As threat of war looms in Ukraine, two victories for the EU in its struggle with Poland & Hungary over the rule of law

The attention of the EU and its citizens has, quite understandably, been focused in recent weeks on the buildup of Russian troops and equipment near its border and that of Belarus with Ukraine. But while the looming threat of war in Ukraine has captured the headlines, there have been other important developments in Europe in recent weeks, perhaps none more important than two recent victories for the EU in its long struggle with Poland and Hungary over the rule of law. Two weeks ago, after refusing for more than two years to address the EU’s concerns about the lack of judicial independence and impartiality in its disciplinary system for judges, Poland finally threw in the towel and agreed to abolish the Disciplinary Chamber of its Supreme Court and replace it with a new one. And on Wednesday, the European Court of Justice (ECJ) dismissed an action brought by Poland and Hungary calling on the Court to annul a regulation enacted in late 2020 that would allow the Council, at the request of the Commission, to suspend payments from the EU budget or suspend the approval of one or more programs financed by that budget if there is a breach of the principle of the rule of law in a member state.

In the October 2015 election in Poland, Law and Justice (PiS), the conservative and nationalist party headed by Jarosław Kaczyński, won 38 percent of the vote and a narrow majority in the Sejm, the lower house of the parliament, that enabled it to form the country’s first one-party government since the advent of democratic politics in 1991. Soon thereafter, the PiS government embarked on a number of important institutional changes involving the media, the universities, and the courts that were designed to enhance, and indeed ensure, its political control over those institutions and that, once enacted, gave rise to a prolonged and continuing conflict between Poland and the EU over the rule of law.

A new law on the Supreme Court was published in December 2017 and took effect in April 2018. In April 2019, the Commission launched an infringement procedure against Poland on the grounds that the new disciplinary regime for judges created by the law undermined their judicial independence by not protecting them from political control. In particular, it said the new regime didn’t guarantee the independence and impartiality of the Disciplinary Chamber of the Supreme Court, which reviews decisions taken in disciplinary proceedings against judges. The Chamber was composed entirely of new judges selected by the National Council for the Judiciary, whose members are appointed by the Sejm. In October 2019, the Commission referred the case to the ECJ and in January 2020, it asked the ECJ to impose interim measures suspending the functioning of the Disciplinary Chamber. In April 2020, the ECJ ruled that Poland must immediately suspend the application of the provisions in the law pertaining to the powers of the Chamber in disciplinary cases concerning judges until it had rendered its final judgment in the case. Poland refused to comply with the ruling and in December 2020 the Commission sent Poland an additional letter of formal notice that added a new grievance to the case. After concluding that Poland’s response to the letter wasn’t satisfactory, last March it informed the ECJ that Poland “violates EU law by allowing the Disciplinary Chamber of the Supreme Court – the independence of which is not guaranteed – to take decisions that have a direct impact on judges and the way they exercise their function.” It asked the ECJ to order interim measures to “prevent the aggravation of serious and irreparable harm inflicted to judicial independence and the EU legal order.” Specifically, it asked the ECJ to suspend the provisions empowering the Disciplinary Chamber to decide on requests for lifting judicial immunity as well as on matters of employment, social security and retirement of judges, to suspend the effects of decisions already taken by the Chamber, and to suspend the provisions preventing Polish judges from directly applying provisions of EU law protecting judicial independence and from putting references for preliminary rulings to the ECJ.

On July 14, ECJ Vice President Rosario Silva de Lapuerta, aware that the ECJ would be issuing its judgment in the case the next day, issued an emergency order upholding all of the requests of the Commission until the final verdict had been issued. That meant, the order said, that “Poland is obliged to immediately suspend application of domestic provisions relating in particular to the powers of the Disciplinary Chamber of the Supreme Court.” The next day, the ECJ issued its judgment in the case. In it, the Court said that, “taken together, the particular context and objective circumstances in which the Disciplinary Chamber was created, the characteristics of that Chamber, and the way in which its members were appointed are such as to give rise to reasonable doubts in the minds of individuals as to the imperviousness of that body to external factors, in particular the direct or indirect influence of the Polish legislature and executive, and its neutrality with respect to the interests before it and, thus, are likely to lead to that body’s not being seen to be independent or impartial, which is likely to prejudice the trust which justice in a democratic society governed by the rule of law must inspire in those individuals.” It concluded that “by failing to guarantee the independence and impartiality of the Disciplinary Chamber of the Supreme Court,…by allowing the content of judicial decisions to be classified as a disciplinary offence involving judges of the ordinary courts,…by conferring on the President of the Disciplinary Chamber of the Supreme Court the discretionary power to designate the disciplinary tribunal with jurisdiction at first instance in cases concerning judges of the ordinary courts…and, therefore, by failing to guarantee that disciplinary cases are examined by a tribunal ‘established by law’, and by failing to guarantee that disciplinary cases against judges of the ordinary courts are examined within a reasonable time…and by failing to guarantee respect for the rights of defence of accused judges of the ordinary courts, the Republic of Poland has failed to fulfil its obligations under the second subparagraph of Article 19(1), Treaty on European Union.” Article 19(1) requires that national bodies which can rule as courts or tribunals guarantee effective judicial protection by their independence and impartiality. In addition, the Court found that “by allowing the right of courts and tribunals to submit requests for a preliminary ruling to the Court of Justice to be restricted by the possibility of triggering disciplinary proceedings, the Republic of Poland has failed to fulfil its obligations under the second and third paragraphs of Article 267, Treaty on the Functioning of the EU.” Article 267 states that the Court has jurisdiction to give preliminary rulings concerning the interpretation of the Treaties and the validity and interpretation of acts of the institutions, bodies, offices and agencies of the EU.

On July 20, Commission Vice-President Vĕra Jourová announced the Commission had sent a letter to the Polish government, asking it to confirm that it would fully comply with the ECJ’s order and stating that it must inform the Commission about the measures foreseen to that effect by August 16. Two days later, Prime Minister Mateusz Morawiecki suggested that the purpose and functioning of the Disciplinary Chamber should be reconsidered: “Today we are in a situation where the activities of the Disciplinary Chamber of the Supreme Court can and should be reviewed. And this is because this chamber certainly did not meet all expectations, including mine…We are aware, as a Polish society – I think 80, if not 90 percent, of the society – that judges had largely impunity until recently and actually I have not seen any big change in terms of what the situation was before. So, just like any system, any reform, including this one, needs a new analysis.” On July 30, President Andrezj Duda weighed in, saying that “everything indicates that legislative changes will be needed” and that it’s important that judges can be confident the disciplinary system is “really transparent, fair and honest.” Two days later, Morawiecki said he wanted to resolve the issue with the EU: “The situation is complex because we are an EU member, we want to be in the EU, we benefit from free trade, Polish companies are growing, employees have higher earnings. For that reason we must achieve some kind of accord with the EU.” Toward that end, he said he would be proposing amendments to the way judges are disciplined. On August 7, Kaczyński, the long-time leader of PiS and, notwithstanding his position as a Deputy Prime Minister, the de facto political leader of the government, stepped into the fray and clearly came down on Morawiecki’s side, signaling that Poland would modify the law pertaining to the Disciplinary Chamber: “We will dissolve the Disciplinary Chamber as it currently operates and in this way the subject of the dispute will disappear.” He said the government will do that not because of the ECJ’s decision, which he said Poland doesn’t recognize, but, rather, because the government has been dissatisfied with it and has been planning to make some changes: “We want to reform the chamber not because of the EU Court of Justice ruling, but simply because this chamber has not fulfilled its obligations.” He said the government would bring forward a proposal to modify the disciplinary regime in September: “It will be a completely different entity. That will be a test as to whether the EU is ready to show at least a semblance of good will, or whether the rule is that Poland should be ruled by those who are picked by the EU institutions.”

On August 16, Morawiecki said Poland would submit a response to the Commission’s request that it confirm by that day that it will comply with the ECJ’s July 14 order and July 15 judgment. He said a “comprehensive response” was being prepared and “will be submitted to the European Commission by the end of the day in due course.” The next morning, the government said it had sent a letter to the Commission informing it that it “plans to dissolve the Disciplinary Chamber in its current form” and draft new regulations concerning a disciplinary system for judges as part of a wider reform of the judicial system in the coming months: “Poland will continue reforms of the judiciary, also in the area of judges’ answerability, aimed at improving the efficiency of this system.” But on September 7, after studying Morawiecki’s letter, the Commission wasn’t persuaded Poland would in fact comply with the ECJ’s July 14 order and July 15 judgment and decided to request the ECJ to impose financial penalties, in the form of substantial daily payments, on Poland. On October 27, the ECJ ordered Poland to pay the Commission a daily penalty of €1 million for failing to comply with the July 14 order to adopt a series of interim measures pertaining to the Disciplinary Chamber. Finally, on February 3, after a penalty that by then involved almost €100 million, Duda announced that he had submitted legislation to the Sejm to abolish the Disciplinary Chamber of the Supreme Court. He said the chamber’s judges would be offered either retirement or a position in another chamber of the Court and that disciplinary cases involving judges would henceforth be heard by a panel of 11 Supreme Court judges chosen through a random draw.  

The ECJ’s decision on Wednesday concerned the so-called conditionality mechanism that was agreed upon, in very general terms, by the leaders of the 27 EU member states in a five-day meeting in July 2020 that was focused on addressing the economic consequences of the Covid pandemic. Meeting as the European Council, the leaders approved a €750 billion recovery program comprised of €390 billion in grants and €360 billion in loans to the member states that would be financed by issuing debt and would be administered by the Commission, in addition to its €1.074 trillion Multiannual Fiscal Framework (MFF), the EU’s seven-year budget for 2021-27. One of the provisions the leaders included in the recovery plan – and one of the reasons the July meeting went on for five days – was the stipulation that disbursements would be conditional on adherence to the rule of law. Proposed and advocated by the leaders of a number of member states in Western Europe who were concerned about the erosion of the rule of law as a result of political interference in the judicial system, tolerance of political corruption, or politically-motivated interference with the media and educational institutions in some of the central and eastern European member states, and agreed only after Hungarian Prime Minister Viktor Orbán and Polish Prime Minister Mateusz Morawiecki insisted that it be substantially softened, the provision would allow disbursements under the recovery plan to be suspended if there were “generalized deficiencies” in the rule of law that would directly affect the budget.

In September 2020, the German presidency of the Council of Ministers proposed a regulation that would, under certain circumstances, provide for the suspension of disbursements to a member state that was in violation of one of the foundational values of the EU, such as judicial independence and the rule of law, but only if the violation affected the spending of funds and if no other member state opposed the suspension. The proposed regulation was rejected by a substantial majority of the European Parliament, which regarded it as too lenient and tolerant of breaches of the rule of law, and also by several member states that supported rule-of-law conditionality in regard to budget disbursements. Since approval of the MFF requires the approval of the Parliament and the unanimous approval of the Council of Ministers, the opposition of the Parliament and some of the member states to the proposed regulation meant the MFF would not be approved, as a result of which there would be no new EU budget as of Jan. 1, 2021 that included an increase in “own resources” revenue from the member states that would enable the EU to service the €750 billion in debt it would need to issue in order to fund the recovery program. Without approval of the new MFF, there would be no recovery program.

Eventually, after two months of discussion, the EU ambassadors and negotiators for the Parliament agreed on language for a rule-of-law regulation that not only made the disbursement of funds conditional on respect for EU values, including the independence of the judiciary, but broadened the definition of breaches of the rule of law to include violations that don’t have a direct and immediate effect on the budget and involve only a potential future risk for the EU budget. The Commission would have the power to identify potential future risks to the rule of law and propose a suspension or reduction of funds that would require approval by a majority of member states within a month in order to take effect. The Parliament liked the new language and, with the new language in the regulation, approved the MFF. But not surprisingly, Orbán and Morawiecki didn’t like the new language and made it clear that Hungary and Poland wouldn’t approve the MFF as long as disbursements were subject to rule-of-law conditionality. At a meeting of the EU ambassadors in mid-November 2020, the Hungarian and Polish ambassadors vetoed the MFF, which meant there would not be the modest increment revenue from “own resources” in 2021 that would enable the EU to service the debt that would fund the recovery program. It also meant, in accordance with EU rules, that the budgeted revenue for each month in 2021 would be 1/12^th of the annual revenue in 2020.

To underscore their determination to block the inclusion of any rule-of-law conditionality in regard to the disbursement of funds, including the €750 billion in the recovery plan, Orbán and Morawiecki issued a joint declaration in which, while proclaiming their commitment to the values of the EU, they objected to the link between the EU budget and the rule of law. They said the outcome of the negotiations between the Council Presidency and the European Parliament didn’t conform to the agreement reached by the leaders in July and claimed that, rather than strengthening the rule of law, the conditionality mechanism would “undermine the Rule of Law within the Union by degrading it to a political instrument.” The proposed conditionality, they said, “circumvents the Treaty, applies vague definitions and ambiguous terms without clear criteria on which sanctions can be based and contains no meaningful procedural guarantees.” They called for a “substantial modification” of the regulation and proposed that its scope be limited to “the protection of the financial interests of the Union in accordance with the July conclusions of the European Council.” And they proposed that the European Council discuss “whether a link between the Rule of Law and the financial interests of the Union should be established. If it is so decided, then the appropriate procedures foreseen by the Treaties, including the convening of an intergovernmental conference, should be considered in order to negotiate the necessary modifications of the Treaties.” In concluding, they declared, “We have decided to align our positions on these issues. Neither Poland nor Hungary will accept any proposal that is deemed unacceptable by the other.” The next day, Morawiecki spoke with German Chancellor Angela Merkel and told her Poland was prepared to veto the MFF and, with it, the €750 billion recovery fund.

After the veto, some members of the European Parliament suggested the recovery fund should be separated from the MFF and created as a separate instrument by an intergovernmental treaty of the 25 other member states in a manner somewhat analogous to the creation during the eurozone debt crisis of the European Stability Mechanism. Others suggested that, if Poland and Hungary continued to veto the MFF, the other 25 member states could create the recovery fund through the EU’s “enhanced cooperation” procedure. And Johannes Hahn, the EU budget commissioner, made it clear the Commission’s lawyers had identified ways to get around a Polish and Hungarian veto. Soon thereafter, Polish Deputy Prime Minister Jarosław Gowin, after noting that “a possible veto would not only trigger the provisional budget [the month-by-month allocation of 1/12^th of the current budget] but also something my interlocutors called Plan B…which is some form of cooperation between the 25 other countries,” proposed a “good compromise…a binding declaration interpreting [the rule-of-law regulation]. The interpretative declaration could be a clear statement from the European Council that the conditionality rule would not be used to exert unjustified pressure on individual member states in areas other than the proper use of EU funds.”

Based on that suggestion, the German Presidency took the lead in negotiating an interpretative declaration. Eventually, Poland and Hungary agreed to the provisions that would be included in a Commission declaration pertaining to the rule of law and the German Presidency presented a summary to the EU ambassadors and then to the European Council at its meeting in December 2020. At the meeting, the EU leaders welcomed the Commission’s intention to adopt a declaration, to be entered in the minutes of the Council when it decided on the rule-of-law regulation, that expressed its commitment to apply the elements agreed by the European Council in applying the regulation – specifically, that the objective of the regulation was ensure sound financial management and protect the budget and the EU’s financial interests from fraud, corruption and conflict of interest; that application of the conditionality mechanism under the regulation would be “objective, fair, impartial and fact-based, ensuring due process, non-discrimination and equal treatment of Member States;” that in order to ensure that those principles are respected, the Commission would develop and adopt guidelines on the way it would apply the regulation, including a methodology for carrying out its assessments; that should an action for annulment be introduced with regard to the regulation, the guidelines would be finalized only after the judgment of the European Court of Justice so as to incorporate any relevant elements from the judgment; that until such guidelines were finalized, the Commission would not propose measures under the regulation; that measures under the regulation would be considered only when other procedures set out in EU law would not protect the budget more effectively; that the measures taken under the regulation would be proportionate to the impact of the breaches of the rule of law on the sound financial management of the budget or on the EU’s financial interest, and the causal link between such breaches and the negative consequences on the EU’s financial interests would be sufficiently direct and duly established; that the triggering factors set out in the regulation would be applied as a closed list and not open to factors or events of a different nature; that any formal opening of the procedure would be preceded by a thorough dialogue with the member state involved so as to give it the possibility to remedy the situation; that the Commission would bear full responsibility for autonomously assessing whether the conditions for the adoption of measures existed and would bear full responsibility for the accuracy and relevance of the information and findings on which it based its assessment; that the measures adopted under the mechanism would be promptly reviewed at the initiative of the member state or by the Commission no more than one year after their adoption by the Council; that if the Commission decided not to submit a proposal to lift the measures, it would state the reasons for its decision and would make its reasons known at a meeting of the Council; and that if the member state concerned submitted a request for review by the European Council, the president of the European Council would put the item on its agenda and the European Council would “strive to formulate a common position on the matter.”

The European Council agreed that those elements, taken together, “constitute an appropriate and lasting response to the concerns expressed” and invited the European Parliament and the Council “to immediately take the necessary steps for the adoption of the whole package of relevant instruments, including the MFF regulation and the Own Resources Decision.” On December 16, 2020, the Parliament and the Council approved Regulation 2020/2092 “on a general regime of conditionality for the protection of the Union Budget.” And with that approval, the MFF, with the increase in “own resources” needed in order to service the €750 billion of debt to be issued to fund the recovery plan, was approved. Soon thereafter, the EU went to the capital markets and advised the member states to prepare and submit their plans on how they would make use of the grants and loans they wished to receive from the newly-created Recovery and Resilience Facility.  

Although Hungary and Poland approved the conditionality regulation, both immediately brought an action before the ECJ requesting its annulment. They based their actions on the absence of an appropriate legal basis in the Treaty on European Union and the Treaty on the Functioning of the European Union; the circumvention by the Parliament and Council of the procedure pertaining to the rule of law laid down in Article 7 of the TEU; and the EU having exceeded its powers and on a breach of the principle of legal certainty. On Wednesday, the ECJ dismissed their actions “in their entirety.” It found, in the first place, “that the procedure laid down by the regulation can be initiated only where there are reasonable grounds for considering not only that there have been breaches of the principles of the rule of law in a Member State, but, in particular, that those breaches affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way. In addition, the measures that may be adopted under the regulation relate exclusively to the implementation of the Union budget and are all such as to limit the financing from that budget according to the impact on the budget of such an effect or serious risk. Accordingly, the regulation is intended to protect the Union budget from effects resulting, in a sufficiently direct way, from breaches of the principles of the rule of law and not to penalize those breaches as such….The sound financial management of the Union budget and the financial interests of the Union may be seriously compromised by breaches of the principles of the rule of law committed in a Member State…. Accordingly, a horizontal “conditionality mechanism”, such as that established by the regulation…is capable of falling within the power conferred by the Treaties on the European Union to establish “financial rules” relating to the implementation of the Union budget. In the second place, the Court finds that the procedure established by the regulation does not circumvent the procedure laid down in Article 7 TEU and respects the limits of the powers conferred on the European Union…In the third place, as regards Hungary and Poland’s argument alleging a breach of the principle of legal certainty, in particular in so far as the regulation does not define the concept of ‘the rule of law’ or its principles, the Court states that the principles set out in the regulation, as constituent elements of that concept, have been developed extensively in its case-law, that those principles have their source in common values which are also recognised and applied by the Member States in their own legal systems and that they stem from a concept of ‘the rule of law’ which the Member States share….In those circumstances, the Court dismisses the actions brought by Hungary and Poland in their entirety.” [Bold fonts in the Court’s press release.]  

The attention of Europe, and indeed the world, has, quite understandably, been focused on the buildup of Russian forces near its border, and that of Belarus, with Ukraine, and the looming threat of another Russian invasion. But amid the daily forecasts of imminent war, there has been at least a bit of good news recently in the EU’s long-running dispute with Poland and Hungary over the rule of law. Both are still the subject of the EU’s Article 7 rule of law procedure – initiated by the Commission against Poland in December 2017 and by the Parliament against Hungary in September 2018. But Poland’s decision to abolish and replace the Disciplinary Chamber of its Supreme Court and the ECJ’s decision to reject the attempt by Poland and Hungary to annul the rule-of-law conditionality mechanism are nevertheless important victories in the EU’s continuing struggle to ensure that they, like the other member states, adhere to the rule of law.

David R. Cameron is a professor emeritus and lecturer in political science and the former director of the MacMillan Center’s Program in European Union Studies.