Protection of the Rule of Law and ‘Competence Creep’ via the Budget: The Court of Justice on the Legality of the Conditionality Regulation

Introduction On 16 February 2022, the Court of Justice fully dismissed the annulment actions lodged by Hungary and Poland against Regulation 2020/2092,1 which notoriously established a regime of conditionality for the protection of the Union’s budget in case of breaches of the principles of the rule of law.2 The judgments were long awaited by those following with concern the process of rule of law backsliding unfolding in some EU member states,3 and even more so in light of the much-discussed compromise reached at the European Council’s meeting of 10-11 December 2020.4 As is known, in the attempt to overcome the Hungarian and Polish ‘veto’ threatening the approval of the 2021-2027 Multiannual Financial Framework and of the reform of the Own Resources Decision needed to greenlight the ‘Next Generation EU’ package, the European Council agreed on a de facto suspension of the conditionality mechanism due to be finally approved a few days later, on 16 December 2020. In what is definitely the most controversial part of the Conclusions, the European Council stated that the mechanism should not be enforced before the adoption of guidelines on its application by the Commission and that, should an action of annulment be introduced, such guidelines should be finalised only after the Court of Justice’s ruling on the matter.5 With the Commission faithfully abiding by the indications of the European Council, the delivery of the two judgments – whose decisum was actually anything but surprising – became the crucial piece missing for making the enforcement of the Regulation a concrete reality. In a rare ‘closing of ranks’ in defence of the fundamental values underpinning the European integration process,8 an extraordinary number of ten member states intervened in support of the Council and the Parliament.9 The latter, which figures among the most critical voices on the Commission’s inaction,10 held also a rather unusual debate on the implications of the judgments during the plenary session of 16 February and adopted a resolution that, once again, spells out a firm j’accuse towards the Commission and the Council.11 Finally, as a side note, on the very day of the delivery of the two judgments, the (unlawfully composed)12 Polish Constitutional Tribunal held a public hearing on Case K 1/22, which originates from the application of the Prosecutor General – who is also, by the way, the Polish Minister of Justice – asking whether Article 322(1)(a) TFEU is compatible with the Polish Constitution to the extent that it provides the legal basis of Regulation 2020/2092.13 Besides their political significance, the two judgments touch upon a number of extremely salient legal issues, including the nature and content of the values enshrined in Article 2 TEU, the limits of the ‘national identity’ clause of Article 4(2) TEU, as well as the transparency of the legislative process and the access to opinions of the EU institutions’ legal services, whose influence on EU policy-making has become ever more significant in recent years.14 Crucially, and this will be the specific focus of this case note, the judgments of 16 February 2022 are the first ones to deal with the competence issues arising from the use of ‘spending conditionality’15 as an alternative enforcement mechanism of EU law. [...]it reflects on the broader implications of the judgments on the use of conditionality as an alternative enforcement mechanism of EU law.