EU court upheld rule-of-law mechanism, dismissing Hungary, Poland pleas

By Agnes Szucs

BRUSSELS (AA) - The European Court of Justice upheld the EU's rule-of-law mechanism on Wednesday, paving the way for Hungary and Poland to face budgetary cuts over backslides in democratic standards.

The EU top court’s ruling dismissed the legal action brought by Hungary and Poland against the so-called conditionality mechanism that tied EU funds to the respect of rule of law.

“The sound financial management of the (European) Union budget and the financial interests of the (European) Union may be seriously compromised by breaches of the principles of the rule of law committed in a Member State,” the decision said.

The court pointed out that contrary to claims by Warsaw and Budapest, the mechanism “does not go beyond the limits of the powers conferred on the European Union” and that EU institutions indeed have the right to defend the bloc’s budget in case some breaches threaten it.

"We will act with determination," said European Commission President Ursula von der Leyen in response to the ruling.

She said the EU executive body has been monitoring the situation in all EU member states and assessing in-depth certain cases.

In parallel with the adoption of the 2021-2027 budget, the EU approved the regulation on the rule of law mechanism in 2020.

The process threatens the member states with a suspension or complete cut in EU budgetary transfers if rule of law breaches, such as corruption or problems with judicial independence, directly threaten the EU’s financial interests.

Hungary and Poland, which have been at odds with EU institutions over democratic backslidings, challenged the act at the EU Court.

Von der Leyen did not name any countries in her statement, but the European Parliament and certain member states have been putting pressure on the European Commission for a long time to initiate a procedure against Hungary first.

The timing of the action is highly sensitive since Hungary will hold a general election on April 3, and the unified opposition has built its campaign on the corruption cases of the ruling Fidesz party.