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Dolores Utrilla
11th December 2020
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European Council Conclusions on how rule of law conditionality linked to the EU budget should be applied

The European Council has just made public its Conclusions following its meeting of 10 and 11 December 2020, at which a unanimous agreement has been finally reached for the adoption of the main parts of the EU’s post-pandemic recovery plan, namely the Multiannual Financial Framework (MFF) and the Next Generation EU.

As previously reported on EU Law Live (here, here, and here), in November 2020 the Council of the EU and the European Parliament reached a provisional agreement on these proposals, but adoption of the MFF and of the Own Resources Decision failed because of Poland and Hungary’s refusal to link EU funds to the new rule of law mechanism.

Today’s Conclusions contain a series of relevant statements with regard to the draft Regulation on a general regime of conditionality for the protection of the EU budget, ‘with a view to finding a mutually satisfactory solution and addressing the concerns expressed’ in connection with such regime. The most relevant statements, expressing the European Council’s view as to how conditionality should be applied by the EU institutions, are the following (emphasis added):

  • The Regulation is to be applied in full respect of Article 4(2) TEU, notably the national identities of Member States inherent in their fundamental political and constitutional structures, of the principle of conferral, as well as of the principles of objectivity, non-discrimination and equal treatment of Member States’ (…) ‘The application of the conditionality mechanism under the Regulation will be objective, fair, impartial and fact-based, ensuring due process, non discrimination and equal treatment of Member States’.
  • ‘With a view to ensuring that these principles will be respected, the Commission intends to develop and adopt guidelines on the way it will apply the Regulation, including a methodology for carrying out its assessment. Such guidelines will be developed in close consultation with the Member States. Should an action for annulment be introduced with regard to the Regulation, the guidelines will be finalised after the judgment of the Court of Justice so as to incorporate any relevant elements stemming from such judgment. The Commission President will fully inform the European Council. Until such guidelines are finalised, the Commission will not propose measures under the Regulation’.
  • The application of the mechanism will respect its subsidiary character. Measures under the mechanism will be considered only where other procedures set out in Union law, including under the Common Provisions Regulation, the Financial Regulation or infringement procedures under the Treaty, would not allow to protect the Union budget more effectively’.
  • ‘The measures under the mechanism will have to be proportionate to the impact of the breaches of the rule of law on the sound financial management of the Union budget or on the Union’s financial interests, and the causal link between such breaches and the negative consequences on the Union’s financial interests will have to be sufficiently direct and be duly established. The mere finding that a breach of the rule of law has taken place does not suffice to trigger the mechanism’.
  • ‘The triggering factors set out in the Regulation are to be read and applied as a closed list of homogenous elements and not be open to factors or events of a different nature. The Regulation does not relate to generalised deficiencies’. ‘Any formal opening of the procedure will be preceded by a thorough dialogue with the Member State concerned so as to give it the possibility to remedy the situation’.
  • The Commission will bear full responsibility for autonomously assessing whether the conditions for the adoption of measures exist, whether it relies on its own information or on that from third parties. It will bear full responsibility for the accuracy and relevance of the information and findings on which it bases its assessment. Where such information and findings, whichever their origin, are used for the purposes of the Regulation, the Commission will ensure that their relevance and use will be determined exclusively in light of the Regulation’s aim to protect the Union’s financial interests.’
  • The measures will apply only in relation to budgetary commitments starting under the new Multiannual Financial Framework, including Next Generation EU.’

The European Council is calling on the European Parliament and the Council to immediately take the necessary steps for the adoption of the whole package of relevant instruments, including the MFF Regulation and the Own Resources Decision. According to today’s Conclusions, ‘Member States will do their utmost to approve the Own Resources Decision in accordance with their respective constitutional requirements with a view to its prompt entry into force’.

The Conclusions are available here.

For a more in-depth look at rule of law conditionality, read this Op-Ed by John Morijn and this Analysis by Aleksejs Dimitrovs.


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