The EU court punts on the rule of law

NEW YORK – The European Union and the governments of two member states, Hungary and Poland, have been on a collision course for years now. The broader dispute is about what, if anything, the EU may do when a member starts backsliding on its commitments to a fundamental principle like the rule of law. The parties have been at loggerheads over whether the EU may withhold funds on these grounds. And now, the EU Court of Justice (CJEU) has ruled that it may.

Yet while the ruling has been hailed as a major victory for the rule of law, it might turn out to be a hollow one. Rather than taking a principled stand, the CJEU followed the parties down the rabbit hole of a narrow, formalistic textual analysis that avoids addressing the core of the issue.

In 2020, EU member states approved a $2.1 trillion long-term budget and recovery plan that included a condition requiring all recipients of funds to comply with the rule of law. The Hungarian and Polish governments then threatened to veto the entire budget unless the conditionality was removed. In the end, a compromise was reached: the budget would go forward, but the rule-of-law condition would be implemented only after the CJEU had reviewed and sanctioned them.

The Hungarian and Polish governments made good on their promise to challenge the regulation. They did not dispute that the EU’s legal order is based on core normative principles, including the rule of law, but they insisted that there is only one avenue for policing member states’ compliance, and that is Article 7 of the Treaty on European Union (TEU). This provision empowers the Council of the European Union, comprising member-state heads of state or government, to impose sanctions, such as a suspension of voting rights, on any member state found in violation of EU norms.

Critically, the Council can act only if a proposal to investigate violations has been put forward by one-third of the EU’s 27 member states or by the European Commission with the consent of the European Parliament. The Council must then establish “by unanimity” (excluding the accused) that there is a “serious and persistent breach,” upon which it may proceed with sanctions, pending approval by a qualified majority.

This procedure has been initiated only twice, against Poland in 2017 and against Hungary in 2018. Neither case has progressed beyond hearings. Given the procedural hurdles, it is not hard to see why. Article 7 is more of a blunt sword than a nuclear option. The two governments insist that there is nothing else the EU can do within the Treaty framework, and any amendment would of course face their veto.

In principle, there is nothing wrong with challenging the content and meaning of the rule of law, which the legal philosopher Jeremy Waldron has called an “essentially contested” concept. But Waldron draws a line between contesting the meaning of a shared ideal and peddling “fake legalism” in an effort to gain “spurious legitimacy” for a purely political move.

Fake legalism is an apt description of the Hungarian and Polish governments’ legal strategy. They have made it abundantly clear that they reject the rule of law as a shared fundamental principle of EU law. Its meaning, they argue, should instead be left to the constitutional traditions and circumstances of each member state. By demonstrating their willingness to impose untold hardship on EU citizens (by vetoing a budget and pandemic recovery fund), they showed that they are not contesting the meaning of the rule of law, but the very principle itself.

Unfortunately, although the applicants lost their case, they won on legal strategy. The CJEU went out of its way to show that the new conditionalities were linked to sound budget management; that they were not punitive; and that the rule of law plays a role in protecting the EU’s “financial interests.” The Court also pointed out that the conditionalities must be lifted “where the impact on the implementation of the budget ceases, even though the breaches of the principles of the rule of law found may persist” (my emphasis).

It is not hard to guess the Polish and Hungarian governments’ next moves. They will clean up their budget implementation rules and oversight, perhaps by establishing a special “independent” court for budgetary matters, and then they will challenge the Commission to lift the conditionalities, while continuing to thwart the rule of law in other respects.

By responding to the applicants’ fake legalism with textual legalism, the Court has set the stage for another round of legal jiujitsu. That is not a good strategy for safeguarding the rule of law. Instead, it may simply deepen public cynicism about the issue.

Still, the most important lesson of this case may be that the rule of law cannot be defended on the docket alone. Without a basic consensus among the disputing parties that the rule of law is a shared ideal worth contesting, it will become meaningless.

Katharina Pistor, Professor of Comparative Law at Columbia Law School, is the author of The Code of Capital: How the Law Creates Wealth and Inequality (Princeton University Press, 2019). Copyright: Project Syndicate, 2022. www.project-syndicate.org