Appeasement,ad infinitum

Never underestimate the European Commission's willingness to appease Europe's pet autocrats. ¹ While the EU has made an impressive show of unity in standing up to the murderous dictator Vladimir Putin in response to his unprovoked invasion of Ukraine, EU leaders continue to refuse to stand up to the softer autocrats in their own ranks. The capacity of the von der Leyen Commission (and of Commissions before it) to contrive excuses for refusing to enforce the EU rule of law norms that all Member States have committed to respect is something awesome to behold. The excuses keep changing, but the procrastination and appeasement are consistent.

Over the past decade we have seen successive Commissions draw – sometimes explicitly, sometimes implicitly – on an impressive panoply of excuses for their failure to defend the rule of law more robustly. These have included: lacking the necessary ‘tools’ to defend rule of law, needing to allow more time for ‘dialogue’ with backsliders, having to produce reports on rule of law in all Member States to show all were being treated equally, waiting for critical ECJ rulings and waiting for the resolution of a major crisis that must take priority over defending the rule of law – first it was the eurozone crisis, then the refugee crisis, then Brexit and now the Russian invasion of Ukraine.

To be clear, all of these excuses were bogus: the EU had robust tools in place to defend rule of law all along and the creation of new tools was mostly used as excuse to delay action; producing toothless reports on rule of law in all Member States was pointless, and scofflaws claimed they were treated unequally in any case; suspending the application of EU regulations pending the outcome of ECJ rulings (i.e. in annulment actions such as Cases C-156/21 Hungary v. Parliament and Council and C-157/21 Poland v. Parliament and Council) is unlawful, and political crises are no excuse for suspending law enforcement. Indeed, it is deeply ironic that while Ukrainians are fighting and dying to defend democracy and the rule of law, the Commission is using the crisis as an excuse to abandon the defence of those very values.

Recently, a spokesman defending the Commission's ongoing failure to trigger the rule of law conditionality mechanism against the rogue regimes in Budapest and Warsaw, argued, ‘What matters here is quality over speed.’ ² If the Commission had delivered quality in fighting to defend rule of law, it might be forgiven for lack of speed. However, over the past decade the Commission has delivered neither. According to the V-Dem Institute, the leading organization rating regime types, the two most rapidly autocratizing countries in the world between 2010 and 2020 were EU Member States Poland and Hungary. ³ Other leading ratings bodies broadly agree, and there is a vast consensus that Hungary ceased being a democracy and degraded into an ‘electoral authoritarian regime’ already some years ago. ⁴

Pause for a moment to reflect on what that means. The European Union – an organization which touts the promotion of democracy as central to its very raison d’être and which won a Nobel Peace Prize in part for its role in promoting democracy – has failed to take robust action to defend democracy as it was dismantled in one Member State and is in the process of being rolled back in others. In fact, the EU has become a leading funder of autocratization, pouring hundreds of millions of euros of EU funding into the hands of the very governments dismantling democracy in Hungary and Poland. What is more, the latest V-Dem report ⁵ affirms what many of us have been arguing for some time: due to the EU's failure to address the erosion of democracy in these headline cases, the authoritarian cancer is spreading to other Member States. ⁶

I have written extensively elsewhere about the underlying political reasons for the EU's failure to confront the rise of autocratic Member States’ governments. ⁷ In this editorial, I will focus not on the why but on the how, shedding some light on the game of smoke and mirrors the Commission has played to avoid deploying one of the most powerful tools in its arsenal: the suspension of funds to governments of Member States with systemic rule of law problems.

Expectations that the power of the purse might finally be used in the fight to defend the rule of law and democracy in the EU were heightened in February 2022 after the Court of Justice dismissed the annulment actions brought by the governments of Hungary and Poland against the so-called ‘Rule of Law Conditionality Regulation’ ⁸ (Conditionality Regulation). Since the Commission had claimed it was only delaying application of the Conditionality Regulation because it was waiting for the Court's judgments, many observers hoped the rulings would be followed by prompt action. A month later, such hopes appear were dashed as reports suggested the Commission was delaying application of the regulation in order to avoid conflict with Member governments during a period of crisis caused by Russia's invasion of Ukraine. ⁹

No one should be surprised. While the justification is a new one – and some may even find it compelling – the Commission's reluctance to suspend funds to regimes that systematically breach core rule of law norms is part of a long-standing pattern. Let us consider the path that led here.

Many advocates of democracy in the EU, myself included, were already calling on the EU to suspend funds to governments that violate fundamental rule of law values as early as seven years ago. ¹⁰ In 2018 Israel Butler ¹¹ and Kim Scheppele and I ¹² argued that the Commission could use the Common provisions regulation to suspend funds to Member States where systemic rule of law breaches undermine ‘effective management and control systems’ and thus put at risk EU funds. Notably, suspending EU structural funds under the Common Provisions Regulation could be done directly by the Commission with no vote in the Council.

Rather than simply deploy this existing tool, the Commission argued that it needed a new tool and in May 2018 presented a legislative proposal for a regulation on ‘Protection of the Union's budget in case of generalized deficiencies as regards the rule of law in the Member States’ ¹³ . The Council – which throughout the EU's autocracy crisis has been even more derelict in its duties than the Commission – sat on this legislative proposal for two and a half years. Finally, in December 2020, the Conditionality Regulation was adopted in the context of a compromise over the next Multi-Annual Financial Framework and the Next Generation EU recovery fund brokered by the German Council Presidency. As part of this compromise, the European Council adopted a set of Conclusions ¹⁴ (which the Commission agreed to support) that effectively meant that application of the new Conditionality Regulation would be delayed by at least a year. Ignoring the European Parliament's role as a co-legislator in blatant violation of EU primary law, the Council declared that the Commission would not enforce the regulation until after the European Court had ruled on any annulment actions that might be brought concerning the regulation – and until after the Commission had finalized a set of ‘guidelines’ concerning the application of the Regulation, which it would not do until after the Court ruled on said annulment actions.

Finally, the long-awaited rulings came on 16 February 2022. The Court of Justice upheld the legality of Conditionality Regulation ¹⁵ and flatly rejected the annulment actions brought by the governments of Hungary and Poland. Professor Laurent Pech has already provided a detailed assessment of the rulings. ¹⁶ In truth, there was little suspense involved. The arguments proffered by the governments of Hungary and Poland were ridiculous on their face, and the Court of Justice rejected them emphatically. Importantly, the Court of Justice affirmed that the Conditionality Regulation complements general rule of law protection instruments such as infringement actions (Article 258 TFEU) and the Article 7 TEU procedure (recital 14), and that it is also supplementary to specific procedures laid down in Union financial legislation (recital 17) to ensure the protection of the EU budget. The Court did emphasize the need to establish a sufficiently direct, ‘genuine’ link between a breach of one of the principles of the rule of law and a serious risk to the EU budget. ¹⁷ However, this did not mean – as some have wrongly suggested – that the Court will demand ‘rock-solid evidence that a country had misused previously allocated payouts from the bloc's budget’. ¹⁸ Quite to the contrary, the rulings affirm that the Commission shall act proactively where rule of law breaches seriously risk affecting the sound financial management of the Union or the protection of the financial interests of the Union. ¹⁹

The Commission promised prompt action in the wake of the rulings. But as of this writing – more than two months later – nothing has happened. Tens of millions of euros’ worth of EU funds continue to flow to the regimes in Budapest and Warsaw every week even as their destruction of the rule of law continues. Hungary held parliamentary elections on 3 April 2022 and election monitors from the OSCE’s Office for Democratic Institutions and Human Rights found that the ruling party used state resources (many of which come from the EU) to tilt the playing field decisively in its favour to ensure re-election. ²⁰ Shortly after the election, the Commission announced that it would soon be triggering the Rule of Law Conditionality against Hungary, but not against Poland. Attempting to justify this decision, Budget Commissioner Johannes Hahn indicated that the Commission was singling out Hungary due to corruption issues related to its system of public procurement, rather than focusing on broader violations of rule of law principles that would implicate both Hungary and Poland. This suggests that the Commission is taking a narrow reading of the Regulation, and may only intend to suspend a fraction of the hundreds of millions of euros it sends to Budapest every month. ²¹

Thus, while the governments of Hungary and Poland lost their annulment cases concerning the Rule of Law Conditionality Regulation, their political strategy of giving the Commission and Council an excuse to postpone any action succeeded. With the complicity of the von der Leyen Commission, the Orbán regime has managed to maintain the flow of EU funds that he needs to sustain his regime and rig another election. With Poland now hosting two million refugees from Ukraine, the Commission will likely be wary of the optics of suspending any EU funds flowing to the government in Warsaw. Thus, the EU's funding of autocratic member state governments looks set to continue for the foreseeable future.