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REPORT (COM(2018)0324 – C80178/2018 – 2018/0136(COD))

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

A-8-2018-0469 · A8-0469/2018

Committee on Budgets Committee on Budgetary Control · Rapporteur: Eider Gardiazabal Rubial, Petri Sarvamaa

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Written by a language model from the full text only; every figure comes from the text. The paragraph links open the paragraph a statement rests on — check the text itself before relying on it.

Parliament's amended version of the Commission proposal for a regulation protecting the Union's budget where a member state has generalised deficiencies as regards the rule of law. It widens the definition of such deficiencies, adds a panel of independent experts, and lets the Commission adopt measures by implementing act. Measures may include suspension of payments and commitments, reduction of funding and a ban on new commitments with recipients, and must be proportionate. The Commission must inform Parliament and the Council and give the member state at least one month to reply. A decision on measures enters into force only if Parliament and the Council do not reject, within four weeks, a transfer to a budgetary reserve of an amount equal to the measures. The Commission lifts measures and proposes lifting the reserve when the deficiency is remedied. Final recipients and beneficiaries must be protected: the Commission provides information and tools online, can recover payments and transfer equivalent amounts to the Union reserve, and reports on the regulation after five years.

Committee position. The committees share the Commission's broad objectives and propose amendments to strengthen the proposal: clarifying the rule of law and Copenhagen criteria, requiring the Commission to use all relevant information, protecting final beneficiaries, and giving Parliament and the Council equal footing on measures through a budgetary reserve transfer.

Key points

  1. The rule of law is to be understood having regard to the Union values in Article 2 TEU and the criteria for Union membership in Article 49 TEU.
  2. A generalised deficiency means a widespread or recurrent practice or omission by public authorities that affects or risks affecting sound financial management or the Union's financial interests.
  3. Generalised deficiencies include endangering judicial independence, failing to prevent arbitrary decisions, limiting legal remedies and endangering administrative capacity.
  4. A deficiency may be established when it affects the functioning of authorities implementing the budget, financial control, prosecution of fraud including tax fraud, judicial review, or cooperation with the European Anti-fraud Office and the European Public Prosecutor's Office.
  5. A panel of independent experts in constitutional law and financial and budgetary matters is to be established, with one expert appointed by each national parliament and five by Parliament, to assist the Commission and assess all member states annually.
  6. Measures may include suspension of payments and commitments, reduction of funding under existing commitments and a prohibition on concluding new commitments with recipients.
  7. Measures must be proportionate to the nature, gravity, duration and scope of the deficiency and, as far as possible, target the affected Union actions.
  8. The Commission must inform Parliament and the Council without delay of any notification to a member state, and the member state may make observations within one to three months.
  9. The Commission adopts a decision on measures by implementing act and simultaneously proposes to Parliament and the Council a transfer to a budgetary reserve of an amount equal to the measures.
  10. Parliament and the Council deliberate on the transfer within four weeks; it is approved unless Parliament by majority of votes cast or the Council by qualified majority amends or rejects it, and the decision enters into force only if neither rejects it.
  11. The Commission must provide information and guidance to final recipients and beneficiaries online, and can recover payments or make financial corrections and transfer equivalent amounts to the Union reserve.
  12. The Commission must report to Parliament and the Council on the regulation's application, in particular the effectiveness of measures, at the latest five years after entry into force.

Who is affected

  • Member states with generalised deficiencies as regards the rule of law, which may face suspension of payments and commitments and reduced funding.
  • Final recipients and beneficiaries of Union funds, who must continue to be paid and can inform the Commission of breaches.
  • The Commission, which assesses deficiencies, adopts measures by implementing act and manages the budgetary reserve transfer.
  • The European Parliament and the Council, which deliberate on the transfer to a budgetary reserve within four weeks.
  • National parliaments, which each appoint one expert to the panel of independent experts.

Figures and deadlines

  • EUR 1 trillion a year: the Commission's estimate of the scale of tax evasion and avoidance.
  • one month: minimum time for a member state to provide information and make observations, and no more than three months.
  • four weeks: period for Parliament and the Council to deliberate on the transfer proposal.
  • five years after entry into force: deadline for the Commission's report on the regulation's application.
  • twentieth day following publication: when the regulation enters into force.

Legal basis: Article 294(2) and Article 322(1)(a) of the Treaty on the Functioning of the European Union and Article 106a of the Treaty establishing the European Atomic Energy Community.