by Anna Udvarvölgyi
On 3rd of April, the parliamentary elections were held in Hungary to elect the National Assembly. Before the clock struck midnight – with the votes being only partially processed – it became clear that Vikor Orbán would be able to form its fifth government by securing a majority of more than two-thirds in the parliament.
“We have scored a victory so big that it can be seen even from the Moon, but definitely from Brussels.” – said Orbán in his speech after the victory.
The victory of Fidesz was indeed seen from Brussels as two days after the elections the European Commission announced that it will formally initiate the rule of law proceedings against Hungary. This move means that Hungary becomes the first member state to face this novel tool of the EU.
What is this so-called rule of law mechanism?
The European Rule of Law Mechanism ensures a process for an annual dialogue between the Commission, the Council and the European Parliament together with Member States as well as national parliaments, civil society and other stakeholders on the rule of law. The Rule of Law Report is the foundation of this new process in which the conditions in each member state are assessed annually since 2020. The report covers four pillars: the justice system, the anti-corruption framework, media pluralism, and other institutional issues related to checks and balances.
What has the rule of law got to do with EU funding?
The mechanism described above concerns only one part of the on-goings. The recently announced proceedings against Hungary refer to the ’conditionality mechanism’. The general regime of conditionality for the protection of the Union budget has been in force since January 2021. This new mechanism makes the Member States’ access to funds from the EU budget conditional on respect for the the rule of law. It allows the EU to take measures to protect the budget, for example by suspending payments or financial corrections.
In March 2021, Poland and Hungary challenged the regulation in the European Court of Justice. However, the Court dismissed both appeals and found that the regulation is in line with EU law and its powers as regards rule of law.
How can the mechanism be activated?
The regulation defines rule of law as a set of fundamental values, including legal certainty, effective judicial protection, independent and impartial courts, separation of power and non-discrimination. Therefore, the protection of the EU’s budget in case of deficiencies regards not only corruption or fraud, but also the violation of those fundamental EU values listed above.
The Commission has long been concerned about the independence of the judiciary, conflicts of interest and systemic corruption in Hungary. OLAF, the EU’s anti-fraud agency, has put the country at the top of the list of irregularities affecting EU funds, and public projects are considered to be overpriced and over-budgeted.
“With Hungary, we have been very clear, the problem is corruption,” said Ursula von der Leyen, the president of the European Commission. “Our conclusion is we have to move on to the next step,” she answered, adding that an official notification letter will be sent to the Hungarian authorities shortly.
What is ’the next step’?
A long dialogue between Hungary and the EU will now begin. The introduction of the mechanism does not mean that from now on no more money will flow to Budapest.
First, the Commission must set up a legal case that establishes an evidence-based link between the EU law breach and the EU budget. It must determine where and to what extent the EU’s fundamental values and the budget are being undermined.
Hungary has the right to comment on the Commission’s legal findings, to offer further information and to suggest solutions to address the alleged infringements.
If, following the months of communication, the executive considers that wrongdoing persists and that the common budget is still under threat, it may propose a freeze on EU funds.
Finally, after the Commission imposes a sanction, the members of the European Council will have to vote on it. In contrast with the Article 7 procedure, unanimity will not be required. This means that Poland will not be able to defend Hungary here, because the mechanism can be adopted by a qualified majority. In order to have EU funds cut for Hungary, at least 15 member states with 65 percent of the EU population must approve.
Uncharted waters?
Since the rule of law conditionality mechanism is a new tool of the EU, its efficiency is questionable, as Hungary is the first country to face proceedings. Given its untested nature, the timeline is unclear, the procedure may last for months.
The expectations are high, as the Article 7 procedure against Hungary is in progress since 2018. In case of inefficiency, the European Union fails its role as a guardian of rule of law. If no sanctions are imposed, Fidesz may proclaim the EU’s failure from the house-top. It could strengthen their populist rhetoric and could further deepen the opposition between the EU mainstream and right-wing Christian conservative governments.
However, the gap between the two camps could increase in either case. If major funding cuts are inflicted, the EU succeeds in asserting its interest and could pat its back for teaching Hungary a lesson, even though an actual change in the country’s internal affairs regarding rule of law is not guaranteed. Orbán can easily continue to set up Brussels as an enemy, who poses a threat to the Hungarian national interest by withdrawing funds.
Moreover, the success of the conditionality mechanism may trigger a domino effect, meaning that other countries would have to stand the proof following the test subject Hungary. Besides Poland – the second possible player, – new issues concerning other countries may come to light, which would justify member states voting in favor of Hungary to save their own skin from possible future proceedings.