The final decision of the EU Council against a Member State under the regulation that allows for the suspension of EU funds in cases of non-compliance with the Rule of law could take between five and nine months after the notification letter is sent, according to information released on Friday 18 February by the European Commission.
The guidelines on this ‘Rule of law conditionality’ mechanism could be adopted in “two to three weeks”, according to EU sources.
On Tuesday 22 February, the ‘General Affairs’ Council will hold a hearing with Poland under the so-called Article 7 procedure of the Treaty on the Rule of law. Several Member States are expected to question the Commission on this occasion on the implementation of the ‘Rule of Law conditionality’ Regulation in the light of the recent judgment of the Court of Justice of the EU (see EUROPE 12892/1).
But the Commission is not in a position at this stage to say when it will send notification letters to Poland and Hungary.
The Commission is assessing the responses of Hungary and Poland to the administrative letters sent in November 2021. It “will continue the process and our assessment based on the information provided by the countries and, if necessary, further clarification will be sought. The Hungarian and Polish cases are treated separately”, said an EU source.
Link to the EU budget. The Commission will have to try to establish a real link between the violation of the Rule of law and a breach of the sound financial management of the Union. The risk must have a high probability of occurring, according to the Court. The link would a priori be easier in the case of Hungary, which has already been asked by the Commission to clarify its position after having stated suspicions of conflicts of interest in public procurement or even of corruption. In the case of Poland, where the most difficult problem is that of the independence of the judiciary and the questioning of the primacy of European law, the link seems more complex to determine.
Guidelines in two to three weeks? The Commission plans to publish guidelines on the implementation of the Regulation in “two to three weeks”. These guidelines will be forwarded to EU Member States for information. “There may be a Rule of law problem that could affect the EU budget, or a problem with the way the budget is spent that originates from a violation of the Rule of law, which will be covered in the guidelines”, an EU source said.
Recovery plans. National Recovery Plans are covered by the scope of the Regulation and the text of the Regulation could have an impact already in the early stages, as the Regulation allows for the suspension of legal commitments (financing agreements that would be adopted after approval of the plan). Another possibility is the suspension of recovery funds at the time of payment. The Commission has yet to approve the recovery plans for Hungary and Poland.
Appeal to the Court of Justice. A Member State may appeal to the Court of Justice of the EU against the decision of the EU Council under this regulation. If there is an appeal against the EU Council’s decision, the Treaty states that “the action does not suspend the facts of the decision”, says an EU source. The only possibility for a State would be to go to the Court and ask for interim measures to, exceptionally, request the suspension of the effects of the decision until the Court’s judgment in the case is published. But the criteria for such interim measures to be accepted are very strict, so it is almost impossible for this to happen, according to certain sources.
Beneficiaries of EU funds in the offending country will have to be protected, the text says. A Member State cannot therefore use the EU Council’s decision on measures under the regulation to withhold payments to beneficiaries.
Calculation of the amounts involved. The mechanism does not aim to sanction Member States, an EU source said. However, the Commission may propose measures to protect the EU budget, such as suspending or freezing payments. But the measures must be proportionate to the impact that these violations would have on the EU’s finances.
The decisive factor, according to the Court of Justice, should be the effect of the breach of the Rule of law on the sound financial management of the EU or on the protection of the EU’s financial interests. It is difficult, without concrete examples, to anticipate what form the measures to suspend funds should take. But measures could be based on an estimate of the amount involved, evidence (ongoing proceedings) and reports from the European Anti-Fraud Office (OLAF) could provide further evidence by investigating the management of funds in Member States. “There is no set methodology, as there are no examples of application; the regulation provides the necessary flexibility. Most likely, the Court of Justice will carry out an analysis and then confirm the calculation methods”, an EU source said.
The Court’s judgment also shows that, when a measure is adopted by the EU Council, this measure must be lifted as soon as one of the two conditions disappears: if there is no longer a breach of the Rule of law or if the link between the breach of the Rule of law and the EU’s financial interests disappears. (Original version in French by Lionel Changeur)