The Rule of Law Conditionality Under Regulation No 2092/2020—Is it all About the Money?

Some say that the Union is built by moving from crisis to crisis. Crises in the last decade which affected the Union and its citizens concerned, inter alia, public finance (the financial crisis, 2008), migration (2014), public health (the COVID-19 pandemic, 2020) and the rule of law crisis (2018). This paper focus on the latter. It has been noted that some Member States have been happy to receive the benefits of EU membership, specifically the financial ones, while their commitment to European values, including the rule of law (Article 2 TEU), has been lacking. Since many instruments applied by EU institutions to improve this situation have proved rather insufficient, halting transfers of EU funds to these recalcitrant Member States has been touted as the way that might solve this crisis. Accordingly, a draft regulation was put on the table that authorised the EU institutions to suspend EU funds if a Member State is found to be in breach of the rule of law. This draft aimed to make the transfer of EU funds to the Member States conditional upon their continuous respect for the rule of law (and therefore became known as ‘the rule of law conditionality’). This paper comments on this draft as first proposed by the Commission in 2018 (Proposal for a regulation of the European Parliament and of the Council on the protection of the Union budget in the event of generalized gaps in the rule of law in the Member States [COM (2018) 324 final).], amended in 2019 by the European Parliament [European Parliament legislative resolution of 4 April 2019 on the proposal for a regulation of the European Parliament and of the Council on the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States (COM(2018)0324–C8-0178/2018–2018/0136(COD)); https://www.europarl.europa.eu/RegData/seance_pleniere/textes_adoptes/provisoire/2019/04-04/0349/P8_TA-PROV(2019)0349_EN.pdf. A draft version of these provisions was presented in von Bogdandy and Łacny (Suspension of EU funds for breaching the rule of law - µ a dose of tough love needed? European Policy Analysis 2020, No 2, p. 1–15, https://sieps.se/en/publications/2020/suspension-of-eu-funds/, 2020).], and finally adopted by the European Parliament and the Council as Regulation (EU, Euratom) 2020/2092 of 16 December 2020 on a general regime of conditionality for the protection of the Union budget [Hungary and Poland voted against it and it is expected that its validity will be challenged before the CJEU via an action for annulment (Article 263 TFEU).] (henceforth called ‘Regulation 2020/2092′). This Regulation, containing 29 recitals in the preamble and 10 articles, entered into force on 1 January 2021 (Article 10 Regulation 2020/2092.). In the conclusions of the European Council meeting in December 2020 it was however accepted that it will be applied only in relation to budgetary commitments starting under the new Multiannual Financial Framework (MFF) 2021–2027, including Next Generation EU [Conclusions of the European Council meeting, 10 and 11 December 2020, para I (2) (k) https://www.consilium.europa.eu/media/47296/1011-12-20-euco-conclusions-en.pdf.]. This paper provides the legal characteristics of rule of law conditionality established under Regulation 2020/2092 and aims to determine whether financial incentives can restore compliance with the rule of law in Member States. Or in other words, is it all about the money?