THE STATE OF THE EUROPEAN UNION Towards a new legislative term

THE STATE OF THE EUROPEAN UNION 44 In addition to the significance of this judgement in contributing to European constitutional jurisprudence, the ruling also constitutes an example of how, as a result of the Commission’s submission of infringement procedures for breaching EU law, the Court has made itself the guarantor of respect for EU law and the prin- ciple of the right to effective remedy in the spheres covered by EU law, and is capable of applying effective financial sanctions, in accordance with article 19.1 TEU. From 15 July 2021, Poland was subject to a coercive fine of 1 million euros per day, until 20 April 2023, re- duced to 500,000 euros per day from 21 April by ruling of the Vice-president of the Court of Justice, and which remains in force until the date of the definitive judg- ment. This means that, 170 million euros have been withheld from funds allocated to Poland in the EU budget for 2021, 365 million euros for 2022 and, at the time of writing, 132.5 million euros for 2023. If Poland does not suspend its legislation, in accordance with the Court judgement, it seems likely that the Commission will request the imposition of new provisional measures in accordance with article 260 TFEU. These coercive fines are significant and, while they represent slightly less than 2% of the EU funds allo- cated to Poland between 2021 and 2023, they show that the work of the Court is very important but is not sufficient in itself to deal with grave violations of the values of article 2 TEU and, in particular, with the rule of law. What is important is that, when the Commission approved the Polish National Recovery and Resilience Plan in June 2022 (Poland will have an additional 36 billion euros until 2027), it was clearly established that the Commission will not approve any payment until the 2019 legislation undermining the principle of judicial independence is modified. And this is the major supplementary weapon that is institutionally available without the requirement to acti- vate article 7 TEU or the fear that this will be impossible to apply. This is the new regime of budgetary condition- ality established by Regulation 2020/2092 which I ana- lysed in my contribution to last year’s report. 25 This is the mechanism that has been applied for the first time to Hungary via Council Implementing Decision 25 See note 2, in particular pages 66 to 68. 2022/2506 of 15 December on measures for the protec- tion of the Union budget against breaches of the princi- ples of the rule of law in Hungary. 26 In this decision, the Council has imposed measures to protect the budget of the EU against the consequences of the violation of the principles of the rule of law by Hungary with respect to public procurement, the effectiveness of legal action and the fight against corruption in Hungary, suspend- ing approximately 6.3 billion euros in budgetary commitments, representing around 55% of the credits of EU budget programmes affected by the suspension. This suspensio n will be lifted when Hungary adopts the corrective measures established in the Decision, and to this end the Commission will sub- mit quarterly reports to the Council until it believes that the suspension can be lifted. In accordance with the procedure established in Reg- ulation 2020/2092, this procedure was launched by the Commission on 27 April 2022 by formal notification of the Hungarian government so that it could respond to the critical elements identified by the commission; and following a series of exchanges in which the Hungarian government did not, in the Commission’s view, provide satisfactory responses with respect to the adoption of corrective measures, the Commission formally proposed the Implementing Decision procedure on 18 September 2022. In the Council’s December Decision, a qualified majority ruled that Hungary had to adopt formal legisla- tive measures in the following areas: – systemic irregularities, weaknesses and gaps in pub- lic procurement, with unsatisfactory functioning of the national authorities implementing the EU budget in the context of public procurement procedures (for example, participation of a single bidder, allocation of contracts to specific companies with a significant market share, grave weaknesses in the attribution of framework agreements, etc.); – public interest trusts: these are not subject to EU Directives on public procurement, and there are re- curring problems related to conflicts of interest and transparency (for example, members of the trust not subject to requirements on conflicts of interest, rules on conflicts of interest not applicable to members of 26 OJEU L 325 of 20.12.2022, pp. 94 and ss.