On 5 April Ursula von der Leyen announced in the European Parliament that EU Budget Commissioner Johannes Hahn had informed the Hungarian authorities about the Commission’s plans to “move on to the next step” and formally “launch the rule of law conditionality mechanism” to protect the EU budget, mainly over corruption concerns.

Rule of law is laid down in the EU treaties as one of the values on which the Union is based. It means that governments should be bound by law not to take arbitrary decisions, and that citizens should be able to challenge their actions in independent courts.

It also enshrines the fight against corruption, which unfairly favours some to the detriment of others, and the safeguarding of media freedom, thus ensuring that the public is properly informed about the work of government.

The EU has existing tools at its disposal to protect the rule of law. In September 2020, the European Commission published the first annual rule of law report monitoring both positive and negative developments with regard to the rule of law in all member states. In July 2021 the second edition of the report was published.

There is also dialogue on the rule of law in the Council.

If the Commission deems that a member state is violating EU law, it can start infringement proceedings that may lead to financial sanctions determined by the European Court of Justice. Another procedure, under Article 7 of the Treaty of the European Union, allows the Council to make recommendations or decide by unanimity on sanctions against a member state, including the suspension of membership rights. MEPs have argued that existing tools are insufficient.

Under the new regulation, effective from January 2021, EU budget payments can be witheld from countries where established breaches of the rule of law compromise management of EU funds. At the same time, the EU ensures that final beneficiaries do not end up paying the bill.

EP Plenary session - Commission’s 2021 Rule of Law report

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