The European Commission decided, on Wednesday 27 April, to initiate for the first time the procedure against Hungary that could lead to the suspension of EU funds for breach of the Rule of law.
“Hungary is now invited to respond to the Commission’s concerns. As part of our duty to protect the budget, the Commission continues to examine all Member States under this instrument”, commented the EU Commissioner for Budget Johannes Hahn.
For the MEP, Petri Sarvamaa (EPP, Finland), rapporteur on this dossier, this is a “historic day”.
In accordance with Article 6 of Regulation 2020/2092 on a general system of conditionality for the protection of the Union budget, the Commission sent Hungary a “written notification” setting out the facts and the precise grounds on which it based its findings of a breach of the Rule of law to the detriment of the EU budget.
In November 2021, the Commission had sent administrative letters to Hungary and Poland. “And now we are making a first notification to Hungary”, an EU source confirmed on Wednesday, adding that it was an “important day”.
Commission President Ursula von der Leyen had announced, on Tuesday 5 April, that the procedure under the Rule of Law Regulation (see EUROPE 12926/15) had been launched against Hungary.
This is the beginning of a procedure that can take up to 9 months before the final decision, by the EU Council, imposing a suspension of the payment of EU funds.
“This is an administrative procedure, not a criminal one”, a European source also said. The notification letter has no legal effect and only at the end of the process, when the EU Council decision is taken by qualified majority, can the country concerned lodge an appeal with the EU Court of Justice.
In the notification letter, the Commission identifies matters where it has good reason to believe that the conditions for the application of the Regulation are met and that there is a breach of the Rule of law. This breach could seriously affect the EU’s financial interests, an EU source confirmed.
“Collaboration” with Hungary is desired. The Commission is giving the Hungarian authorities 2 months to “respond, provide information and propose corrective measures, if necessary; this is a collaborative procedure”, commented a European source.
The aim would be to reach an agreement, if possible, so that the procedure can be completed after the letter is sent.
The Commission, after receiving the Member State’s reply, will have 1 month to assess the situation and, if it considers that the problems have not been resolved, it will contact the country again. It will explain in more detail “where the problem lies” and indicate what measures it plans to take to resolve the problems, another EU source said.
Hungary will again have the opportunity to respond in case of persistent disagreement. The final step will be for the College of Commissioners to make a proposal for corrective measures, which will have to be adopted by the EU Council by a qualified majority.
The procedure can end quickly or last between 5 and 9 months, depending on the assessments within the Commission.
The Member State concerned may ask the President of the European Council to refer the matter to the next European Council.
Many grievances. The Commission’s decision to initiate the procedure was based on numerous findings of breaches of the Rule of law in Hungary. The Commission is seriously concerned about a number of situations in which Hungary uses the EU budget: “public procurement, functioning of the authorities implementing the EU budget, audit, transparency, fraud prevention, corruption and other breaches of EU law. This situation has been going on for more than ten years”, summarised a European source.
The Commission has other concerns that make the situation even more serious, especially with regard to public procurement, by “limiting” effective investigation and prosecution. The strategy to fight corruption is not effective enough, the Commission also points out. “The situation is worrying with regard to respect for the Rule of law”, summarised a European source.
The measures that can be taken by the EU Council are neither fines nor sanctions, the Commission recalls. These are administrative measures (suspension of payments, interruption of payments). This regulation applies to all payments that can be made from 1 January 2021 (entry into force of the text), including legal commitments from the previous Multiannual Financial Framework (MFF) (2014-2020).
Protection of final beneficiaries. In case of suspension of EU funds, the Commission, in place of the Member State, will not pay the final beneficiaries. The Commission will check that the country in question is paying its debts to the final beneficiaries and can intervene if this is not the case. The Commission will focus on measures that have the least possible impact on the final beneficiaries.
The Court of Justice of the EU rejected the appeals of Poland and Hungary against this Rule of law conditionality mechanism (see EUROPE 12892/1). (Original version in French by Lionel Changeur)