Vice-President L Bay Larsen,
Presidents of Chambers A Arabadjiev (Rapporteur), A Prechal, K Jürimäe, C Lycourgos, E Regan, S Rodin, I Jarukaitis, N Jääskinen, I Ziemele, J Passer,
Judges M Ilešič, J-C Bonichot, M Safjan, F Biltgen, PG Xuereb, N Piçarra, LS Rossi, A Kumin, N Wahl, D Gratsias, ML Arastey Sahún, M Gavalec, Z Csehi
Advocate General M Campos Sánchez-Bordona
As part of a series of initiatives aimed at protecting the rule of law in member states in response to growing concerns regarding respect by a number of member states for the common values of the Union as set out in article 2 of the EU Treaty (TEU), the European Parliament and Council of the European Union enacted Parliament and Council Regulation (EU, Euratom) 2020/2092 which established a “horizontal conditionality mechanism” providing that the Council of the EU, on a proposal from the European Commission, could adopt appropriate measures where breaches of the principles of the rule of law in a member state directly affected or seriously risked directly affecting the sound financial management or protection of the financial interests of the Union budget. The Republic of Poland brought an action before the Court of Justice of the European Union, supported by Hungary which also brought its own separate action, seeking the annulment of the Regulation on the ground that that Regulation, whilst formally presented as an act forming part of the financial rules referred to in article 322(1)(a) of the FEU Treaty (TFEU) in actual fact sought to penalise any interference by a member state with the principles of the rule of law, the requirements of which were insufficiently precise. Poland founded its action, inter alia, on the lack of competence of the EU to adopt such a Regulation, on account of an absence of legal basis and circumvention of the procedure laid down in article 7 TEU, together with disregard for the limits inherent in the competences of the EU and for the principle of legal certainty.
On the action—
Held, action dismissed. (1) The procedure provided for by Parliament and Council Regulation (EU, Euratom) 2020/2092 could only be initiated where there were reasonable grounds for considering, not only that there had been breaches of the principles of the rule of law in a member state, but also that those breaches directly affected, or risked directly affecting, the sound financial management of the EU or the protection of its financial interests. The Regulation was intended to protect the EU budget from such breaches, not to penalise them. Compliance by the member states with the common values on which the EU was founded, such as the rule of law and solidarity, justified the mutual trust between the member states and the institutions of the EU had to be able to defend those values. Specifically, compliance with those values could not be reduced to an obligation which a candidate state had to meet in order to accede to the EU and which it could disregard after its accession. Since the Union budget was a principal instrument for giving practical effect to the fundamental principle of solidarity between member states, a “horizontal conditionality mechanism”, such as that established by the Regulation, which made receipt of financing from the Union budget subject to the respect by the member states for the principles of the rule of law, fell within the power conferred by the Treaties on the EU to establish “financial rules” within the meaning of article 322(1)(a) TFEU relating to the implementation of the Union budget. Accordingly, there was a sound legal basis for the Regulation (judgment paras 119, 124, 125, 129, 137, 140, 142–147, 151, 157, 162, 163, 174, 189, operative part, para 1).
(2) In addition to the procedure provided by article 7 TEU, numerous provisions of the Treaties, often implemented by secondary legislation, granted the EU institutions the power to examine, determine the existence of and impose penalties for breaches of the values contained in article 2 TEU committed in a member state. Further, the purpose of the article 7 TEU procedure was to allow the Council of the EU to penalise serious and persistent breaches of the common values on which the EU was founded and which defined its identity, in order to compel the member states concerned to put an end to those breaches. By contrast, Regulation 2020/2092 applied only in the event of a breach of the principles of the rule of law in a member state which affected or risked affecting the proper implementation of the Union budget. Also, the procedure under article 7 TEU and that established by the Regulation differed as regards their purpose, conditions for initiation, conditions for adoption and for lifting of the measures envisaged and the nature of those measures. Further, the procedure established by the Regulation did not seek to circumvent the limitation on the general jurisdiction of the Court of Justice under article 269 TFEU, since its wording concerned only the review of the legality of an act adopted by the European Council or by the Council of the EU under article 7 TEU. Accordingly, Poland’s submission alleging circumvention of article 7 TEU and article 269 TFEU was rejected as unfounded, and the EU had sufficient competence to adopt the Regulation (judgment paras 195, 199, 200, 203, 209–219, 229, operative part, para 1).
(3) The assessment of a breach by a member state of the principles of the rule of law did not fall within the exclusive competence of the member states. The exercise by the member states of the competences available to them in their reserved areas was only workable in compliance with EU law. It followed that, by requiring that the member states complied with their obligations deriving from EU law, the EU was not in any way claiming to exercise those competences itself nor was it arrogating them. Accordingly, there was no breach of the principle of conferral or of the duty to respect the essential functions of the member states (judgment paras 267, 269, 270, operative part, para 1).
(4) The principles set out in Regulation 2020/2092, as constituent elements of the concept of the “rule of law”, were developed in the case law of the Court of Justice and had their source in common values which were applied by the member states in their own legal systems. Consequently, the member states were able to determine with sufficient precision the essential content and requirements of each of those principles. Accordingly, there was sufficient precision in the criteria relating to the conditions for initiating the procedure provided by the Regulation and the choice and scope of the measures to be adopted (judgment paras 289–291, 303, 310, operative part, para 1).
B Majczyna and S Żyrek, agents, for the Republic of Poland, the applicant, .
MZ Fehér and MM Tátrai, agents, for Hungary, the intervener in support of the applicant.
R Crowe, F Drexler, U Rösslein, T Lukácsi and A Pospíšilová Padowska, agents, for the European Parliament, the first defendant.
A de Gregorio Merino, E Rebasti, A Tamás and A Sikora-Kalėda, agents, for the Council of the European Union, the second defendant.
M Jacobs, C Pochet and L Van den Broeck, agents, for the Kingdom of Belgium, intervening in support of the defendants.
M Søndahl Wolff, J Nymann-Lindegren and V Pasternak Jørgensen, agents for the ,Kingdom of Denmark, intervening in support of the defendants.
J Möller and R. Kanitz, agents, for the Federal Republic of Germany, intervening in support of the defendants.
David Fennelly (instructed by M Browne, J Quaney and A Joyce, agents) for Ireland, intervening in support of the defendants.
J Rodríguez de la Rúa Puig, S Centeno Huerta and A Gavela Llopis, agents, for the Kingdom of Spain, intervening in support of the defendants.
A-L Desjonquères, A-C Drouant and E Leclerc, agents, for the French Republic, intervening in support of the defendants.
A Germeaux and T Uri, agents, for the Grand Duchy of Luxembourg, intervening in support of the defendants.
MK Bulterman and J Langer, agents, for the Kingdom of the Netherlands, intervening in support of the defendants.
H Leppo and S Hartikainen, agents, for the Republic of Finland, intervening in support of the defendants.
O Simonsson, J Lundberg, C Meyer-Seitz, A Runeskjöld, H Shev, M Salborn Hodgson, H Eklinder and R Shahsavan Eriksson, agents, for the Kingdom of Sweden, intervening in support of the defendants.
D Calleja Crespo, J-P Keppenne, J Baquero Cruz, A Tokár, and K Herrmann, agents, for the European Commission.