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Gloves Come Off in EU Clash With Rogue Members Over Rule of Law

·3 min read

(Bloomberg) -- The struggle between the European Union and members Poland and Hungary over the rule of law erupted into full-blown legal conflict.

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The rebel nations are challenging new powers the bloc is using to punish them for undermining democratic values, both on the EU level and through their own judicial systems.

At a two-day hearing at the EU’s top court that ended Tuesday, lawyers for the governments in Budapest and Warsaw argued the rules that could choke off aid crucial to their economies were unclear and unpredictable. As that contest unfolded in a Luxembourg courtroom, Poland’s nationalist government cemented into law a ruling that challenges the EU legal order by saying Polish law can override it.

The EU has been battling Poland and Hungary over numerous issues, including the rule of law, LGBTQ rights and climate policy and so far has led to little by way of concrete punishment. Now, Poland is challenging a mechanism established in January that allows the EU to withhold budget distributions to member states.

Since the bloc’s massive coronavirus recovery fund is part of the budget, it means Poland could lose out on 23.9 billion euros ($27.6 billion) of stimulus grants, while smaller Hungary has at least 7.2 billion euros at stake.

Financial Interest

Both countries argued that the rule lacked clarity and therefore they shouldn’t be punished under it.

Not even EU institutions seem to agree on the scope of the legislation, which is “very good evidence that the provisions of the regulation are unclear,” Sylwia Zyrek, a lawyer for Poland, told the court. “How can we adapt our conduct” if the “EU institutions have divergent opinions?”

The commission’s lawyer, Katharina Herrmann, countered by saying: “This mechanism is intended to protect the EU’s financial interests.” Advocate General Alexander Arabadjiev of the EU court said he would give his non-binding opinion in the case on Dec. 2.

Poland’s Rogue Court Ruling Puts EU in a Multibillion-Euro Bind

Poland and Hungary filed their EU court challenge in March, three months after leaders passed a historic 1.8 trillion-euro budget and stimulus package. It included the provision that would penalize member states that fail to adhere to democratic standards. While Poland and Hungary opposed the move, they eventually signed on to the deal and then took their fight to the EU court.

Separately on Tuesday, Luxembourg Prime Minister Xavier Bettel said his government “fully supports the new conditionality mechanism.”

Member nations “cannot take advantage of EU financial aid on the one hand, and disrespect the European values that unite us on the other. We cannot and will not accept this,” he said. “This is even truer in the context of a recent decision in Poland.”

Testing the Limit

The verdict questioning the supremacy of EU law, announced last week in Warsaw, marked a major escalation in Poland’s already fraught relations with the bloc and triggered street protests. In a joint statement just days later, France and Germany said Poland has a legal and moral obligation to abide by EU rules.

Poland’s opposition, led by former European Council President Donald Tusk, accused the government of trying to force the country out of the EU. Prime Minister Mateusz Morawiecki, who triggered the ruling by the Polish court, has dismissed that accusation as “fake news”

Still, his government ushered the ruling into law by publishing it in the official gazette on Tuesday, putting put to rest any doubt it may be seeking a way to compromise.

“The government has decided to put itself on the collision course with the EU,” said Piotr Buras, a senior policy fellow at the European Council on Foreign Relations in Warsaw. “They’re trying to test the limits of how far they can go.”

The cases are: C-156/21, Hungary v. European Parliament and Council of the European Union, C-157/21, Republic of Poland v. European Parliament and Council of the European Union.

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