member State, EU budget, application of EU law, budget policy, conditionality mechanism, financial management, implementation of the budget, rule of law

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.2.2024  COM(2024) 17 final/2  CORRIGENDUM This document corrects document COM(2024) 17 final of 12 January 2024. Concerns all language versions. Correction of references in footnotes 12, 20 and 42; capitalised letter in page 6.  The text shall read as follows: COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of 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           
 
 
CONTENTS 

1. 

Introduction ................................................................................................................. 1 

2.  Application of the Conditionality Regulation ............................................................. 1 

2.1.  Screening of relevant sources ............................................................................ 3 
2.2.  Requests for information ................................................................................... 5 
2.3.  Procedure ........................................................................................................... 5 
2.4.  Communication with the European Parliament and the Council ...................... 8 

3.  Complementarity with other instruments .................................................................... 8 

4.  Effectiveness of the measures adopted ...................................................................... 12 

5.  Effectiveness of the procedure .................................................................................. 14 

5.1.  Effectiveness  of  the  procedure  to  address  the  identified  breaches  of  the 

principles of the rule of law ............................................................................. 14 

5.2.  Effectiveness of the procedure – the steps provided for in the Conditionality 

Regulation ....................................................................................................... 17 

6.  Conclusion ................................................................................................................. 18 

 
 
 
 
 
1. 

INTRODUCTION 

Regulation (EU, Euratom) 2020/2092 on a general regime of conditionality for the protection 
of  the  Union  budget  (the  ‘Regulation’  or  the  ‘Conditionality  Regulation’)1  applies  since  1 
January  2021.  In  accordance  with  Article  4(1)  of  the  Conditionality  Regulation,  the 
Commission can propose to the Council to adopt measures in case breaches of the principles of 
the  rule  of  law  in  a  Member  State  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. Complementary to other tools and procedures established to protect and 
foster the rule of law, the objective of the Conditionality Regulation is the protection of the 
Union budget and the Union’s financial interests.  

According to  Article 9 of the Conditionality Regulation,  the Commission shall report by 12 
January 2024 to the European Parliament and the Council on its application, in particular on 
the effectiveness of the measures adopted. Moreover, recital 28 of the Conditionality Regulation 
states that the Commission should consider, in addition to reporting on the effectiveness of the 
measures adopted, to report also on the overall effectiveness of the procedures set out in the 
Conditionality  Regulation,  as  well  as  the  complementarity  of  this  instrument  with  other 
instruments.  

The report is structured in the following five sections: 

–  Section  2  describes  the  actions  taken  by  the  Commission  in  the  application  of  the 
Conditionality Regulation, including the first procedure opened as regards Hungary;  

–  Section 3 reflects on the complementarity of the Conditionality Regulation with other 

relevant instruments;  

–  Section 4 describes the Commission’s evaluation of the effectiveness of the measures 

adopted and refers to the protection of final recipients and beneficiaries; 

–  Section  5  addresses  the  overall  effectiveness  of  the  procedure  set  out  in  the 

Conditionality Regulation;  

–  Finally,  section  6  presents  an  evaluation  of  the  application  of  the  Conditionality 

Regulation. 

2.  APPLICATION OF THE CONDITIONALITY REGULATION 

The  Conditionality  Regulation  is  a  budgetary  instrument  designed  to  react  with  effective 
protective measures in the event of breaches of the principles of the rule of law that affect or 
seriously risk affecting the Union budget or the financial interests of the Union. As such, the 
Conditionality Regulation is not designed primarily to remedy specific situations that may be 
indicative  of  breaches  of  the  principles  of  the  rule  of  law  as  referred  to  in  Article  3  of  the 
Regulation; instead, those situations could be relevant for the Conditionality Regulation and 
could be addressed as a result of its application when they affect or seriously risk affecting the 
sound  financial  management  of  the  Union  budget  or  the  protection  of  the  Union’s  financial 

1  OJ L 433I, 22.12.2020, p. 1. 

1 

 
 
 
interests in a sufficiently direct way. Only in that case, in fact, and if other instruments would 
not allow the Commission to protect the Union budget more effectively, the Commission can 
initiate  a  procedure  under  the  Conditionality  Regulation.  Appropriate  measures  under  that 
Regulation must be taken where the conditions set out in its Article 4 are fulfilled, following 
the procedure established in Article 6.  

On 16 February 2022, the Court of Justice of the European Union confirmed in its rulings2 the 
validity  of  the  Conditionality  Regulation,  dismissing  Hungary’s  and  Poland’s  actions  for 
annulment.  

To provide clarity and predictability on the application of the Conditionality Regulation, and 
considering  the  case  law  of  the  Court  of  Justice  of  the  European  Union,  the  Commission 
adopted the Guidelines on the application of the Conditionality Regulation (‘Guidelines’)3.  

In the first three years of the application of the Conditionality Regulation, the Commission has 
been proactively and permanently monitoring the situation in all Member States, to identify at 
the earliest possible stage breaches of the principles of the rule of law falling within the scope 
of the Regulation. Since the entry into force of the Conditionality Regulation in January 2021, 
the Commission has intensified the cooperation between its services to combine both country- 
and sector-specific knowledge and identify possible situations or developments in the Member 
States that would be relevant for the application of the Conditionality Regulation.  

Information and evidence gathered under different instruments applied by the Commission can 
be relevant to identify whether situations that are indicative of breaches of the principles of the 
rule  of  law  exist  in  a  Member  State.  Similarly,  the  Commission,  in  defending  the  financial 
interests of the Union under different instruments, may become aware of risks for the Union 
budget that are linked to breaches of the principles of the rule of law.  

In particular, services responsible for the preparation of the European Semester4, of the Rule of 
Law Report5 and for the implementation of the Recovery and Resilience Facility6 and of the 
Common Provisions Regulation7, as well as the European Anti-Fraud Office ‘OLAF’ and the 
audit services of the Commission, have exchanged information acquired under the respective 
activities on a regular basis. 

2 

Judgment of the Court (Full Court) of 16 February 2022, Hungary v European Parliament and Council of the 
European Union, C-156/21, ECLI:EU:C:2022:97; Judgment of the Court (Full Court) of 16 February 2022, 
the  European  Union,  C-157/21, 
Republic  of  Poland  v  European  Parliament  and  Council  of 
ECLI:EU:C:2022:98. 

3  Communication from  the  Commission  Guidelines  on  the  application  of  the  Regulation  (EU,  EURATOM) 
2020/2092 on a general regime of conditionality for the protection of the Union budget, OJ C 123, 18.3.2022, 
p. 12. 
https://commission.europa.eu/business-economy-euro/economic-and-fiscal-policy-coordination/european-
semester_en. 

4 

5  The Rule of Law Report is the centrepiece of the European Rule of Law Mechanism. See more information 
at  https://commission.europa.eu/strategy-and-policy/policies/justice-and-fundamental-rights/upholding-rule-
law/rule-law/rule-law-mechanism_en. 

6  Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing 

the Recovery and Resilience Facility (RRF Regulation), OJ L 57, 18.2.2021, p. 17. 

7   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 L 231, 30.6.2021, p. 159. 

2 

 
 
 
The Commission has also actively raised awareness about the Conditionality Regulation with 
a view, inter alia, to incentivise the filing of complaints and the sharing of relevant information 
by third parties, which may be relevant for the application of the regulation.  

So far, the procedure was opened and the Council adopted measures upon the Commission’s 
proposal  under  the  Conditionality  Regulation  once,  with  respect  to  relevant  breaches  of  the 
principles of the rule of law identified in Hungary.  

2.1. 

Screening of relevant sources 

In  the  application  of  the  Conditionality  Regulation,  the  Commission  ensures  a  permanent 
monitoring of the situation in all Member States to identify relevant breaches of the principles 
of the rule of law that affect or seriously risk affecting the sound financial management of the 
Union budget or the protection of the financial interests of the Union, in line with Article 6(3) 
of the Conditionality Regulation. In the course of this monitoring, the Commission takes into 
account all possible relevant sources of information, in particular those listed in recital 16 of 
the Conditionality Regulation, such as the Commission’s Rule of Law Reports, reports of the 
European  Court  of  Auditors  and  of  International  Organisations8,  as  well  as  other  relevant 
sources,  including  resolutions,  studies  of  the  European  Parliament,  reports  from  NGOs  and 
investigative  journalists.  The  Commission  screens  these  sources  on  a  regular  basis,  as 
appropriate.  

In  doing  such  a  screening  for  all  Member  States,  the  Commission  carries  out  a  qualitative 
assessment on a case-by-case basis to identify whether there are reasonable grounds to initiate 
a procedure under the Conditionality Regulation. As the Court of Justice of the European Union 
has stressed9, the Commission is required to ensure that the information it uses is relevant and 
that the sources of that information are reliable. This requires a comprehensive assessment of 
alleged issues; the Commission should base its assessment on a wide range of evidence and 
strives to use several sources for its conclusions10.  

Additionally, the Commission takes advantage of the monitoring performed and meetings with 
stakeholders taking place as part of other work streams. Information coming from the Rule of 

8  Recital 16 of the Conditionality Regulation reads ‘[t]he identification of breaches of the principles of the rule 
of law requires a thorough qualitative assessment by the Commission. That assessment should be objective, 
impartial and fair, and should take into account relevant information from available sources and recognised 
institutions,  including  judgments  of  the  Court  of  Justice  of  the  European  Union,  reports  of  the  Court  of 
Auditors, the Commission’s annual Rule of Law Report and EU Justice Scoreboard, reports of the European 
Anti-Fraud Office (OLAF) and the European Public Prosecutor’s Office (EPPO) as relevant, and conclusions 
and  recommendations  of  relevant  international  organisations  and  networks,  including  Council  of  Europe 
bodies  such  as  the  Council  of  Europe  Group  of  States  against  Corruption  (GRECO)  and  the  Venice 
Commission, in particular its rule-of-law checklist, and the European networks of supreme courts and councils 
for the judiciary. The Commission could consult the European Union Agency for Fundamental Rights and the 
Venice Commission if necessary for the purpose of preparing a thorough qualitative assessment.’ 
Judgment of the Court (Full Court) of 16 February 2022, Hungary v European Parliament and Council of the 
European Union, C-156/21, ECLI:EU:C:2022:97, paragraph 285, and Judgment of the Court (Full Court) of 
16 February 2022, Republic of Poland v European Parliament and Council of the European Union, C-157/21, 
ECLI:EU:C:2022:98, paragraph 285. 

9 

10  See paragraph 63 of the Guidelines. The Commission could not, for example, initiate a procedure based on a 
single piece of information, such as a press article, even if that source is considered reliable. The Commission 
assesses  the  information  provided  by  the  sources  available  and  corroborates  that  with  other  sources  or 
information. 

3 

 
 
 
Law annual cycle11 or from the application of other relevant instruments, such as the Recovery 
and  Resilience  Facility  and  the  Common  Provisions  Regulation,  is  also  considered  for  the 
purposes of its screening under the Conditionality Regulation. Commission services responsible 
for auditing  Union funding or for infringements  also  contribute. Moreover, the Commission 
consults OLAF as well as the European Public Prosecutor’s Office (‘EPPO’), to collect more 
data, where relevant. 

Furthermore, the Commission collects information from citizens and civil society, in particular 
on the basis of complaints about potential breaches of the principles of the rule of law. The 
Commission has been receiving complaints by various means (emails and letters to Members 
of  the  Commission  or  to  different  Commission’s  services,  etc.).  To  make  the  information 
provided to the Commission more streamlined already at the input stage and to provide a clear 
contact  point  for  complaints  under  the  Conditionality  Regulation,  the  Commission  made 
available  a  complaint  form12  that  complainants  could  use,  with  particular  features  for  those 
wishing  to  remain  anonymous,  and  set  up  a  dedicated  functional  mailbox13.  This  dedicated 
complaint  form  was  adopted  as  an  Annex  to  the  Guidelines  with  the  aim  of  facilitating  the 
submission  of  information  that  would  be  relevant  to  the  application  of  the  Conditionality 
Regulation. The filling of the complaint form and sending it to the dedicated functional mailbox 
is the recommended contact method with the Commission. 

The Commission has been consistently raising awareness on the possibility of filing complaints 
and  on  the  existence  of  the  complaint  form  for  this  purpose,  for  instance  in  its  replies  to 
grievances  from  citizens,  in  meetings  with  relevant  stakeholders,  and  in  the  context  of  its 
interventions before a number of European Parliament’s committees. 

The  Commission  carries  out  a  qualitative  assessment  of  the  information  and  documents 
provided by every complainant to identify whether it contains relevant information that would 
substantiate  possible  grounds  for  the  application  of  the  Conditionality  Regulation.  Over  the 
three-year  period,  a  considerable  number  of  letters,  emails  or  complaints  were  received.  To 
date, the information received has typically not shown that the conditions for the application of 
the  Regulation  were  fulfilled.  For  example,  there  have  been  numerous  complaints  about 
challenges  to  the  functioning  of  the  internal  market,  which  however  did  not  involve  Union 
funding14. None of the nearly three hundred were substantiated enough for the Commission to 
corroborate evidence, nor to initiate a procedure under the Conditionality Regulation. While 
the Commission considers every complaint, so far only a very small number of complainants 
used the standard complaint form. To improve the basis for assessing the merits of a complaint 
and facilitate better handling and response, complainants are encouraged to use the standard 
complaint  form,  as  it  may  help  them  better  frame  their  submission  for  the  purposes  of  an 

11  Within the Rule of Law mechanism, the preparatory work for the Rule of Law Report spans throughout a year 
every  year.  It  includes  consultations  on  rule  of  law  issues  between  the  Commission  and  Member  States, 
international 
at 
https://commission.europa.eu/strategy-and-policy/policies/justice-and-fundamental-rights/upholding-rule-
law/rule-law/rule-law-mechanism_en. 

non-governmental 

organisations. 

information 

more 

and 

See 

12  The 

complaint 

form 

is 

available 

in 

the  public  webpage  on  Conditionality  Regulation 

(https://commission.europa.eu/strategy-and-policy/eu-budget/protection-eu-budget/rule-law-conditionality-
regulation_en), as published on 23 November 2021; it is also annexed, as Annex II, to the Guidelines adopted 
in March 2022, see supra fn. 3. 

13  BUDG-CONDITIONALITY-REGIME-COMPLAINTS@ec.europa.eu. 
14  These can typically be followed up through other tools, but are not relevant for the Conditionality Regulation. 

4 

 
 
 
 
assessment  under  the  Conditionality  Regulation.  This  will  also  facilitate  a  meaningful 
assessment by the Commission services under the Regulation.  

2.2.  Requests for information 

Pursuant to Article 6(4) of the Conditionality Regulation, and as part of the process of collecting 
information  for  its  assessment,  the  Commission  can  send  a  request  for  information  to  the 
Member State concerned. Pursuant to the Conditionality Regulation and in line with paragraph 
56 of the Guidelines, the Commission may request additional information aimed at confirming 
the fulfilment of the conditions for the application of the Conditionality Regulation, assessing 
the extent of the impact on the Union’s budget or on the protection of the financial interests of 
the Union (or risk thereof), or assessing more in detail any remedial measures that the Member 
State  put  in  place  or  is  planning  to  put  in  place.  The  Commission  can  request  additional 
information  not  only  before  initiating  the  procedure,  but  also  after  sending  a  written 
notification. 

During  the  reporting  period,  the  Commission  sent  two  administrative  letters  to  request 
information from Poland and Hungary, on 24 November 2021.  

Poland replied to the request for information in January 2022 and the information contained in 
the reply was taken into account to assess whether breaches of the principles of the rule of law 
affected or seriously risked affecting the Union budget in a sufficiently direct way. A procedure 
under  the  Conditionality  Regulation  was  not  initiated  in  the  case  of  Poland,  since  the 
Commission did not find that it had reasonable grounds to consider that all the conditions for 
the application of the Conditionality Regulation were fulfilled. This is without prejudice to the 
Commission continuing to address rule of law issues in Poland through other instruments. The 
Commission  has  continued  to  closely  monitor  the  situation  in  Poland,  the  same  way  it 
continuously  monitors  the  situation  in  all  the  other  Member  States  to  assess  whether  the 
conditions for the application of the Conditionality Regulation are met.  

Hungary replied to the Commission’s request for information on 27 January 2022, and after 
assessing Hungary’s reply, the Commission sent a written notification to Hungary on 27 April 
2022, thereby initiating a case under the Conditionality Regulation (see Section 2.3 below). 

2.3. 

Procedure 

Article 6 of the Conditionality Regulation sets out the procedure to be followed for the adoption 
of protective measures. By design, the procedure is mainly (i.e. until its final steps, where the 
Council takes the final decision) a bilateral process between the Commission and the Member 
State  concerned,  with  the  obligation  to  inform  the  European  Parliament  and  the  Council  of 
specific acts taken throughout the procedure (see Section 2.4 below). 

Following the sending of a written notification under Article 6(1)15, stating the factual elements 
and  specific  grounds  on  which  the  findings  are  based,  the  Commission  carries  out  a 

15  Article 6(1) reads ‘[w]here the Commission finds that it has reasonable grounds to consider that the conditions 
set out in Article 4 are fulfilled, it shall, unless it considers that other procedures set out in Union legislation 
would allow it to protect the Union budget more effectively, send a written notification to the Member State 
concerned,  setting  out  the  factual  elements  and  specific  grounds  on  which  it  based  its  findings.  The 
Commission shall inform the European Parliament and the Council without delay of such notification and its 
contents.’ 

5 

 
 
 
 
contradictory procedure with the Member State concerned. If the Member State, in the course 
of the procedure, demonstrates that it remedied the situation in full, the conditions to propose 
measures to the Council would not be fulfilled. Otherwise, the Commission must continue the 
procedure and eventually propose the adoption by the Council of an Implementing Decision16 
on appropriate measures to protect the  Union budget or the Union’s financial interests. Any 
protective measures adopted by the Council remain in place until the situation that led to their 
adoption  is  remedied.  The  Council  can  lift  or  modify  the  protective  measures  following  a 
Commission proposal when the situation is deemed to be partially or totally remedied, pursuant 
to the procedure established in Article 7.  

The only case opened so far under the Conditionality Regulation that has led to adoption of 
protective  measures  by  the  Council  is  the  case  concerning  Hungary.  This  first  case  also 
constituted the first practical application of the definitive deadlines set out in the Conditionality 
Regulation, which sets clear and ambitious time limits for every actor at every stage.  

On 27 April 2022, the Commission sent a written notification to Hungary, given that, after an 
objective analysis, it found that it had reasonable grounds to consider that all the conditions for 
the application of the Conditionality Regulation were met. The written notification informed 
Hungary about concerns on a number of issues that affected or seriously risked affecting the 
sound financial management of the Union budget in a sufficiently direct way. 

Hungary submitted its observations with complementary letters on 27 June 2022, 30 June 2022, 
and 5 July 2022. In substance, Hungary did not to submit any remedial measures during this 
time period. Instead, Hungary rejected all findings and in particular their link to EU financial 
interest.  In practical terms and as a result of the deadlines embedded in  the Regulation, this 
created significant time pressure during all subsequent stages of the procedure.  

It was only on 19 July 2022, at a very advanced stage of the procedure, that Hungary proposed 
17 remedial measures to address the identified findings17. The Commission evaluated them and 
considered that the remedial measures did not appropriately address the concerns.  

On  20  July  2022,  the  Commission  informed  Hungary  of  its  intention  to  propose  budgetary 
protection measures to be adopted under the Conditionality Regulation. Hungary replied on 22 
August 2022. This reply was complemented by a second letter on 13 September 2022.  

On 18 September 2022, the Commission proposed to the Council to adopt budgetary protective 
measures for the protection of the Union budget and the financial interests of the Union against 
breaches of the principles of the rule of law in Hungary18. In this proposal, the Commission 
raised concerns with regard to: (i) the systemic irregularities, deficiencies and shortcomings in 
public procurement, (ii) detection, prevention and correction of conflicts of interest, and (iii) 
investigation, prosecution and anti-corruption framework. The Commission concluded, after a 
thorough  assessment,  that  the  risk  for  the  budget  remained.  On  that  basis,  the  Commission 
proposed the suspension of 65% of the commitments for three operational programmes under 
cohesion policy (or the suspension of one or more of those programmes, in proportion to the 

16  Pursuant to Article 6(11) of the Conditionality Regulation, the Council adopts its implementing decision by 

qualified majority. 

17  See Section 4 for more details on the remedial measures submitted by Hungary. 
18  Proposal for a Council Implementing Decision on measures for the protection of the Union budget against 
breaches  of  the  principles  of  the  rule  of  law  in  Hungary,  COM(2022)  485  final,  available  at  https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=celex:52022PC0485. 

6 

 
 
 
ensuing risk for the budget, in case they are not adopted by the time of the Council decision) 
and a prohibition to enter into legal commitments with specific entities (the so-called public 
interest trusts (PITs)19 and entities maintained by them) for programmes implemented in direct 
and indirect management. 

On  30  November  2022,  the  Commission  informed  the  Council  of  its  assessment  on  the 
implementation of the remedial measures, considering the progress made until 19 November 
2022.  In  this  assessment,  and  in  the  complementary  assessment  of  9  December  2022,  the 
Commission  identified  remaining  weaknesses  and  risks  and  decided  to  maintain  its  initial 
proposal from September, inviting the Council to proceed on this basis.  

On 15 December 2022, the Council, in line with Article 6(10) of the Conditionality Regulation, 
adopted  an  Implementing  Decision  within  three  months  of  receiving  the  Commission’s 
proposal, exceptionally extending the one-month period for adoption. 

The Council Implementing  Decision established measures  to  protect  the Union budget  from 
breaches of the principles of the rule of law in Hungary, based on the Commission’s proposal20. 
Pursuant  to  Article  6(11)  of  the  Conditionality  Regulation,  and  for  reasons  linked  to  the 
proportionality of the measures, the Council amended the Commission proposal and reduced 
the percentage of commitments to be suspended from 65% to 55% for the three operational 
Cohesion programmes concerned21, once adopted, amounting to approximately EUR 6.3 billion 
in  total  for  the  period  2021-2027.  The  Council  also  prohibited  entering  into  new  legal 
commitments  with  Hungarian  public  interest  trusts  and  entities  maintained  by  them  when 
implementing the Union budget in direct and indirect management. 

Following  the  adoption  of  the  Council  Implementing  Decision,  Hungary  informed  the 
Commission of the further steps it took to implement all the commitments it had submitted in 
the course of the procedure. The Commission has exchanged with the Hungarian authorities to 
help  Hungary  devise  the  appropriate  new  remedial  measures  that  would  be  effective  in 
addressing the outstanding issues outlined in the Council Implementing Decision. 

According  to  Article  7(2)  of  the  Conditionality Regulation,  ‘[a]t  the  request  of  the  Member 
State concerned, or on its own initiative and at the latest one year after the adoption of measures 
by the Council, the Commission shall reassess the situation in the Member State concerned, 
taking  into  account  any  evidence  submitted  by  the  Member  State  concerned,  as  well  as  the 
adequacy of any new remedial measures adopted by the Member State concerned.’  

In the absence of a written notification from Hungary, the Commission reassessed on its own 
motion the situation in Hungary based on the information available. On 13 December 2023, the 
Commission decided (in its ‘Reassessment Decision’) that the situation that led the Council to 
adopt measures had not been remedied and that the Union’s budget remained at the same level 

19  PITs are also called “public interest asset management foundations”. 
20  Council  Implementing  Decision  (EU)  2022/2506  of  15  December  2022  (the  ‘Council  Implementing 
https://eur-lex.europa.eu/legal-

20.12.2022, 
Decision’),  OJ  L 
content/EN/TXT/?uri=CELEX:32022D2506. 
a) Environmental and Energy Efficiency Operational Programme Plus; b) Integrated Transport Operational 
Programme Plus; c) Territorial and Settlement Development Operational Programme Plus. 

available 

325, 

94, 

p. 

at 

21 

7 

 
 
 
of risk as established by the Council Implementing Decision. For that reason, the Commission 
concluded that the measures adopted had to remain in place22. 

2.4.  Communication with the European Parliament and the Council 

Pursuant  to  Article  6(1)  of  the  Conditionality  Regulation,  the  Commission  must  inform  the 
European  Parliament  and  the  Council  in  the  event  of  a  written  notification  initiating  a 
procedure;  under  Article  7(2),  the  Commission must  inform  the  Council  if  it  addresses  to  a 
Member State a decision that the situation that had led to the adoption of measures has not been 
remedied.  Article  8  states  that  the  European  Parliament  must  be  informed  of  any  measures 
proposed, adopted and lifted under the Conditionality Regulation procedure. 

In  the  only  case  so  far,  the  Commission  fulfilled  its  information  obligations  under  the 
Conditionality Regulation by notifying the European Parliament and the Council of the steps 
taken  or  acts  adopted  throughout  the  procedure,  in  line  with  the  Regulation.  Beyond  its 
obligations, it firstly published its proposal for an implementing decision on the appropriate 
measures to the Council23, as well as its communication to the Council on the remedial measures 
notified by Hungary24  and its Reassessment Decision. The Commission, secondly,  regularly 
informed the European Parliament and the Council at technical  and political level  about the 
implementation  of  the  Conditionality  Regulation.  In  addition,  representatives  of  the 
Commission participated in hearings and Committee meetings of the two institutions, and the 
Commission replied to Resolutions, letters and other queries from Members of the European 
Parliament. 

3.  COMPLEMENTARITY WITH OTHER INSTRUMENTS 

The Union has developed a variety of instruments and processes that promote the rule of law 
and its application and provide an effective response from Union institutions to breaches of the 
rule of law through infringement proceedings and the procedure provided for in Article 7 TEU. 
Further tools include financial support for civil society organisations, the Rule of Law annual 
cycle  and  the  EU  Justice  Scoreboard25.  Other  tools  and  procedures  established  by  Union 
legislation specifically aim to protect the Union budget, including OLAF investigations, checks 
and  audits  or  financial  corrections.  The  Conditionality  Regulation  complements  these 
instruments26 by protecting the Union budget against breaches of the principles of the rule of 
law affecting its sound financial management or the protection of the financial interests of the 

22  The  text  of  the  Commission  decision  of  13  December  2023  is  available,  under  the  section  News,  at 
https://commission.europa.eu/strategy-and-policy/eu-budget/protection-eu-budget/rule-law-conditionality-
regulation_en. 

23  Proposal for a Council Implementing Decision on measures for the protection of the Union budget against 
breaches  of  the  principles  of  the  rule  of  law  in  Hungary,  COM/2022/485  final,  available  at  https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=celex:52022PC0485. 

24  Communication from the Commission to the Council on the remedial measures notified by Hungary under 
Regulation (EU, Euratom) 2020/2092 for the protection of the Union budget, COM(2022) 687 final, available 
at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52022DC0687. 

25   Other tools included the Cooperation and Verification Mechanism, which had been introduced to facilitate 
progress in certain fields, e.g. judicial reforms and anti-corruption for two Member States. In September 2023, 
the  Commission  closed  the  Cooperation  and  Verification  Mechanism,  as  the  two  Member  States  had 
satisfactorily met their obligations set out under this instrument. 

26   These instruments are independent of each other, each serving its own purpose. 

8 

 
 
 
Union27. Recital 28 of the Conditionality Regulation notes that complementarity is one of the 
main topics that this report should address. 

Article 6(1) of the Conditionality Regulation requires assessing whether procedures set out in 
Union legislation other than the one established by the Conditionality Regulation would allow 
to protect the Union budget more effectively. Recital 17 of the Conditionality Regulation notes 
in  that  context  that  ‘[…]  Union  financial  legislation  and  the  applicable  sector-specific  and 
financial  rules  provide  for  various  possibilities  to  protect  the  Union  budget,  including 
interruptions, suspensions or financial corrections linked to irregularities or serious deficiencies 
in management and control systems. […]’. 

In considering whether the procedure established by the Conditionality Regulation protects the 
Union budget more effectively than other procedures, the Commission takes into account a set 
of criteria, to be applied on a case-by-case basis. The Guidelines refer specifically to two criteria 
to  determine the  effectiveness  of the protection by the Conditionality Regulation  over other 
instruments28.  This  ‘complementarity  test’  will  be  refined  based  on  the  practical  experience 
gained in applying the Conditionality Regulation. 

Under Union legislation, several instruments can be activated to protect the Union budget. As 
mentioned,  OLAF29  and  EPPO30  investigations  can  address  risks  to  the  Union  budget, 
irrespective of their underlying issues,  and the application of Financial  Regulation rules can 
also lead to audits, checks and suspensions of payments31. 

The  Common  Provisions  Regulation  governs  four  cohesion  policy  funds,  one  maritime, 
fisheries and aquaculture fund, and three home affairs funds under shared management. The 
implementation  of  programmes  under  the  Common  Provisions  Regulation  is  subject  to  the 
fulfilment  (throughout  the  entire  programming  period)  of  prerequisite  conditions  for  the 
effective  and  efficient  implementation  of  the  specific  objectives  (known  as  “thematic”  or 
“horizontal”  enabling  conditions).  The  horizontal  enabling  condition  on  the  Charter  of 
Fundamental  Rights32  set  out  in  Article  15  and  in  Annex  III  of  the  Common  Provisions 
Regulation  requires  that  all  Member  States  put  in  place  effective  mechanisms  to  ensure 
compliance  of  the  programmes  supported  by  the  Funds  and  their  implementation  with  the 
Charter.  When  there  is  a  failure  to  fulfil  an  enabling  condition,  the  Commission  cannot 
reimburse  expenditure  related  to  programmes  or  parts  of  the  programmes  for  those  specific 
objectives linked to the enabling condition33. Risks for the protection of certain fundamental 
rights, for instance the right to an effective remedy and to a fair trial, might also put at risk the 
principles of the rule of law. If, at any point in time, the Commission considers that an enabling 
condition previously found as fulfilled is no longer fulfilled, it shall inform the Member State 
setting  out  its  assessment.  Where  the  Commission  concludes  that  the  non-fulfilment  of  the 

27  Recital 14 of the Conditionality Regulation. 
28  Paragraphs 41-43 of the Guidelines. 
29  Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 
concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation 
(EC)  No 1073/1999  of  the  European  Parliament  and  of  the  Council  and  Council  Regulation  (Euratom) 
No 1074/199, OJ L 248, 18.9.2013, p. 1. 

30  Council  Regulation  (EU)  2017/1939  of  12  October  2017  implementing  enhanced  cooperation  on  the 

establishment of the European Public Prosecutor’s Office (the ‘EPPO’), OJ L 283, 31.10.2017, p. 1.  

31   Article 63 and 131, 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, OJ L 193, 30.7.2018, p. 1. 

32  Charter of Fundamental Rights of the European Union. OJ C 326, 26.10.2012, p. 391. 
33  Article 15(5), Common Provisions Regulation. 

9 

 
 
 
enabling condition persists, expenditure related to the specific objective concerned shall not be 
reimbursed. In addition, the Common Provisions Regulation requires the Member State to set 
up  an  effective  and  efficient  internal  control  system  to  protect  the  financial  interests  of  the 
Union.  It  includes  specific  safeguards  and  measures,  including  the  interruption  of  payment 
deadlines or the suspension of payments in relation to deficiencies in the effective functioning 
of the management and control system, and financial corrections, to protect the Union budget 
from irregularities in the implementation of the programmes.  

Additionally, the conditions to access the Recovery and Resilience Facility funding require the 
Member State to set up an effective and efficient internal control system to protect the financial 
interests of the Union in implementing the Facility. Member States must also address all or a 
significant  subset of challenges identified in  the relevant  country-specific recommendations. 
Challenges that may be indicative of breaches of the principles of the rule of law may be covered 
by such country-specific recommendations. The applicable rules also require Member States to 
take all the appropriate measures to protect the financial interests of the Union and to ensure 
that the use of funds in relation to measures supported by the Recovery and Resilience Facility 
complies with applicable Union and national law. A suspension of payments, the termination 
of agreements related to financial support as well as  the reduction and recovery of financial 
contribution already paid are possible when a recovery and resilience plan is not implemented 
in a satisfactory manner by the Member State concerned, or in the case of serious irregularities 
(such as fraud, corruption and conflicts of interest) in relation to the measures supported by the 
Facility, or a serious breach of an obligation under the agreements related to financial support34.  

As regards the common agricultural policy, the Regulation on the financing, management and 
monitoring of the common agricultural policy35 sets specific obligations for the Member States 
to protect the financial interests of the Union and the Commission can suspend payments in 
relation to serious deficiencies in the proper functioning of governance systems to protect the 
financial interests of the Union and exclude expenditure from Union financing, in case it has 
not been incurred in conformity with Union law36. In certain instances, such serious deficiencies 
may stem from a breach of the principles of the rule of law37 and may therefore be relevant for 
the application of the Conditionality Regulation. 

In this regard, according to the Guidelines38, one of the criteria to address the effectiveness of 
the Conditionality Regulation over other procedures relates to the types of remedies available 
and their suitability for different situations. Article 5 of the Conditionality Regulation sets out 
the  list  of  budgetary  measures  that  the  Commission  can  propose  to  the  Council  if  all  the 
conditions  of  the  Conditionality  Regulation  are  fulfilled39.  Moreover,  the  various  protective 

34  Article 24, RRF Regulation. 
35   Regulation  (EU)  2021/2116  of  the  European  Parliament  and  of  the  Council  of  2  December  2021  on  the 
financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 
1306/2013, 6.12.2021, OJ L 435, p. 187. 

36  Articles 42, 55 and 59, Regulation on the financing, management and monitoring of the common agricultural 

policy. 

37   For example, in relation to the proper functioning of the authorities in charge of land registries and of related 
controls  on  leasing  and/or  ownership  of  agricultural  land  (including  law  enforcement  actions,  where 
appropriate), insofar as such leasing and/or ownership is relevant to the receipt of subsidies under the CAP. 
See paragraph 24 of the Guidelines. 

38  Paragraphs 41-43 Guidelines. 
39  Pursuant to Article 5 of the Conditionality Regulation, the protective measures can entail, in direct or indirect 
management, the suspension of payments or of the implementation of legal commitments, termination of the 

10 

 
 
 
 
measures to address the specificities of the relevant breach(es) of the principles of the rule of 
law may be applied cumulatively. 

In the case of Hungary, a combination of serious issues supported the conclusion that there was 
no other procedure under Union law that would allow the Commission to protect the Union 
budget effectively40. This case also showed that the measures that can be proposed under the 
Conditionality Regulation are not limited to specific projects or programmes: they can cover all 
Union funds and therefore better deal with systemic or cross-cutting deficiencies that put the 
Union budget at risk. 

In the case of Hungary, the procedure under the Conditionality Regulation has been running in 
parallel to various processes under several Union instruments. This was the case mainly due to 
the timing of entry into force of those instruments and of the procedural steps established by 
each of them, which also depended on the timing of the information submitted by Hungary in 
the course of each of the procedures. It is to be noted that the Conditionality Regulation is the 
only instrument that requires an assessment of whether there are more effective ways under 
other instruments to protect the Union’s financial interests from the breaches of the principles 
of the rule of law.  

In its proposal for a Council Implementing Decision on measures for the protection of the Union 
budget  against  breaches  of  the  principles  of  the  rule  of  law  in  Hungary41,  the  Commission 
considered that no other procedure under Union law would allow it to protect the Union budget 
against the breaches identified in the Proposal more effectively than the procedure set out by 
the Conditionality Regulation. The identified deficiencies, weaknesses, limits and risks were 
considered  widespread  and  intertwined,  which  prevented  other  procedures  from  being  more 
effective  than  that  provided  for  by  the  Conditionality  Regulation.  The  Commission  stressed 
that,  for  more  than  ten  years,  Hungary  had  been  the  addressee  of  recommendations  and 
corrections due to weaknesses and serious irregularities, in particular in the public procurement 
domain. Over an extended period of time, public procurement in Hungary continued to present 
significant deficiencies and weaknesses that affected the sound financial management of the 
Union budget and the protection of the financial interests of the Union, which Hungary failed 
to address in a systematic manner. 

Under the Recovery and Resilience Facility, on 15 December 2022, the Hungarian Recovery 
and Resilience Plan was approved42. In this plan, Hungary committed to 27 “super-milestones”, 
milestones linked to the protection of the financial interests of the Union to ensure compliance 
with Article 22 of the RRF Regulation, through the establishment of an adequate control system, 
which  must  be  satisfactorily  fulfilled  by  Hungary  before  any  payment  following  a  payment 
request under the Recovery and Resilience Facility is possible: as such, the ‘super-milestones’ 

legal  commitments,  prohibition  of  new  legal  commitments,  suspension  of  disbursements,  suspension  or 
reduction of the economic advantage and prohibition on entering into new agreements on loans or other Union 
instruments.  Under  shared  management,  the  protective  measures  can  entail  suspension  or  programs, 
suspension or reduction of legal commitments, reduction of pre-financing, and interruption or suspension of 
payments. 

40  Council Implementing Decision, recitals 14–18. 
41   COM/2022/485 final. 
42  Council  Implementing  Decision  on  the  approval  of  the  assessment  of  the  recovery  and resilience  plan  for 
https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-
and 

Hungary, 
resilience-facility/country-pages/hungarys-recovery-and-resilience-plan_en 
https://www.consilium.europa.eu/en/press/press-releases/2022/12/12/nextgenerationeu-member-states-
approve-national-plan-of-hungary/. 

see 

11 

 
 
 
are  necessary  conditions  for  Hungary  to  be  able  to  submit  requests  for  payments  under  its 
recovery plan. These cover three areas: firstly, reforms in the areas of anti-corruption and public 
procurement,  which  effectively  implement  all  key  implementation  steps  of  the  17  remedial 
measures  introduced  under  the  Conditionality  Regulation  procedure;  secondly,  reforms  to 
strengthen judicial independence  which  reflect  the conditions included in the Commission’s 
implementing  decisions  approving  Hungary’s  programmes  under  the  Common  Provisions 
Regulation  to  ensure  compliance  with  the  judicial  independence  aspect  of  the  horizontal 
enabling  condition  on  the  Charter  of  Fundamental  Rights43;  and  thirdly,  specific  audit  and 
control measures. However, the ‘super-milestones’ are not able to protect the financial interests 
of the Union in relation to breaches of the principles of the rule of law that already affect or risk 
affecting  the  implementation  in  Hungary  of  spending  programmes  financed  by  the  Union 
budget other than the Recovery and Resilience Facility.  

As  regards  the  Common  Provisions  Regulation,  on  22  December  2022,  the  Commission 
adopted  the  Partnership  Agreement  and  all  programmes  under  the  Common  Provisions 
Regulation for Hungary for the multiannual financial framework 2021-202744. Nevertheless, at 
the  time,  the  Commission  had  found  that  Hungary  did  not  fulfil  the  horizontal  enabling 
condition  on  the  effective  application  and  implementation  of  the  Charter  of  Fundamental 
Rights.  This  meant  that  Hungary  could  still  implement  the  programmes,  and  receive  pre-
financing,  but  could  receive  reimbursements  only  for  technical  assistance,  which  represents 
around  3%  of  the  total  funds  allocation  under  the  Common  Provisions  Regulation,  or  for 
operations that contribute to the fulfilment of the enabling condition. On 13 December 2023, 
after  a  thorough  assessment  and  several  exchanges  with  the  Hungarian  government,  the 
Commission established that Hungary has taken the measures necessary for the Commission to 
consider that the horizontal enabling condition  on the EU Charter of  Fundamental  Rights is 
fulfilled as regards judicial independence. As a consequence, for part of the above-mentioned 
funding  Hungary  may  start  receiving  reimbursements,  as  long  as  the  condition  remains 
fulfilled45.  

The Commission has also launched a number of infringement proceedings against Hungary, in 
relation to the rights of civil society organisations, academic freedom, media freedom, the rights 
of migrants and asylum seekers, and the rights of LGBTIQ people as well as to the functioning 
of the single market46. These infringement  procedures  do not  concern the conditions  for the 
application of the Conditionality Regulation under its Article 6(1). Infringement proceedings 
are not aimed directly to protect the Union’s financial interests and do not by default lead to 
budgetary  protective  measures.  However,  they  can  also  be  a  tool  to  lead  the  Member  State 
concerned to reform areas deemed problematic from a rule of law perspective. 

43   See  the  press  release  Judicial  independence  and  EU  funding  for  Hungary,  and  the  questions  and  answers 

therein, at https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6465.  

44  See 

the 

Partnership 

Agreement 

with 

Hungary 

– 

2021-2027 

(europa.eu), 

at 

https://commission.europa.eu/publications/partnership-agreement-hungary-2021-2027_en. 

45  See  the  press  release  Judicial  independence  and  EU  funding  for  Hungary,  and  the  questions  and  answers 

therein, at https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6465. 

46   See  the  2022  Annual  Report  on  monitoring  the  application  of  EU  law,  section  on  Hungary,  at 
https://commission.europa.eu/law/application-eu-law/implementing-eu-law/infringement-procedure/2022-
annual-report-monitoring-application-eu-law/hungary-2022_en  and  the  Single  Market  Scoreboard  data  on 
Hungary at https://single-market-scoreboard.ec.europa.eu/countries/Hungary. 

12 

 
 
 
4.  EFFECTIVENESS OF THE MEASURES ADOPTED 

According to  Article 9 of the Conditionality Regulation,  the Commission shall report to  the 
European Parliament and the Council on the effectiveness of the measures adopted.  

From  the  point  of  view  of  the  protection  of  the  Union’s  budget,  the  budgetary  measures  as 
proposed by the Commission and adopted by the Council in the case of Hungary are considered 
to be effective, in the sense that they currently achieve their objective to protect the Union’s 
financial interests. The adopted measures are also proportionate, in line with the requirements 
set  by the Conditionality Regulation, as interpreted by the  Court of Justice of the European 
Union47.  

As regards the question of the effectiveness of the suspension of 55% commitments in three 
cohesion  programmes  (Article  2(1)  of  the  Council  Implementing  Decision),  the  Council 
considered such percentage to be proportionate in light of the circumstances of the case and 
taking  into  account  the  positive  steps  taken  by  Hungary  already  at  the  time  of  the  Council 
Implementing Decision (see section 5 below). In addition, effectiveness also depends on the 
targeted nature of measures and the Commission therefore identified the programmes most at 
risk from breaches of the principles of the rule of law in relation to public procurement.  

As  regards  the  question  of  effectiveness  of  the  measure  related  to  the  public  interest  trusts 
(Article  2(2)  of  the  Council  Implementing  Decision),  since  the  adoption  of  the  Council 
Implementing Decision there has been no new legal commitment signed with the public interest 
trusts  and  the  entities  maintained  by  them,  thereby  ensuring  full  protection  of  the  Union’s 
financial interests from the conflict of interests risks identified. 

The measures as adopted by the Council took into account the remaining risks for the Union 
budget and are effective, insofar as they have been protecting the Union budget concerned from 
the  risks  identified  throughout  the  procedure.  In  line  with  Article  7  of  the  Conditionality 
Regulation, the risks outlined in the Council Implementing Decision must be addressed with 
new adopted (remedial)  measures  that Hungary should  notify to  the Commission before the 
budgetary measures can be lifted by the Council (upon a Commission’s proposal). 

In the absence of a written notification from Hungary, on 13 December 2023, the Commission 
reassessed  on  its  own  motion  the  situation  based  on  the  information  available,  within  the 
deadline  imposed  by  Article  7(2)  of  the  Conditionality  Regulation.  The  Commission’s 
reassessment takes note of the implementation of the commitments Hungary made in 2022 and 
the willingness to address outstanding issues. At the same time, the reassessment concludes that 
cross-cutting  issues  have  not  yet  been  addressed,  and  no  further  remedies  were  adopted  by 
Hungary. This leaves the risk for the Union budget at the same level as identified by the Council 
Implementing Decision. In light of this, the Commission decided that it could not propose the 
Council to adapt or lift the budgetary protective measures.  

However, for a full and overall appreciation of the effectiveness of the measures, all elements 
of the Conditionality Regulation aimed at addressing the identified breaches of the principles 
of the rule of law (see section 5.1 below) should be considered, taking into account the entire 

47 

Judgment of the Court (Full Court) of 16 February 2022, Hungary v European Parliament and Council of the 
European Union, C-156/21, ECLI:EU:C:2022:97, in particular paragraphs 328-333 and 344. 

13 

 
 
 
procedure, including remedial measures submitted by the Member State concerned before the 
adoption of budgetary measures by the Council.  

Apart  from  effectiveness,  the  Conditionality  Regulation  also  considers  the  protection  of  the 
rights of final recipients of beneficiaries48. Under Article 5(2) of the Conditionality Regulation, 
unless  the  relevant  Council  Implementing  Decision  provides  otherwise,  the  imposition  of 
measures does not affect the obligations of government entities or Member States to implement 
the programme or fund affected by the measure.  

In practice, following measures imposed because of the conduct of its authorities, a Member 
State is not relieved of its obligations to implement the Union budget, including paying those 
who should ultimately receive the Union funding. The Member State remains required to fulfil 
its  obligations,  provided  any  such  obligations  existed  before  the  adoption  of  the  relevant 
Council  Implementing  Decision  or  are  established  following  it.  At  the  same  time,  the 
suspension of EU funding under the Regulation may lead to a situation where the policy areas 
concerned by breaches will not benefit from the entire pre-assigned amount of Union funding 
when  they  otherwise  should,  as  long  as  the  suspension  is  maintained.  As for  any  budgetary 
measure, the Member State concerned must act to take swift and substantial action to allow for 
the  lifting  of  possible  budgetary  protection  measures  imposed  due  to  the  conduct  of  public 
authorities. 

5.  EFFECTIVENESS OF THE PROCEDURE 

5.1.  Effectiveness  of  the  procedure  to  address  the  identified  breaches  of  the 

principles of the rule of law 

The assessment of the effectiveness of the procedure under the Conditionality Regulation  to 
address the identified breaches of the principles of the rule of law is based on a single case of 
application of the Conditionality Regulation, which has to be seen also in a wider context of 
several  actions  that  were  taken  to  enhance  the  protection  of  the  Union  financial  interest.  In 
practice, these actions result from the entire procedure initiated in the case of Hungary in April 
2022,  even  before  the  adoption  of  measures  by  the  Council.  They  are  without  prejudice  of 
further developments that could only be observed after the publication of this report, be they 
positive or negative. 

In the case of Hungary, the Commission identified widespread and intertwined deficiencies, 
weaknesses,  and  risks,  which  put  at  particular  risk  the  Union  budget  implemented  through 
public procurement and funding implemented for the benefit of public interest trusts and entities 
maintained by them.  

Hungary committed to the adoption of 17 remedial measures before the adoption of the proposal 
for a Council Implementing Decision: such measures were meant to address the findings in the 
Commission’s written notification. Following the opening of the procedure against Hungary 
and  the  intention  to  propose  budgetary  measures  to  the  Council  (which  the  Commission 
communicated to Hungary with a letter pursuant to Article 6(7), the “Intention Letter”), in 2022, 

48  Recital 19 of the Conditionality Regulation reads ‘[i]t is essential that the legitimate interests of final recipients 
and  beneficiaries  are  properly  safeguarded  when  measures  are  adopted  in  the  event  of  breaches  of  the 
principles of the rule of law. When considering the adoption of measures, the Commission should take into 
account their potential impact on final recipients and beneficiaries.’ 

14 

 
 
 
 
Hungary has proposed a number of relevant reforms, taking legislative and non-legislative steps 
to implement the proposed remedial measures.  

For each remedial measure, Hungary proposed detailed and realistic commitments and steps 
that  could  address  the  issues  identified  in  the  course  of  the  procedure.  On  that  basis,  the 
Commission assessed the remedial measures proposed by Hungary as pertinent and adequate 
in principle, if correctly and fully implemented49. 

By way of example of these commitments, which Hungary has been implementing: 

a)  To reinforce the prevention, detection and correction of illegalities and irregularities 
concerning  the  implementation  of  Union  funds  through  public  procurement  in 
Hungary, a new Integrity Authority was set up. While the regulatory framework as 
set  out  in  the  Act  establishing  the  Integrity  Authority  (the  ‘Integrity  Authority 
Act’ 50) does not fulfil certain commitments taken under the remedial measure51, the 
introduction of an independent authority with powers to detect, prevent and correct 
illegalities and irregularities is already a major step forward for the protection of the 
Union’s financial interests. Its long-term systemic impact can only be assessed later 
on in view of its operation but the setting up of such a body is an improvement that 
has a clear link to this procedure. 

b)  A new Anti-Corruption Task Force was established, with the participation of non-
governmental  actors  selected  in  an  open  and  transparent  manner.  Among  its 
competences, the Anti-Corruption Task Force can present proposals for measures 
aimed at improving corruption prevention and detection; it has also been consulted 
on important aspects of the Hungarian anti-corruption framework and contributes to 
the scrutiny of trends of corruption with its annual report. The existence of such a 
task  force,  with  the  involvement  and  parity  of  representation  of  relevant  and 
independent non-governmental organisations is already a step in the right direction 
which has been undertaken under this procedure. 

c)  The  anti-corruption  framework  was  strengthened  with  the  broadening  of  the 
personal scope of asset declarations to include persons entrusted with senior political 
functions and members of the National Assembly, as well as relatives living in the 
same household, in addition to extending the material scope to include all relevant 
assets. However, important weaknesses, risks and shortcomings remained as regards 
certain  elements  of  the  asset  declaration  system  which  create  possible  loopholes 
undermining the effectiveness of the measure52. Despite the weaknesses that remain 
to be solved, the already introduced measures have clear links to this procedure. 
d)  Hungary adopted a legislative act amending certain Acts concerning public interest 
asset management foundations performing public duty (also called “public interest 
trusts”)53, which  entered into  force on 13  October 2022.  It  enlarged the scope of 
rules on public procurement and on conflict of interests to cover also public interest 
asset  management  foundations  performing  public  duty.  However,  important 

49   See recitals 28-39 of the Proposal for a Council Implementing Decision; the Explanatory Memorandum of the 

Proposal contains further details on the Commission’s assessment. 

50  Act XXVII of 2022 on the control of the use of European Union budget funds, entered into force on 11 October 

2022. 

51  Council Implementing Decision, recital 36. 
52  Council Implementing Decision, recital 41. 
53  Act XXIX of 2022. 

15 

 
 
 
shortcomings  that  maintained  or  even  aggravated  possible  conflicts  of  interest, 
remain54. 

e)  Hungary introduced a specific procedure in the case of special crimes related to the 
exercise of public authority or the management of public property, which allows for 
the review of the decision by the prosecution service not to prosecute a case or the 
decision of the investigative authority not to investigate. The Integrity Authority was 
also given powers to file a motion for revision or repeated revision with this new 
procedure.  However,  certain  weaknesses,  such  as  those  introducing  a  margin  of 
discretion  in  the  procedure,  remain55.  The  existence  of  this  procedure  gives 
additional  oversight  to  the  work  of  the  prosecution  which  can  trigger  increasing 
prosecutorial efforts. 

f)  To strengthen audit and control mechanisms to guarantee the sound use of Union 
support, Hungary established by law the Directorate of Internal Audit and Integrity 
to improve compliance with conflict of interest rules, and amended the regulatory 
framework to guarantee the independence of the Directorate-General for Audit of 
European Funds (‘EUTAF’) responsible for conducting independent audits over the 
implementation of Union support in Hungary. Moreover, Hungary strengthened the 
rules  applicable  to  the  implementation  and  control  of  Union  support  to  more 
effectively prevent, detect and correct conflicts of interest56. 

g)  After Hungary undertook to significantly reduce the share of single bids financed 
from Union funds, the share dropped to the envisaged level57. However, it should be 
monitored whether this level will be maintained in the long-term.  

h)  Hungary developed a new monitoring and reporting tool, which has been audited as 
operational, functional and capable of monitoring the ratio of single bid procurement 
procedures.  This  was  further  developed  in  December  202258.  This  contributes  to 
keep under public scrutiny public procurement procedures closed with single bids. 
i)  Similarly, with a view to increasing public scrutiny on public procurement, Hungary 
completed the development of the Electronic Public Procurement System database 
by 30 September 2022, including information on contract award notices of public 
procurement  procedures,  company  identification  numbers  and  the  names  of  each 
individual member of the consortia and the subcontractors59. 

j)  On  5  September  2022,  the  Government  Decision  1425/2022  established  a 
performance measurement framework to assess the efficiency and cost effectiveness 
of public procurements, which was published on the Electronic Public Procurement 
on 30 November 202260. 

k)  On 4 October 2022 Act XXIX of 2022 was adopted to strengthen cooperation with 
OLAF,  by  designating  the  National  Tax  and  Customs  Administration  as  the 
competent national authority to assist OLAF and to introduce a dissuasive financial 
sanction  to  be  imposed  in  case  an  economic  operator  refuses  to  cooperate  with 

54  Council Implementing Decision, recitals 42-43. 
55  Council Implementing Decision, recital 46. 
56  Council Implementing Decision, recital 47. 
57  Council Implementing Decision, recital 48. 
58  Council Implementing Decision, recital 49. 
59  Council Implementing Decision, recital 50. 
60  Council Implementing Decision, recital 51. 

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OLAF61. This amendment facilitates the work of OLAF when carrying out on the 
spot checks in the course of its investigations.  

All  the  above  demonstrates  that  the  procedure  effectively  spurs  changes  that  increase  the 
protection of the financial interests of the Union from breaches of the principles of the rule of 
law.  In  the  Commission’s  assessment,  other  instruments  under  Union  legislation  would  not 
have led to the same results. 

These  remedial  measures  were  taken  into  account  by  the  Commission  when,  given  the 
remaining deficiencies, it proposed to the Council to adopt budgetary measures in relation to 
Hungary under the Conditionality Regulation. Any further remedy to be adopted by Hungary 
to  request  the  lifting  of  the  budgetary  measures  could  be  considered  as  adequate  only  if  it 
remedies in full the situation that led to their adoption. 

While the measures adopted by the Council are effective to protect the Union budget concerned 
(see Section 4 above), the Commission will continue to monitor closely developments on the 
ground that may hamper or undo the remedies already adopted by Hungary, as well as those, if 
any, that will address the outstanding issues and possibly lead to the lifting of measures.  

5.2.  Effectiveness of the procedure – the steps provided for in the Conditionality 

Regulation 

The Conditionality Regulation has been in force for three years, and so far, the procedure under 
the Conditionality Regulation has led to the adoption of protective measures once, in the case 
of Hungary. The adoption of the Guidelines, in line with the case law of the Court of Justice of 
the European Union, provided more clarity and predictability as regards the procedure. Further 
development  of  the  case  practice  in  the  enforcement  of  the  Conditionality  Regulation  will 
provide  more  specifications  and  examples  on  the  application  of  the  Regulation  and  the 
procedure provided therein. 

The procedure, from the moment a written notification is sent, is relatively quick, as it can be 
concluded in a time-limited period ranging from five to nine months. The time limits for the 
Commission allow for little flexibility and are in certain phases particularly challenging. For 
instance, to decide whether measures should be proposed to the Council, the Commission has 
one month to assess the observations of the Member State, including remedial measures if any, 
consult internally to gather the expertise needed, draft and adopt a reasoned decision. Taking 
the example of Hungary, the Member State did not submit remedial measures in reply to the 
written notification from the Commission. Instead, remedial measures were only submitted at 
a later stage, i.e. in reply to the Intention letter. This shows that, where the remedial measures 
submitted by a Member State at that stage are numerous and/or complex to assess, the overall 
effectiveness  of  the  procedure  could  benefit  from  more  flexibility  in  the  application  of  the 
mentioned one-month deadline. 

Another element that may improve the effectiveness of the procedure is ensuring that, when 
submitting its observations to the Commission, the Member State also puts forward the views, 

61  Council Implementing Decision, recital 53. 

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if any, of the government entities62 that may be concerned by the measures. That would allow 
an even more granular assessment of the issues at stake and of the measures that would be most 
effective. 

Finally,  given  the  lack  of  experience  of  the  procedure  under  Article  7  of  the  Conditionality 
Regulation, regarding the lifting of measures, it is too early to  report any observation on its 
effectiveness.  

6.  CONCLUSION 

The analysis provided in this report shows how the Conditionality Regulation has been applied 
in the past three years.  

While it is too early to draw definitive conclusions on the procedure and the effectiveness of 
the protective measures adopted under the one case that led to the adoption of measures by the 
Council, at this stage the analysis outlined in this report confirms their effectiveness and their 
potential looking forward. 

A more extensive case practice would allow to better identify possible improvements, if any. 
The  Commission  will  continue  to  gather  and  rigorously  assess  information  indicative  of 
breaches  of  the  principles  of  the  rule  of  law  in  Member  States  that  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. 

Based on a more established case practice, the Commission may review the Guidelines to take 
into account  developments  in  its practice,  relevant  changes to  Union legislation,  or relevant 
case  law  of  the  Court  of  Justice  of  the  European  Union.  Such  review  would  be  done  after 
consultation of the Member States and the European Parliament.  

62  A government entity is defined in Article 2(b) of the Conditionality Regulation as a public authority at any 
level of government, including national, regional and local authorities, as well as Member State organisation 
within  the  meaning  of  point  (42)  of  Article  2  of  Regulation  (EU,  Euratom)  2018/1046  of  the  European 
Parliament and of the Council (16) (the ‘Financial Regulation’). Government entities, as recipients of funding 
under direct or indirect management, can be affected by measures under Article 5(1)(a) of the Conditionality 
Regulation. 

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