Respect rule of law or lose out on EU money, court tells member states

The European Court of Justice (ECJ) has dismissed challenges by Poland and Hungary to a regulation that makes the disbursement of European Union funds to member states conditional on their compliance with rule of law.

Known as the Conditionality Regulation, the rule has had the long-standing support of the European Parliament (EP), which has long advocated for the protection of EU monies from misuse by national governments.

Speaking after the ruling, EP President Roberta Metsola said: “The European Parliament now expects the Commission to apply the conditionality mechanism swiftly. Conditionality of EU funds linked to respect of the rule of law is non-negotiable for the European Parliament.”

Poland and Hungary had sought to annul the regulation after it was adopted by the European Council in 2020. The regulation allows a suspension of payments from the EU budget for breaches of rule of law.

The Court found that compliance by member states on the common values on which the EU is founded “define the very identity of the European Union as a legal order common to those States”.

“Since that compliance is a condition for the enjoyment of all the rights deriving from the application of the Treaties to a Member State, the European Union must be able to defend those values, within the limits of its powers,” the ECJ said.

“Compliance with those values cannot be reduced to an obligation which a candidate State must meet in order to accede to the European Union and which it may disregard after accession.”

The ECJ also expressed concerns that the sound financial management of the EU could be seriously compromised by rule of law breaches in member states, arguing that a “conditionality mechanism” on EU funds fell well within the powers of the EU to create rules on how its money is spent.