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Adopted text

Protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States ***I

TA-8-2019-0038 · P8_TA(2019)0038 · PE628.374

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Parliament's amended version of a proposed regulation on protecting the Union's budget where a member state has generalised deficiencies as regards the rule of law. It defines such deficiencies, lists the situations that count, and sets out measures including suspension of payments and commitments. The Commission would decide on the measures by implementing act, after notifying the member state, which may reply within one to three months. A panel of independent experts would assist and assess all member states annually. Measures would enter into force only after Parliament and the Council approve a transfer to a budgetary reserve of an amount equal to their value, and would be lifted when the deficiency is remedied. Final recipients and beneficiaries would be protected: the Commission would publish information and tools online and could recover payments or make financial corrections to ensure amounts due are paid to them.

Key points

  1. The rule of law is defined by reference to the Union values in Article 2 TEU and the membership criteria in Article 49 TEU, including legality, legal certainty, access to justice and equality before the law.
  2. A generalised deficiency means a widespread or recurrent practice, omission or measure 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 or sanction unlawful decisions, limiting legal remedies, and endangering administrative capacity to meet membership obligations.
  4. A deficiency may be established where it affects the functioning of authorities implementing the budget, financial control and audit bodies, prosecution services, judicial review, or prevention of fraud, tax fraud, corruption, tax evasion and tax competition.
  5. Cooperation with the European Anti-fraud Office and, subject to the member state's participation, the European Public Prosecutor's Office is required, as is proper budget implementation after a systemic violation of fundamental rights.
  6. A panel of independent experts in constitutional law and financial and budgetary matters would be set up, with one expert appointed by each national parliament and five by Parliament, ensuring gender balance.
  7. Measures may include suspension of payments and commitments, reduction of funding under existing commitments, and a ban on new commitments with recipients; they must be proportionate to the nature, gravity, duration and scope of the deficiency.
  8. The Commission would provide information and guidance for final recipients and beneficiaries online, with tools to report breaches, and could recover payments or make financial corrections to ensure amounts due are paid.
  9. Before adopting measures, the Commission would notify the member state and inform Parliament and the Council; the member state may reply within one to three months and propose remedial measures.
  10. The Commission would adopt measures by implementing act, taking into account the panel's opinions, and would simultaneously propose a transfer to a budgetary reserve equal to the value of the measures.
  11. Parliament and the Council would deliberate on the transfer within four weeks; it is approved unless amended or rejected, and the measures enter into force only if neither institution rejects it.
  12. The member state may at any time notify evidence that the deficiency is remedied; the Commission would then lift measures in full or in part and propose lifting the budgetary reserve, and would report on the regulation's application after five years.

Who is affected

  • Member states with generalised deficiencies as regards the rule of law, which may face suspended payments and commitments.
  • Final recipients and beneficiaries of Union funds, who would get information, reporting tools and protection of amounts due.
  • National parliaments, which would each appoint one expert to the panel of independent experts.
  • The Commission, which would assess deficiencies, adopt measures and manage the budgetary reserve.
  • Parliament and the Council, which would approve transfers to the budgetary reserve.

Figures and deadlines

  • Tax evasion and avoidance estimated by the Commission at up to EUR 1 trillion a year.
  • Member state observations within not less than one month nor more than three months from notification.
  • Commission follow-up on information received within an indicative time limit of one month.
  • Parliament and Council deliberate on the transfer proposal within four weeks of receipt.
  • Commission report on the regulation's application at the latest five years after entry into force.
  • Regulation enters into force on the twentieth day following publication in the Official Journal.