Parliament on Thursday voted to upgrade the Rule of Law Conditionality Regime, the mechanism that allows EU institutions to suspend or cut EU funds when a government seriously undermines democratic standards. MEPs had called for improvements to make the system more effective at protecting EU funds from misuse. The resolution passed with 386 in favour, 184 against, and 15 abstentions.
Experience with the mechanism showed that it needs to respond faster, more clearly, and more decisively to rule-of-law backsliding. In May this year, rapporteur Ana Catarina Mendes said that for the EU to deliver on its promise of rule of “law, freedom, and fundamental rights for every person living in Europe,” the bloc needed to improve its capacity to monitor and act when governments undermined democratic standards. The vote on Thursday to speed up processes sent a broader signal to all member states that EU funding remains conditional on respecting democratic norms.
Hungary as a test case
The Commission first applied the mechanism to Hungary in 2021, citing concerns over judicial independence, corruption, and weaknesses in public procurement that threatened the EU budget. Around €6.3 bn in commitments were suspended, and reassessments irreversibly withdrew approximately €1 bn after finding that the risks were not addressed. Poland avoided suspension after the new government undertook reforms, leaving Hungary as the main test of enforcement.
The EU had introduced the mechanism earlier after Article 7 sanctions stalled when invoked against Hungary’s post-2010 Orbán administration and Poland’s former Law and Justice (PiS) government. In both cases, unanimity requirements blocked decisive action. In 2020, Prime Minister Orbán objected to linking rule of law to EU funds, claiming that it would “undermine the Rule of Law within the Union by degrading it to a political instrument” and arguing it contradicted EU treaties. Polish leaders insisted that judicial reforms were a domestic matter. Both governments challenged the regulation in court.
Resolution and reasoning
The Court of Justice of the European Union resolved the uncertainty in February 2022, dismissing the challenges brought by Hungary and Poland and ruling that the regulation is lawful and compatible with EU treaties. The mechanism links EU funding directly to democratic standards, giving Brussels a practical enforcement tool: suspending payments, freezing commitments, or redirecting funds pressures governments while avoiding blanket punishment of citizens. The Commission could also redirect funds to civil society or local authorities, limiting political misuse by central governments.
Thursday’s vote focused on improving existing rules. MEPs aimed to simplify complaints, accelerate activation, broaden coverage to courts and media, protect final beneficiaries, and enhance parliamentary scrutiny and transparency. All while reinforcing the principle that EU funds cannot be separated from adherence to democratic standards.
