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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-8-2019-0349 · P8_TA(2019)0349 · 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 measures that may be taken, and sets out the procedure for adopting and lifting them. It creates a panel of independent experts to assess the rule of law in all member states each year and to advise the Commission. Measures may include suspending payments and commitments, reducing funding and banning new commitments. The Commission must notify the member state concerned, which may reply within one to three months, and must take account of any opinions of the panel. Measures enter into force only after Parliament and the Council approve a transfer to a budgetary reserve. The regulation applies from 1 January 2021 and its contents are to be inserted into the Financial Regulation at its next revision.

Key points

  1. The regulation sets rules to protect the Union's budget where there are generalised deficiencies as regards the rule of law in a member state.
  2. It defines the rule of law by reference to the Union values in Article 2 TEU and the membership criteria in Article 49 TEU, listing principles such as legality, legal certainty, access to justice and separation of powers.
  3. A generalised deficiency is a widespread or recurrent practice, omission or measure by public authorities affecting the rule of law that affects or risks affecting sound financial management or the Union's financial interests.
  4. Examples include endangering judicial independence, failing to prevent or sanction arbitrary decisions, limiting legal remedies, endangering administrative capacity, and weakening lawyer-client confidentiality.
  5. A deficiency may be established where it affects areas such as public procurement, financial control and audits, prosecution of fraud and corruption, judicial review, recovery of funds, tax matters and cooperation with the European Anti-fraud Office and the European Public Prosecutor's Office.
  6. The Commission must establish a panel of independent experts in constitutional law and financial and budgetary matters, with one expert appointed by each national parliament and five by Parliament, ensuring gender balance.
  7. The panel assesses the situation in all member states annually, may issue opinions on a generalised deficiency, and publishes a summary of its findings each year; the Commission must take relevant opinions into account.
  8. Measures may include suspending payments or legal commitments, terminating a legal commitment, banning new commitments, suspending or amending programmes, reducing commitments or pre-financing, interrupting payment deadlines and suspending payments.
  9. Measures must be proportionate to the nature, gravity, duration and scope of the deficiency and must target the Union actions affected; they do not remove the obligation to pay final recipients or beneficiaries.
  10. The Commission must provide information and guidance to final recipients and beneficiaries via a website, and must ensure amounts due are paid, recovering payments or making financial corrections and transferring equivalent amounts to the Union reserve.
  11. Before proposing measures, the Commission must notify the member state concerned and inform Parliament and the Council; the member state may reply within one to three months and propose remedial measures.
  12. Measures enter into force only after Parliament and the Council approve a transfer to a budgetary reserve equal to their value, deemed approved unless amended or rejected within four weeks; the Commission lifts measures and proposes lifting the reserve once the deficiency is remedied.

Who is affected

  • Member states: may be notified of a generalised deficiency, asked for information, and have measures imposed on their use of Union funds.
  • Final recipients and beneficiaries of Union funds: protected by continued payment obligations and Commission recovery and guidance.
  • National parliaments: each appoints one expert to the panel of independent experts.
  • The Commission: assesses deficiencies, proposes measures, establishes the panel and reports on the regulation's application.
  • The Council and Parliament: decide on the transfer to a budgetary reserve and on lifting measures.

Figures and deadlines

  • Tax evasion and avoidance estimated by the Commission at up to EUR 1 trillion a year.
  • Member state reply time limit: not less than one month nor more than three months from notification.
  • Commission indicative time limit of one month to decide follow-up on information received.
  • Parliament and Council deliberate on the transfer proposal within four weeks of receipt.
  • Council may reject the Commission proposal within one month of its adoption.
  • Commission assesses the situation within an indicative time limit of one month from a formal notification.
  • Suspended commitments of year n may not be entered in the budget beyond year n+2.
  • Commission reports on the regulation's application at the latest five years after its entry into force.

Legal basis: 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.