Rule of Law and the Veto of Poland and Hungary on the European Budget
By: Francesca Principe
Tags: European Union, Government, Politics, Law, Democracy

Photo by Jakob Braun on Unsplash

As is well known, the European Union is a unique political and economic union of States. The construction of a united Europe is based on values and principles to which the Member States are committed. Among these principles, Article 2 includes the rule of law. It permeates many aspects of EU law, from the accession process to — until recently — the European budget. In order to understand the importance of this principle and how it came into the spotlight following the veto of Poland and Hungary on the European budget, it is necessary to provide a definition of rule of law and review the steps that led to this veto. Let’s begin.

Rule of law definition and its fundamental value

The rule of law is the mechanism, process, or norm that supports the equality of all citizens before the law, secure a nonarbitrary form of government, and more generally prevents the arbitrary use of power. At the EU level, the rule of law means that everything the EU does is founded on treaties, voluntarily and democratically agreed by its members. If a country wants to enter the European Union, it must achieve some established goals and it has to fulfill some requirements to become legally part of the EU. These requirements are set out in the Copenhagen Criteria, also known as Accession Criteria. They are a set of conditions and principles to which any country wishing to become an EU member must conform.[1] In order to become an EU member, the State must fulfil essentially three criteria: the political criterion, which means the presence of stable institutions guaranteeing democracy, the rule of law, human rights, and the respect and protection for minorities; the economic criterion, which implies the existence of a viable market economy able to copy with forces and competitive pressure within the Union; the acquis communautaire criterion, which is the ability to assume the obligations arising from the accession. For the European Council to decide on the launching of the EU accession negotiation, the political criterion — to which the rule of law belongs — must be fulfilled. This says a lot about the primary importance of the rule of law within the EU. Even more relevant to understand how the rule of law concept is involved in the approval of the European budget, it is important to remember that these criteria must not only be met at the time of accession to the EU; they must be constantly reinforced by the Member States.

What it means reinforcing the rule of law and what the legal systems of Poland and Hungary have to do with the European Union

Reinforcing the rule of law can mean many things, such as promoting a common rule of law culture, preventing rule of law problems, and providing an effective response. In particular, the role of national courts is enhanced. Indeed, if they are adequately protected from other powers in terms of independence, this can effectively represent the first level of monitoring the reinforcing of the rule of law within each Member State. That is why it is important to briefly analyze what happened to the legal systems — particularly the judicial systems — of Poland and Hungary before addressing the reasons which have led to their veto on the EU budget.

The Constitutional principles of organization and functioning of the judiciary in Poland cover the legal and organizational status of court authorities, proceedings before courts, and the legal status of the judge. The judicial system in Poland is composed of the Supreme Court and the common, administrative and military Courts. Common court are divided into regional courts, which are courts of the first instance, and they handle most cases, except cases reserved for other courts; district courts, which function as both first and second instance courts, handling serious cases and appeals; appeal courts, which are the second instance courts, and their jurisdiction covers a territory of at least two regional courts. It is also important to mention the Constitutional Tribunal, which is an organ of the judiciary which remains a separate body from the court system. The Tribunal is competent to decide the conformity of the issued law with the Constitution, disputes concerning competence between the organs of central administration, the conformity of the political parties’ tasks with the Constitution and to hear constitutional complaints filed by citizens. Lastly, the National Council of the Judiciary, which is a constitutional body obliged to uphold the independence of the courts and judges, responsible for appointing judges to the Supreme Court.[2] In Hungary, the functioning of the State is based on the principle of the division of powers. In particular, the Parliament is the supreme legislative body, the Government is the executive branch and the Judiciary is the system of courts. The judicial organization is one of the basic pillars of the Hungarian rule of law, and it is composed of district courts, administrative and labor courts, regional courts, regional courts of appeal, and the Curia. The different court levels are closely interconnected but there is no subordination between the respective levels: the courts situated higher in the hierarchy do not have any right to give instructions. Judges shall be independent and only subordinated to laws, and may not be instructed in relation to their judicial activities.[3]

In the last few years, Poland and Hungary have implemented policies which, in various ways, have undermined the foundations of the EU principles, leading to the activation of the procedure under Article 7 TEU. According to this procedure, the European Union may determine that “there is a clear risk of a serious breach by a Member State of the values referred to in Article 2”.[4] Since 2017 the Polish government has put into effect a series of reforms that have raised the European Union's concern. Among others, the reform in question regards the lowering of the retirement age of the Supreme Court judges, and the attribution to the President of the Republic of the discretionary power to extend the active judicial function of these judges beyond the retirement age newly fixed.[5] These reforms undermine the independence of the judiciary which, as we have seen, constitutes an important part of the rule of law notion. Regarding Hungary, the government has actively engaged in major constitutional reorganization in the country. The results of this process have been manifested, among other things, in a substantial decrease of independence of the judiciary and the deterioration of academic freedom. This triggered the procedure under article 7 TEU, on the basis of the proposal by the European Parliament, which observed the presence of potential violations not only of the rule of law, but also of other EU fundamental values such as the respect and protection of human and social rights, the system of checks and balances, equality and non-discrimination.[6]

What the rule of law has to do with the European budget

Apparently, the rule of law and the European budget has nothing to do with each other. At least until the European Parliament and the Council of the European Union have reached a provisional agreement on the conditionality mechanism for the protection of the budget of the Union on 5 November. According to this mechanism, the EU could stop funding governments for disrespect of fundamental values, such as the rule of law.[7] Given the abovementioned situation in Poland and Hungary, it seems that the decision of the two States to veto the EU budget (Multiannual Financial Framework) was used as a way to express their disagreement with the application of this mechanism. Indeed, since the EU is currently investigating both countries, the clause threatens to cost them a lot of euros in EU funding, should it be applied to them. Therefore, it is possible to imagine that an agreement on the European budget will not be reached until a solution is found on the conditionality mechanism which, according to Poland and Hungary, “applies vague definitions and ambiguous terms without clear criteria on which sanctions can be based, and contains no meaningful procedural guarantees”.[8] To understand the consequences of this veto, it is necessary to refer to the European Union Treaties. According to the procedure of Article 312 TFEU, if unanimity (requested for the approval of the Multiannual Financial Framework) could not be reached within the Council by the end of the current year, a “provisional” management phase would begin with the possibility of very low expenditure precisely because of the temporary basis on which to make decisions. This would entail a delay in the implementation of the Multiannual Financial Framework (which also includes the Next Generation EU recovery plan), with the consequent impossibility for all European States (Poland and Hungary included), but especially for those in difficulty due to the Covid-19, to take advantage of European funds.

[1] Curious fact: these criteria were defined by the European Council of Copenhagen in 1993 and reinforced by the European Council of Madrid in 1995.

[2] Rakowski, Piotr Rakowski, and Robert Rybicki. “UPDATE: An Overview of Polish Law.” GlobaLex, Apr. 2020, www.nyulawglobal.org/globalex/Poland1.html.

[3] Courts of Hungary. “Judicial System.” Courts of Hungary, 2020, birosag.hu/en/judicial-system.

[4] On the basis of a proposal from one-third of the countries of the European Union, or the Commission or the European Parliament, the Council — acting by a majority of four-fifths of its members and after having to obtain the assent of the European Parliament — can establish there is a clear risk of a serious breach of the fundamental principles of the EU. After having determined the risk of a serious breach by a Member State of the values referred to in Article 2, the Council shall first address recommendations to the Member State, if it considers it appropriate. The Member State is then invited to submit observations, and the Council at this point decides unanimously on the existence of the alleged infringement. At this stage, the Council may decide to suspend certain rights deriving from the application of the Treaties, such as the voting rights of the representative of the government of that Member State in the Council.

[5] European Parliament. “Rule of Law in Poland: MEPs Point to ‘Overwhelming Evidence’ of Breaches | News | European Parliament.” Www.Europarl.Europa.Eu, 14 July 2020, www.europarl.europa.eu/news/en/press-room/20200712IPR83209/rule-of-law-in-poland-meps-point-to-overwhelming-evidence-of-breaches. Accessed 1 Dec. 2020.

[6] European Parliament. “Rule of Law in Poland and Hungary Has Worsened | News | European Parliament.” Www.Europarl.Europa.Eu, 16 Jan. 2020, www.europarl.europa.eu/news/en/press-room/20200109IPR69907/rule-of-law-in-poland-and-hungary-has-worsened.

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[7] It is worth pointing out that this new mechanism is not intended as a punishment for the citizens of the State affected by the suspension. Indeed a web platform is envisaged in order to collect complaints directly from the citizens and ensure the continuity of the disbursement of funds. The aim of this mechanism is to counter the rise of autocratic and illiberal tendencies, corruption, and disinformation, which the EU is currently struggling to limit only through the Article 7 TEU procedure.

[8] Von Der Burchard, Hans. “Hungary and Poland Escalate Budget Fight over Rule of Law.” POLITICO, 26 Nov. 2020, www.politico.eu/article/poland-hungary-budget-democracy-rule-law-orban-morawiecki-merkel/.