THE STATE OF THE EUROPEAN UNION. Reforming Europe in a time of war

THE STATE OF THE EUROPEAN UNION 64 the Vice-President on 27 October 2021, it has imposed on it a daily penalty payment of 1 million euros since 15 July 202 34 , a penalty that continues to be enforced awaiting correct implementation of the judgment by Po- land, deducting the amounts from the financing of funds and programmes of the EU budget allocated to Poland. In the year 2021/2022 we have seen that the EU has specific weapons to respond to threats or attacks against the values of Article 2 TEU. And here the new budget conditionality regulation stemming from the need to protect the EU’s financial interests when effective legal protection is in jeopardy because of attacks on the independence of national judicial systems, and which is the latest instrument in the EU’s “tool box”, has been fundamental. Regulation 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Un- ion budget 35 , the legal basis for which is Article 322 TFEU, had been proposed by the Commission on 2 May 2018, when it presented its legislative proposals for the Multiannual Financial Framework 2021-2027 36 . The ra- tionale for this proposal appears on the first page of this Communication, where it states: “Effective respect for the rule of law is a prerequisite for confidence that EU spending in Member States is sufficiently protected (…) Considering the link between the respect for the rule of law and mutual trust and financial solidarity amongst Member States of the European Union, and that control mechanisms cannot be effective unless supported by an effective application of administrative and legal control and remedies in the case of wrongdoing, existing obli- gations to ensure effective control systems should be supplemented by measures to ensure respect of the rule of law”. 34  Orders C-4204/21 R (EU:C:2021:593) and C-204/21 R (EU:C:2021:878), respectively. 35  OJEU L 433 of 22.12.2020, p. 1. 36  COM(2018) 324 final. On the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States. Therefore, “In order to protect the Union’s financial interests from the risk of financial loss caused by gener- alised deficiencies as regards the rule of law in a Member State, the European Union should be granted the pos- sibility to adopt appropriate measures in such cases”. This Regulation was adopted by ordinary legislative procedure following lengthy negotiations, chiefly with Poland and Hungary, and addressing the initial doubts of the Council’s legal service over whether the Commis- sion was not acting ultra vires in order not to apply the Article 7 TEU procedure 37 . Despite certain reservations, and focusing basical- ly on the fact that it is a measure for guaranteeing that EU funds are invested in the intended purpose: improving the lives of the people who live and work in the EU countries, and it is not, as the proposal of 2018 intended, an instrument to be applied in cases of generalised deficiencies as regards the rule of law in Member States, this Regulation is without doubt the most innovative instrument the EU has to be able to respond to threats against and breaches of the values of Article 2 TEU, especially after the Court of Justice judgment of 16 February 2022 dismissing the actions for annulment against Regulation 2020/2092 brought by Hungary and Poland 38 . I base this on the rationale of a system in which, as stated in points 7,8 and 9 of the Regulation: “respect for the rule of law is an essential precondition for compli- ance with the principles of sound financial management enshrined in Article 317 of the Treaty on the Functioning of the European Union (TFEU) (since) sound financial management can only be ensured by Member States if public authorities act in accordance with the law (…) and are subject to effective judicial review (where) the independence and impartiality of the judiciary should always be guaranteed…” 37  For a detailed analysis of these negotiations see: Louis, Jean- Victor: op, cit., p. 7 and ss. 38  Judgments in the cases 156/21, Hungary/European Parliament and Council (EU:C:2022:97) and 157/21 Poland/European Parliament and Council (EU:C:2022:98).