Sittings · Document
Follow up to the European Parliament non-legislative resolution on ongoing hearings under Article 7(1) TEU regarding Hungary to strengthen Rule of Law and its budgetary implications
Resolution tabled pursuant to Rule 132(2) of the European Parliament’s Rules of procedure
Reference numbers: 2024/2683 (RSP) / B9-0223/2024 / P9_TA(2024)0367
Date of adoption of the resolution: 24 April 2024
Competent Parliamentary Committee: N/A
Brief analysis/ assessment of the resolution and requests made in it:
Following the plenary debate of 10 April 2024, Parliament adopted its final resolution in the current legislative term assessing respect for the values of Article 2 TEU in Hungary. The text denounces serious deficiencies related to the justice system, anti-corruption and conflicts of interest, media freedom, fundamental rights, the constitutional and electoral system, the functioning of civil society, the protection of the EU’s financial interests, and compliance with the single market principles. Referring to ‘persistent systemic and deliberate breach’ of EU values in the country, the Parliament condemns the adoption of the Protection of National Sovereignty Act and the establishment of the Sovereignty Protection Office. In relation to these, the Parliament asks the Commission to request the Court of Justice of the EU for interim measures to immediately suspend the law, deeming that it affects the principle of free and fair elections. The Parliament reiterates serious concerns about the Commission’s decision to release up to EUR 10.2 billion frozen EU funds. The resolution calls on the Commission to revoke this decision, referring also to the recent leaked revelations by Hungary’s former Minister of Justice implying a lack of independence of the prosecution and political interference in criminal proceedings. The Parliament insists that all measures linked to EU funding that depend on rule of law reforms (the Rule of Law Conditionality Regulation, the Recovery and Resilience Facility (RRF) Regulation, the Common Provisions Regulation (CPR)) must be assessed in a single package. The Parliament reiterates the need to determine whether Hungary has committed ‘serious and persistent breaches of EU values’ under the procedure of Article 7(2) of the Treaty on European Union (TEU) instead of the Article 7(1) TEU process that the Parliament initiated in 2018 and that remains blocked in the Council. The Parliament is also concerned that the Hungarian Government will not be able to credibly fulfil its duties in the Presidency of the Council in the second half of 2024 and reiterates its call to establish an EU mechanism on democracy, the rule of law and fundamental rights in the form of an interinstitutional agreement.
Response to the requests in the resolution and overview of the action taken, or intended to be taken, by the Commission:
As regards the Protection of National Sovereignty Act (paragraph 3), the Commission has initiated an infringement procedure in February 2023; on 23 May 2024, it sent a reasoned opinion to Hungary. The Commission considers that the Act violates EU law, in particular when it comes to the fundamental rights enshrined in the EU Charter of Fundamental Rights, EU data protection laws and several rules applicable to the internal market. Under Article 279 of the Treaty on the Functioning of the European Union (TFEU) and Article 160(2) of the Rules of Procedure of the Court of Justice, an application for interim measures can only be made when the case is already before the Court of Justice.
As regards the Article 7(1) TEU procedure (paragraph 4), the Commission has had the opportunity to explain on different occasions that it shares an important number of the concerns expressed by the European Parliament in its reasoned proposal that triggered this procedure in 2018. So far, the Council has not taken a decision under this procedure. The Commission has made clear that, whatever position the Council will be taking on the Article 7(1) TEU procedure, it must ensure a fair handling of the proposal tabled by the Parliament.
The Commission defends and promotes all the values enshrined in Article 2 TEU using the adequate tools at its disposal. In its annual Rule of Law Report, the Commission already clearly identifies in a consistent way challenges that are of a systemic nature (paragraph 6). It is important that the country chapters are considered as a whole, in order to have a full picture of the rule of law situation and the seriousness of the challenges identified.
As regards action under the Conditionality Regulation (paragraph 7), the Commission has a toolbox of instruments to protect the Union budget, each with different substantive and procedural rules. The Conditionality Regulation aims at protecting the EU budget from breaches of the principles of the rule of law, where those breaches affect the budget or seriously risk affecting it in a sufficiently direct way, and where no other instrument under Union law can protect the budget more effectively. The Commission keeps under constant screening the situation in Hungary and will not hesitate to initiate a new procedure under the Conditionality Regulation, if necessary and provided its conditions are met. In line with its duties, the Commission will not hesitate to apply the Conditionality Regulation, where its conditions are met, for any of the Member States.
The Commission has issued several recommendations to Hungary in the context of the European Semester and the Rule of Law Reports. These recommendations have contributed to identifying the criteria for Hungary address the rule of law situation, in particular, as regards the justice system, and to access EU funding. This has been notably the case under the Recovery and Resilience Facility, and regarding the horizontal enabling condition on the effective application and implementation of the EU Charter of Fundamental Rights (paragraph 8). In May 2023, Hungary passed a new law setting up a justice reform that addresses the relevant recommendations from the 2022 Rule of Law Report. This law strengthens judicial independence and limits the possibility of political interference in the judiciary. This was required for Hungary to meet the conditions for accessing reimbursement from the Funds covered by the Common Provisions Regulation as set out in the Commission decisions of 22 December 2022 approving Hungary’s programmes for funding under Cohesion Policy funds, Maritime and Fisheries funds, and Home Affairs funds. At that moment, before the adoption of the aforementioned Hungarian law in May 2023, the Commission considered that Hungary did not fulfil the conditions set out in the CPR as regards this horizontal enabling condition, including as regards the independence of the judiciary.
On 18 July 2023, following the adoption of legislation to strengthen the independence of the judiciary Hungary submitted a new self-assessment, considering it fulfilled the horizontal enabling condition on the effective application and implementation of the EU Charter of Fundamental Rights as regards the independence of the judiciary. After a thorough assessment and several exchanges with the Hungarian authorities, the Commission considered Hungary to have taken the necessary measures to consider that the horizontal enabling condition was fulfilled as regards judicial independence. Therefore, parts of the Funds were no longer blocked, and Hungary was able to start claiming partial reimbursements from part of the Cohesion Policy funds, Maritime and Fisheries funds, and part of the Home Affairs funds. As for all enabling conditions and for all Member States, the Commission will closely monitor their continued fulfilment and will take action should new issues arise which put into question the fulfilment of the horizontal enabling condition as regards judicial independence, or any other one. Given that Hungary has addressed the justice reforms raised by the Commission and there was no evidence of new deficiencies in connection with judicial independence capable of directly and significantly affecting the effectiveness of the mechanisms in place to ensure Charter compliance in the implementation of the CPR Fund programmes, in December 2023 there was no scope for the College to take a negative decision on the fulfilment of the Charter horizontal enabling condition with regard to the deficiencies in judicial independence in Hungary and continue blocking the reimbursements of all expenditure from the CPR Funds on that basis.
The Commission has kept the Parliament regularly informed about this process and stands ready to provide updates anytime. The Commission recalls that when taking such a decision, it is bound by the strict timelines and conditions set out in the applicable Union legislation. Hungary had submitted all evidence the Commission had required to show that the issues concerning the independence of its judiciary were addressed. The Commission therefore was under a legal obligation to adopt this decision within the deadline foreseen in the CPR for all enabling conditions. The Commission considers that it acted in full compliance with EU law and will defend its decision of last December concerning access to certain cohesion policy Funds, including before the Court of Justice of the EU.
However, significant parts of CPR funding remain frozen (paragraph 8) under the horizontal enabling condition on the effective application and implementation of the EU Charter of Fundamental Rights, for concerns relating to LGBTIQ rights, academic freedom, and asylum rights. Funding is also blocked under the general regime of conditionality for the protection of the EU budget, notably when it comes to issues linked to the fight against corruption, the transparency of public procurements, and conflict of interest. Finally, no regular payments have been made at this stage from the RRF, as Hungary has still not submitted a payment request to the Commission to demonstrate, in particular, that all the super milestones under its Recovery and Resilience Plan are fulfilled. No payment can be made until Hungary fulfils all the necessary conditions.
The Commission is bound to pay pre-financing (paragraph 8) to all Member States also when enabling conditions are not fulfilled, in line with the CPR. These are advances on payments which are duly controlled when Member States send certified payment claims to the Commission and at closure. Any prefinancing amounts paid to a Member State will be either cleared against future payments or recovered as was, for instance, the case for Hungary´s pre-financing of 2022 which was partially recovered in 2024. As regards the RRF Regulation, as decided by the co-legislators, it establishes the possibility for Member States to request pre-financing specifically for the implementation of a REPowerEU chapter. Hungary thus received EUR 779.5 million on 28 December 2023, corresponding to the prefinancing amount of the loan part relating to the REPowerEU chapter, and EUR 140.1 million on 15 January 2024, corresponding to the REPowerEU grant prefinancing part. The payment of the pre-financing amounts is not conditional on the Member State meeting any milestones or ‘super milestones’. Any prefinancing amounts paid to a Member State will be either cleared against future payments or ultimately recovered entirely in case no payment under the RRF has taken place by end 2026.
As regards Hungary’s participation in the European Public Prosecutor’s Office (EPPO) (paragraph 8), the Commission has repeatedly called on the Member States that do not participate in the EPPO to consider doing so as soon as possible. Hungary’s participation in the EPPO would strengthen the protection of the Union budget. Irrespective of their participation in the EPPO, the Member States are anyway obliged to provide for effective protection to the Union’s financial interests in accordance with Article 325 TFEU.
The Commission agrees that the economic dimension of the rule of law is particularly relevant, as respect for the rule of law is essential for the correct application of EU law and for a well-functioning single market (paragraph 11). Reforms related to the justice system and the anti-corruption framework, access to information and the quality and inclusiveness of the law-making process, in particular, can have an important impact on the business environment. As such, and given their macroeconomic relevance, these issues are also part of the European Semester. In 2023, in the context of the European Semester, the Commission proposed to the Council to recommend to Hungary to improve its business environment in line with the principles of the single market and of the rule of law. The Rule of Law Report country chapters include Eurobarometer data on businesses’ confidence in investment protection and on businesses’ attitudes towards corruption and on corruption in public procurement. Furthermore, the Rule of Law Report assesses also specific relevant areas, with a particular regard to public procurement as a high-risk corruption sector and to lobbying rules. National business associations are also invited to take part in the country visits in preparation of the annual rule of law reports. Beyond this, the functioning of the single market as such is also assessed under dedicated instruments, such as the Single Market Scoreboard.
The Commission has launched several investigations and infringement procedures against Hungary, many concerning legislation in fields defined by the Hungarian Government as having strategic interest (paragraph 11). For instance, the Commission has recently referred Hungary to the Court of Justice of the EU in two cases concerning restrictive Hungarian measures in the construction sector (cases C-499/23 and C-144/24) and is actively pursuing cases in other sectors, including public procurement and motorway concessions. Commission services are also closely monitoring the situation in the retail sector and are carrying out investigations with regard to potential violations of EU law in this area. A pattern of instances where companies from elsewhere in the EU are effectively hindered in their economic activities in another Member State would constitute a major threat to the Single Market.
The Commission is bound by the CPR, which provides for shared management in which the Commission does not directly implement the funds via local and regional authorities and civil society (paragraph 13). In shared management, Cohesion policy funding is implemented by the Members States who are bound to implement the Funds according to the programmes as agreed in decisions adopted by the Commission. Furthermore, under the Conditionality Regulation, the imposition of measures does not affect the obligations of Member States to implement the programme or fund affected by the measures, including the obligation to make payments to final recipients and beneficiaries of Union funds. The Commission has provided information and guidance to that end in the guidelines on the application of the Conditionality Regulation, adopted in March 2022.
However, in 2022, the European Urban Initiative was introduced to support sustainable urban development directly by the Commission with a total budget of EUR 450 million from the European Regional Development Fund (ERDF) over the programming period 2021-2027. This initiative is not under shared management and provides direct financing to innovative actions, improving capacities of cities and also knowledge sharing.
Moreover, Hungary allocated EUR 17 million of its European Social Fund Plus (ESF+) allocation to capacity building of social partners and civil society. The relevant call is open for application in the framework of the economic development programme of Hungary financed by cohesion policy.
Support to civil society organisations (paragraph 15) is at the core of the Citizens, Equality, Rights and Value (CERV) programme, which is the biggest ever EU programme promoting and supporting actions on democracy, equality, fundamental rights and the rule of law within the EU. All CERV funded activities must respect the EU values enshrined in Article 2 TEU and the rights and principles enshrined in the EU Charter of Fundamental Rights. Since 2021, more than 100 Hungarian civil society organisations have been awarded more than EUR 11 million in CERV funding for coordinating projects covering a broad range of themes, as well as to build the capacity and distribute financial support to grassroot organisations.
Fostering a supportive environment for civil society organisations and human rights defenders (paragraph 15) is a shared responsibility of the EU and its Member States. The Commission is using a toolbox to contribute to the protection of the civic space and to support independent civil society organisations, human rights defenders, national human rights institutions and equality bodies to ensure that they can work in an enabling environment. All the Commission’s actions (funding, monitoring, enforcement actions, etc.) form part of a coherent whole, and the Commission efforts are focussed on ensuring that all these actions in the toolbox are carried out in a coordinated way to maximize their effectiveness on the ground.
As regards the call to enter into negotiations on an inter-institutional agreement on an EU mechanism on democracy, the rule of law and fundamental rights (paragraph 16), while such an agreement could help to frame further the discussion, the formalisation could be difficult to negotiate, with the risk that discussions focus on procedure rather than substance. For that reason, the Commission’s preference at this stage remains to make the most of the interinstitutional cooperation framework as it stands, fully using its potential for further development. However, the Commission reiterates its openness to setting up an informal contact group, where Commission representatives would be available to conduct regular discussions with Members of the Parliament and where the Presidency of the Council and relevant Member States could also be invited.