EUROPEUM Institute for European Policy

  • On the 2nd May 2018, the European Commission introduced its first draft of the post-2020 Multiannual Financial Framework as well as a special provision[1] outside the MFF regulation.
  • Its intention is to assure that beneficiary countries respect “a sound financial management and the Rule of Law” – if a member state breaches these principles, it will be deprived of access to EU funding so that the “financial interests of the Union are protected.”

With this regard, three important aspects of the proposed regulation should be mentioned:

No Focus on Policy Compliance

The European Commission’s proposal addresses general deficiencies in member states´ legal and political systems, which might affect distribution of the EU funds. If enacted, the Commission would assess, for instance, whether prosecution, audit offices or the judiciary are independent enough to conduct unbiased investigation of potential frauds. The provision is not constructed to punish member states for promoting policies that diverge from “the European mainstream” (e.g. for the infamous migration quotas), as many critics would argue, but rather countries whose political system cannot guarantee solid systems of checks and balances, and fundamental Rule of Law. In this sense, the new Commission´s proposal is very similar to the existing system of the MFF 2014-2020´s ex-ante conditionality.

Concentrating on political system as such is a smart move for two reasons. Firstly, the Commission´s argumentation dodges criticism that conditionality of the Cohesion Policy would become “a western neo-colonial tool” that is meant to impact those who do not comply with policies imposed by the EU. The EU community will only acquire an additional and better focused leverage on countries that do not abide such fundamental requirements as the Rule of Law or independent judiciary. Secondly, it drives a wedge between V4 countries since, for the time of being, the only two potential targets of the provision are Poland and Hungary. Had the Commission proposed conditionality regarding EU law compliance, it would surely meet a fierce opposition in other central European capitals.[2]

Weakened Position of Poland and Hungary

Due to the special provision on the Rule of Law being external to the general MFF regulation, the bill will undergo the Standard Legislative Procedure with Qualified Majority Voting (QMV) in the Council. In this sense, the Commission opted for the same approach as in the case of the ex-ante conditionality in the current MFF, which was also adopted as a regulation outside the MFF.

This strategy will very likely weaken the position of states that expressed reluctance to support any conditionality of the EU funding (e.g. Hungary, Poland, or Bulgaria). It will be difficult for them to create coalitions that would hamper the legislative procedure – unanimity is not required, and the framing of the Commission´s arguments in support of the provision make it politically difficult to vocally oppose the proposal.

If a country refuses the provision, it can be easily labelled as having problems with the Rule of Law. Finally yet importantly, it will also be legally possible to adjust the regulation in the future if it proves inefficient.

Ambiguities regarding the triggering mechanism

The most ambiguous part of the Commission´s proposal is the process under which the provision could be triggered. If enacted, the Commission could investigate the condition of the Rule of Law and subsequently, in case of deficiencies, impose sanctions. The decision could be reversed by QMV vote in the Council. Such a mechanism will surely face criticism from many sides as the Commission has not explained why it proposes this particular procedure.

In case we consider Rule of Law as something that should be assessed by an independent and politically unbiased arbiter, we have to ask why the decision could be altered by the Council – which is per se a political institution. The logic would suggest that any action taken by the Commission should be approved by the European Court of Justice, similarly as it is in case of deficiencies regarding EU law implementation.

Contrary, if we presume that the decision should be politically accountable and thus made by institution with strong political mandate, the only option would be to give the Council authority of voting about the Commission´s proposal in advance. In this sense, the EC should consider to copy the payments pre-conditionality procedure used with regard to basic macro-economic stability as it is used in the current MFF.

The triggering procedure should be clearly defined and should have a strong political or expert legitimacy. The current system, as proposed by the Commission, deficiently combines both approaches which results in reduced clarity – is the Commission as an expert institution responsible for the decision, or the Council as purely political body? In this respect, the upcoming MFF negations should resolve the ambiguity and opt for only one source of legitimacy.

Adoption of the provision is probable

We can expect that some kind of provision restricting the access to EU funding in case of deficiencies in Rule of Law will be adopted. In this respect, net contributors of the European budget have the upper hand – as history has showed us, he who pays the piper calls the tune. The only question is to what extent the provision will evoke backlash in the target countries and whether the results will be worth the hypothetical political tensions. It may well happen that limiting access to EU funds will only serve as political ammunition for already strong populist movements in the EU member states. Finally, the current pre-conditionality system of the EU funds has delivered mixed results. If a state does not feel ownership of a certain reform or policy, it simply refuses to act according to the EU´s opinion. It has happened in case of the Public Service Law reform in the Czech Republic and it will surely happen again.

 

Vít Havelka

 

[1] See “Regulation on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States”; accessible on https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0324&from=EN

[2] Czech government officials as well as the Czech incumbent PM Babiš have already indicated that the Czech Republic would support the provision on Rule of Law.

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