New EU budget proposal: Union could restrict access to funds for states that endanger rule of law

The European Commission has put forward a budget proposal for the 2021-2027 period, and one of its main objectives is to ensure sound financial management and the rule of law.

According to the proposal, only an independent judiciary that upholds the rule of law and legal certainty in all Member States can ultimately guarantee that money from the EU budget is sufficiently protected.

The mechanism aims to protect the EU budget from financial risks linked to generalised deficiencies regarding the rule of law in the Member States. The new proposed tools would allow the Union to suspend, reduce or restrict access to EU funding in a manner proportionate to the nature, gravity and scope of the rule of law deficiencies. Such a decision would be proposed by the Commission and adopted by the Council through reverse qualified majority voting.

The measures will stay in place until the deficiencies regarding the rule of law cease to exist.

It could be invoked when a generalized deficiency as regards the rule of law in a Member State endangers:

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• The proper functioning of the authorities implementing the Union budget;
• The proper functioning of investigation and public prosecution of fraud or corruption relating to the  budget;
• The effective judicial review by independent courts;
• The prevention and sanctioning of fraud, corruption or other breaches of EU law relating to the budget;
• The effective and timely cooperation with the European Anti-Fraud Office and the European Public Prosecutor’s Office.

The rules would apply to all EU funds in shared management, as well as funds in direct and indirect management where the financial beneficiary is a government entity (national, regional, local authority, public law body or private organization entrusted with a public service mission).

The proposed mechanism would not affect the individual beneficiaries of EU funding under the budget, since they cannot be held responsible for generalised deficiencies in the rule of law system. Member States would continue to be obliged to implement the affected programmes and make payments to Erasmus students, researchers, civil society or any other final recipients or beneficiaries.

The Commission has billed the next budget as a “litmus test” for the post-Brexit EU, as a period of intense wrangling will follow before the European Parliament and Council of the EU sign off on the final version.