Rule of law conditionality


By Eulalia Rubio, Senior research fellow, Jacques Delors Institute.

|   14/10/2020             |   Eulalia Rubio             |   Economics and finance

The rule of law conditionality is without a doubt one of the thorniest issues in the negotiations of the EU’s €1.8 trillion budget and coronavirus recovery package. When the EU leaders accepted at the end of July the principle of tying the EU funds to the respect of the rule of law, the compromise was written in deliberately ambiguous terms to have all 27 governments on board. Now it is time for the Council of the EU and the European Parliament to negotiate the details and procedures of this new mechanism. This proves to be difficult, and any delay in this specific negotiation risks endangering the adoption of the whole MFF-Recovery package.

If we look at the side of the Council, the difficulties encountered by the German presidency to come up with an agreed negotiating position on this topic reveal the level of division that exists among Member States. Seven countries did not support the German proposal on the grounds that it was too weak (basically the Nordics, Benelux and Austria) whereas Hungary and Poland continue to insist that they want to secure a veto right over the mechanism. From a strictly legal perspective, the lack of consensus is not a problem, given that the regulation has to be adopted by a qualified majority in the Council.  However, Hungary and Poland’s rejection is worrying as both countries have threatened to block the adoption of the Own Resources Decision, a necessary step to set up the EU’s budget and coronavirus recovery package, if the compromise reached on rule of law conditionality is not to their liking.

The Parliament, for its part,  demands  a robust rule of law mechanism able to react to any systemic threat to the values enshrined in Article 2 of the TEU and based on reverse qualified majority voting.  In a letter sent to the German presidency at the end of August, the four main European parties (the EPP, the S&D, Renew Europe and the Greens) made clear that they will not give their consent to the next multi-annual EU budget (2021-2027) until the adoption of such a robust rule of- law conditionality regime.

How to get out of this conundrum? Many people fear that MEPs will end up giving up their principles and accepting a watered-down, ‘toothless’ version of the mechanism for the sake of preserving the overall budget/recovery package. They argue that the Parliament´s margin of manoeuvre is very limited in this affair. However, things are less black-and-white. Contrary to a dominant vision, this dispute is not a zero-sum negotiation over a single dimension, the voting rule to adopt sanctions (whether it is unanimity, qualified majority or reverse qualified majority). The robustness of this mechanism will also depend on other factors such as the scope of rule of law violations covered by the instrument, the clarity of conditions to trigger its use and the existence of effective provisions to protect the final beneficiaries of the EU funding.  These elements are equally or more important to ensure the credibility, effectiveness and perceived legitimacy of the rule of law conditionality mechanism. The Council and the Parliament may forge an acceptable compromise if the Parliament lowers its ambitions on the decision-making rule, the Council accedes to broaden the scope of application and both parties agree to reduce the level of political discretion in the activation of the procedure and to set up realistic mechanisms to protect end beneficiaries. ▪▪▪