For the first time in history the EU uses the rule of law instrument in a lawsuit it has opened against Hungary. Hungary could face heavy financial sanctions. Why? And how exactly does this mechanism work?
An important topic has been discussed in the European Union for years: How should the EU deal with member state governments that systematically violate basic democratic values and dismantle the rule of law in their own country? The debate on this issue lasted a whole decade before Brussels finally agreed to put into operation the so-called rule of law mechanism, which entered into force in early 2021.
Following the appeals of Hungary and Poland against this mechanism, it took another year until the European Court declared the mechanism in February this year, as a mechanism in line with EU law and as such applicable. Now it is actually being used for the first time against Hungary, that EU member state, which since 2010 sparked debate in the EU over the undemocratic activities of the government led by Prime Minister Viktor Orban.
Viktor Orban
On Wednesday (27.04.2022) the Vice President of the EU Commission, Margaritis Schinas announced in Brussels that the EU Commission has opened a process against Hungary, according to the mechanism of the rule of law. The most important arguments are a large number of suspicions of corruption and irregularities in public tenders as well as endangering the independence of the judiciary.
For these charges Hungary could be punished with heavy financial sanctions. Specifically, it could lose hundreds of millions of euros in EU subsidies. Since they are important to the economy and reach the level of four percent of gross domestic product per year, non-delivery would be a means to stop the dissolution of the rule of law by the Orban government. At least that is what those who criticize the Hungarian Prime Minister hope.
Complicated and with a lot of details
What sounds simple at first glance is complicated and detailed. The first step is that the EU Commission sends a letter to the Hungarian government, in which it expresses its concern about the rule of law violations in the country and raises its own questions. Specifically, these are systematic irregularities in public tenders. It often happens that public tenders are won by people who come from the family and friends of Prime Minister Orban or his party, Fidesz. It happens that EU money is at stake.
There are suspicions that tenders are deliberately designed in such a way that this particular circle of people benefits from them. Following criticism from the EU, the Minister of State in Orban’s government, Gergely Gulyas, had stated a few months ago that in the future public tenders would be projected from scratch. But so far nothing has changed.
Obstacles in implementation
On the other hand we are dealing with systematic irregularities during the sale of agricultural land to entrepreneurs close to Orban, with transfers of large amounts of public property to uncontrolled foundations and with a lack of cooperation between the EU Anti-Fraud Office, OLAF, and the Prosecution Hungarian. OLAF has been investigating fraud and corruption with EU money in recent years and has handed over files to the Hungarian Prosecutor’s Office. But it has opened almost no proceedings or closed them without any result even in cases of very obvious frauds.
The Hungarian government has three months to respond to the EU Commission letter. It can then come to an agreement with the Commission on concrete proposals, as well as at what time it intends to eliminate the problems. If the Commission is not satisfied with the answers, it may impose financial sanctions. They will be valid for six or nine months. The obstacle is that the EU Council, the body of heads of state and government, must approve sanctions by a qualified majority. This majority is reached by 15 of the 27 EU member states, ie at least 65 percent of the EU population.
This is a major obstacle, although not insurmountable, as in the case of processes based on Article 7 of the EU Covenants. Through this article, an EU member state is deprived of the right to vote in the EU, so it is a kind of exclusion from the Union, without making an official withdrawal. This decision requires the approval of all other member states. Which is rare, for example Poland would veto the case of Hungary.
New political game?
Another obstacle is the scope of application of the rule of law mechanism: This instrument can be used in violations of the rule of law when they involve, in some form or another, EU money. If we are not dealing with such a case, the EU can not intervene even in the case of serious corruption. Ultimately the general endangerment of the independence of the judiciary may be one of the reasons to open the process for imposing sanctions.
Critics see in this mechanism more an instrument for fighting corruption than an effective means of combating violations of the rule of law in general. In the current situation of the Russian war against Ukraine, it may happen that the Hungarian government tries to defend itself against the threats of imposing sanctions by raising its veto against certain EU anti-Russian sanctions. So the implementation of the EU rule of law mechanism, the much-praised mechanism, could again turn into a political game, like the one that Viktor Orban has been doing for years with the EU./DW