The verification of Member States’ compliance with the rule of law that would be performed under the conditionality mechanism if the Draft Regulation is adopted may also be checked under other legal procedures established in EU Treaties. The most important are: the Article 7 TEU procedure and the general infringement procedures (Articles 258-260 TFEU). Since the Draft Regulation does not specify the relationship between the proposed conditionality mechanism and these procedures, this may lead to major legal disputesFootnote 98 and require some clarifications.
7.1 The Article 7 TEU Procedure
Article 7 TEU allows the EU institutions to examine whether the Member States respect the values on which the EU is based (Article 2 TEU) which include, inter alia, the rule of law. Article 7 TEU foresees a procedure to be followed and measures to be adopted if a breach of these values is detected. This procedure has already been launched against Poland (in 2017) and Hungary (in 2018).
The Article 7 TEU procedure consists of two stages: ‘the preventive stage’, where decisions are taken by the Council;Footnote 99 and ‘the sanctioning stage’, which belongs to the European Council and the Council.Footnote 100 At ‘the preventive stage’ of the Article 7 TEU procedure, the Council hears the Member State, addresses recommendations to it, and determines whether there is a clear risk of a serious breach by this State of the rule of law.Footnote 101 At ‘the sanctioning stage’ of the Article 7 TEU procedure, the European Council determines the existence of a serious and persistent breach of the rule of law by this State.Footnote 102 After that, the Council may decide to suspend certain rights of this State deriving from the application of the Treaties, including the voting rights of the representative of the government of this Member State in the Council.Footnote 103 In response to changes in the situation which led to the imposition of the above measures, the Council may decide to alter or revoke them.Footnote 104 As regards the judicial control of actions taken based on Article 7 TEU, the CJEU decides only on the legality of the procedural stipulations contained in this Article,Footnote 105 with no substantive control of measures (e.g. sanctions) adopted.
Article 7 (3) TEU, which allows the Council to suspend certain rights of the Member States deriving from the application of the Treaties, deserves a closer look inasmuch as actions undertaken on its basis prima facie may be similar to actions performed under the Draft Regulation. The legal nature of actions undertaken based on Article 7 (3) TEU is not determined by the Treaties. These provisions simply indicate the essence of such actions (suspension of rights deriving from the application of the Treaties) and provide one example (suspension of the voting right in the Council); otherwise they describe such actions by using the neutral term ‘measure’. The scope of competences conferred on the Council based on Article 7 (3) TEU have given rise to a heated debate, in which it is commonly accepted that the Council’s actions constitute political sanctions imposed on Member States for breaching the values on which the EU is founded.Footnote 106 It should thus be determined whether, based on Article 7 (3) TEU, the Council is authorized to suspend the EU funds of a Member State found to be in breach of the rule of law. In other words, is it true that the competences to be created under the conditionality mechanism (the Draft Regulation) already exist under Article 7 (3) TEU?
Given that under Article 7 (3) TEU the rights of a Member State deriving from the application of the Treaties may be suspended, it should also be possible to suspend transfers of EU funds to this State on this basis.Footnote 107 Undoubtedly, receipt of the EU funds is a right that the Member States benefit from as a result of their EU membership, and the amounts received are set out in the MFF Regulations based on political agreements reached by all Member States. It can therefore be stated that by suspending transfer of the EU funds, the Member State is temporarily deprived of the possibility to enjoy its right deriving from the Treaties.
It thus follows that the suspension of the EU funds of Member States breaching the rule of law is possible both under Article 7 (3) TEU and would be under the conditionality mechanism as well if the Draft Regulation is adopted. It has already been pointed out that the Draft Regulation does not specify the relationship between the Article 7 TEU procedure and the conditionality mechanism. This silence calls for an analysis in which two options should be taken into consideration.
The first option, based on the hierarchy of EU legal norms, is that the Article 7 TEU procedure and the conditionality mechanism are interdependent. The Article 7 TEU procedure (regulated by EU Treaty) has a primary role and the conditionality mechanism (regulated in the Draft Regulation) supplements it. The Article 7 TEU procedure provides a general framework for a suspension of EU funds for breaches of the rule of law, and the Draft Regulation ensures its practical implementation. Based on this reasoning, in legal terms the suspension of EU funds under the conditionality mechanism would constitute a ‘measure’ within the meaning of Article 7 (3) TEU. Following this logic, the suspension of EU funds would have to be first imposed under Article 7 (3) TEU and only then under the conditionality mechanism. In this scenario, however, one breach of the rule of law would be double-checked in two different procedures—first under the Article 7 TEU procedure and then under the conditionality mechanism. At a glance, this seems counterproductive. It may not be also excluded that decisions made under the Article 7 TEU procedure and under the conditionality mechanism would differ, depending on the political ambience, not to mention how unpractical and time-consuming this may be. If one recalls that the reasons to create the conditionality mechanism regulated by the EU secondary law was to overcome the political difficulties or even impossibility of conducting the Article 7 procedure, proven by the unsuccessful proceedings launched against Poland and Hungary, the idea to merge the Article 7 TEU procedure and the conditionality mechanism multiplies existing difficulties. Therefore the second option requires scrutiny.
The second option is based on the argument of procedural effectiveness, or the effet utile principle. Under this option the Article 7 TEU procedure and the conditionality mechanism are parallel and independent of each other, because their legal nature is different. The Article 7 TEU procedure is a political one, while the conditionality mechanism is a legal proceeding. In the Article 7 TEU procedure decisions are made by a political body (the Council) based on political assessments. Judicial control of the legality of these decisions performed by the CJEU is limited only to reviewing the procedural requirements stipulated in Article 7 TEU. This procedure aims exclusively to eliminate breaches of values on which the EU is based, including the rule of law. In contrast, the objective of the conditionality mechanism is more clear-cut, as it should safeguard the EU funds, or more precisely their sound managementFootnote 108 and protectionFootnote 109 against damages resulting from systematic breaches of the rule of law in the Member State. In this procedure decisions are made based on an assessment of the legal (and not political) criteria established under the Draft Regulation, namely the existence of a generalised deficiency as regards the rule of law in the Member State as defined in this Draft (see Sect. 3.2). The key decisions are taken by the Commission,Footnote 110 which is the guardian of the EU Treaties,Footnote 111 also responsible for the EU budget.Footnote 112 The legality of these decisions is fully checked by the CJEU under an action for annulment.Footnote 113 This kind of jurisdiction of the CJEU significantly strengthens the legal situations of the Member States in comparison to the purely procedural checks of decisions performed by the CJEU under the Article 7 TEU procedure.Footnote 114 In conclusion, it is thus justified to claim the Article 7 TEU procedure and the conditionality mechanism are parallel and independent of each other.
One could imagine to attack the Draft Regulation as an illegal circumvention of the Article 7 TEU procedures. However, Article 7 TEU does not contain an explicit statement as to whether other Union institutions may defend European values using other instruments. Thus, the general rules apply. It is well established that a specific procedure designed to deal with a certain problem does not exclude developing other instruments,Footnote 115 a core doctrine since the Van Gend en Loos judgment.Footnote 116 Accordingly, it is, in principle, admissible to develop new instruments,Footnote 117 such as the Commission’s Rule of Law Framework, or to use the budget to defend European values.
7.2 The General Infringement Procedure (Arts. 258-260 TFEU)
The general infringement procedure is another legal proceeding that can be initiated against a Member State’s breaching the rule of law. Under this procedure, if the Commission considers that a Member State has failed to fulfil its obligation under the Treaties it may bring the matter before the CJEU. If the CJEU finds that the Member State indeed infringed provisions of EU law, it confirms its finding in a judgment.Footnote 118 The Member State is then obliged to eliminate the infringement found, and if it does not do so the CJEU may impose financial penalties on this State.Footnote 119
The possibilities offered by the general infringement procedure (Article 258-260 TFEU) in the context of rule of law breaches have already been described by legal scholars.Footnote 120 Unlike the Article 7 TEU procedure fruitlessly conducted against Poland and Hungary, the general infringement procedure has already been successfully completed in 2019 in cases against Poland. In case C-192/18 Commission v. Poland the CJEU ruled that by establishing a different retirement age for men and women judges and prosecutors in Poland, Poland has failed to fulfil its obligations under Article 157 TFEU and Articles 5(a) and 9(1)(f) of Anti-Discrimination Directive 2006/54/EC. In addition, by granting the Minister for Justice the right to authorise judges to continue to carry out their duties beyond the new retirement age, Poland has failed to fulfil its obligations under Article 19 (1) TEU.Footnote 121 In similar cases C-619/18 Commission v. Poland the CJEU also ruled that Poland had failed to fulfil its obligations under Article 19 (1) TEU by lowering the retirement age of the judges of the Supreme Court and by granting the President of Poland the discretion to extend the period of their judicial activity beyond the newly fixed retirement age.Footnote 122 In 2019 the Commission brought another case against Poland (C-791/19 Commission v. Poland) concerning disciplinary proceedings against judges also with charges of breaching Article 19 (1) TEU. Although the charge of breaching the rule of law was not explicitly raised in that case, it concerned judicial independence, which is a key element of the rule of law.Footnote 123
All in all, the general infringement procedure (Article 258-260 TFEU) and the conditionality mechanism (Draft Regulation) are initiated by the Commission against Member States in cases of possible breaches of the EU law, with a view toward eliminating them. However, these procedures significantly differ.
While the general infringement procedure is regulated by EU primary law (Arts. 258-260 TFEU), the conditionality mechanism will be regulated by EU secondary law (the Draft Regulation). Litigation is also resolved differently. In the case of the general infringement procedure, the dispute between the Commission who brings charges and the accused Member State is resolved by the CJEU. Under the conditionality mechanism, the CJEU is involved only if a Member State—an addressee of a decision launching the conditionality mechanism—challenges its legality in the front of the CJEU under action for annulment (Articles 263 TFEU).
Last but not least, while the general infringement procedure is of a horizontal nature, as it may concern all different kinds of violations of EU law (including breaches of the rule of law), the conditionality mechanism is of a sectoral nature, since its concerns only one specific EU law violation, namely a breach of the rule of law detrimental to EU funds. The relationship between the general infringement procedure (Articles 258-260 TFEU) and the sectoral procedures provided in EU regulations allowing the Commission to protect the EU funds has already been analysed by the CJEU. In cases concerning EU funds, the Member States have claimed that if the Commission finds that expenditures financed by EU funds were incurred in breach of EU law, it should initiate the general infringement procedure against them (Article 258 TFEU), under which the CJEU would assess the charges and legality of EU expenditures. By this approach the Member States opposed the Commission’s practice to initiate, in such cases, ‘the clearance of accounts procedure’, regulated in the CAP regulations. In these procedures, now already also conducted in the cohesion policy, if the Commission detects irregular EU expenditures incurred in a Member State, it adopts a decision imposing financial corrections on said State, which obliges it to return the irregularly spent EU funds to the EU budget. The CJEU did not share the Member States’ argumentation and ruled that infringements of EU law related to the illegal spending of EU funds should be decided within the framework of sectoral procedures and not under the general infringement procedure (Article 258 TFEU).Footnote 124 The practice of bringing cases involving the irregular spending of EU funds under sectoral procedures, developed in, e.g., agriculture and cohesion regulations, is currently applied today. In such cases the Commission does not bring general infringement proceedings against the Member States (Arts. 258-260 TFEU) but applies procedures established under EU secondary law regulations. The question that can be asked is whether the above-mentioned case-law of the CJEU would apply to the conditionality mechanism. Prima facie there are no legal obstacles excluding such a possibility.