Why the ECJ’s Latest Ruling May Divide Poland and Hungary
Fabio Turco 18 February 2022

The ruling with which the European Court of Justice rejected Poland and Hungary’s challenge to the introduction of  new instruments enabling the EU to withhold funding if member States fail to uphold the rule of law, was no surprise. It was already clear last December that the court in Strasbourg would have ruled in this sense when AG Manuel Campos Sánchez-Bordona recommended that the challenge be dismissed.

For Warsaw and Budapest this is not only a political blow but also a financial one. These are the only two nations that have had their Recovery Fund plan rejected: 36 billion Euros for Poland and 7.2 billion for Hungary. When the Commission  approves the guidelines for the implementation of the judgment – which will not happen immediately – they will be denied access to funding provided by the 2021-2027 budget.


A long story

In order to understand the process that resulted in this historic ruling on Wednesday – broadcast in live streaming for the first time – it is best to start from the beginning.

For years now Poland and Hungary have been engaged in a tug-of-war with Brussels over respect for the rule of law. For Warsaw, the main issue remains the independence of judges: a long-standing story with roots in late 2015, when the conservative Law and Justice (PiS) government, still in power today, had been in office for a couple of months. With a controversial series of appointments and corrective measures, the PiS quickly succeeded in changing the composition of the judges in the Constitutional Tribunal, resulting in it becoming an extension of the government. The National Council of Magistrates and the Supreme Court were then also “taken over” becoming the object of a broader and more radical reform in 2017. The main bone of contention turned out to be the Disciplinary Chamber, a supervisory body set up within the Supreme Court itself with the task of assessing and possibly sanctioning those judges whose work is deemed inadequate.

In spite of warnings and infringement procedures, the Polish government has stuck to its guns from the very start. In 2017, the European Commission started procedures to apply Article 7 of the Lisbon Treaty, the so-called ‘nuclear option’ never used so far, which results in the sanctioned nation losing its right to vote in the European Council. This procedure, however, can only be implemented with the unanimous approval of all EU members. In this sense, Poland has found a formidable ally in Viktor Orbán, who has vetoed the operation. The Magyar prime minister, leader maximus of European sovereignty, had already been on a collision course with Brussels for some time because of controversial constitutional reform that undermined Hungary’s democratic foundations. In any case, Poland was able to repay the favour by in turn vetoing Article 7 proceedings against Budapest

The turning point came at the end of 2020 when the European Parliament approved the introduction of the rule of law as the condition for the disbursement of European funds. The approval process was stormy, with Poland and Hungary objecting and blocking approval of the multiannual budget for several days, to which the Recovery Fund is also linked, thus causing problems to the whole of the EU.

In the end the two rebel governments had given-in thanks to Angela Merkel’s mediation. The compromise reached with the German Chancellery was that the mechanism would not be implemented until judgement was passed on their challenge. And that is what happened until Wednesday’s ruling, which, however, was not in favour of these two countries. In their legal challenges Poland and Hungary had stated that the provision was incompatible precisely with Article 7 of the treaties and violated the principle of the certainty of the law. Arguments refuted by the ruling, which also states that the regulation is not intended to punish violations of the rule of law per se, but to protect the EU budget from the effects of such violations.


Reactions and consequences

The ruling issued by the ECJ is bound to result in serious and direct consequences for domestic policy in both countries as well as on relations with the European Union. Teresa Coratella, programme manager of the European Council on Foreign Relations, sees a dual effect: “The first within the Visegrád Group, where Slovakia and the Czech Republic have already followed a different path and therefore distanced themselves from the route embarked on by Poland and Hungary; the second is at a European level, not only because it concerns the rule of law, but also because it involves the Recovery Fund, an unprecedented plan for Europe, the failure or success of which depends precisely on the implementation of these funds.”

The ruling also comes at a particularly sensitive time for Hungary, where parliamentary elections will be held on April 3rd and Viktor Orbán will seek a fourth consecutive term in office, his fifth overall as prime minister. According to polls, Fidesz, the party he leads, is a couple of percentage points ahead of the coalition led by Péter Marki-Záy. This is no ordinary election. For the first time, the Hungarian opposition has decided to unite and chosen its prime ministerial candidate through primary elections. Although Orbán has an advantage, the outcome is not a foregone conclusion, and the period between now and the elections will see a bitter campaigning battleground.

According to Coratella, this is a serious problem for the Hungarian premier. “On the one hand he will have to be able to manage the impact this ruling will have on his position, while on the other he will have to find a way of justifying himself in the eyes of public opinion, which just like in Poland is very active as far as European issues are concerned.” The first attacks coming from the opposition are aimed at accusing him of making Hungarians pay a high price for his anti-democratic policies. Justice Minister Judit Varga has pointed a finger at what she defines as a political ruling inspired by revenge for the child protection law that forbids the exposure of minors to so-called “LGBT propaganda”. A referendum has been organised to vote on this law and will be held on the same day as the elections. According to Varga, the reasons for the Court’s rulings are therefore dictated by ideological reasons and not the need the defend the rule of law.

The situation in Poland is more nuanced, but in some ways more complicated, as the country is experiencing a difficult economic moment due to galloping inflation, which in January exceeded 9.2% on an annual basis, and also serious political fragility. Justice Minister Zbigniew Ziobro, one of the hawks in the governing coalition, accused Prime Minister Mateusz Morawiecki of making a capital mistake when he accepted the introduction of the conditionality mechanism. The figure of the Polish Prime Minister is already severely weakened by a controversial tax reform that came into force at the beginning of the year and led to the resignation of the finance minister and his deputy.

The question is whether faced with such a situation Poland and Hungary can try to get back in through a back door by seeking an agreement with Brussels. “I think we will now enter a situation in which Warsaw and Budapest will push themselves to the limit,” says Coratella, “and then they will get to the point where in order to achieve something they will have to backtrack using diplomacy. But this moment will only come when the EU, Poland and Hungary reach a point of no return. However, it should be emphasised that at the moment the two countries have nothing to offer, given their instability at a political, economic and even pandemic level.”


The global picture

The turning point in the affair – it should also be noted – comes at a crucial time in East-West relations, in light of the pressing Russian-Ukrainian crisis. On this issue Poland and Hungary have assumed two completed divergent attitudes. For years Orbán has adopted what is known as “peacock tactics”, which has resulted in increasingly cordial relations with China and Russia, at times irritating Western allies. At the beginning of February he visited the Kremlin a few days before Emmanuel Macron, and publicly declared that he had no need for NATO to defend himself or to manage any eventual emergency linked to the arrival of Ukrainian refugees.

Poland on the other hand, albeit at a time in which relations with Washington are not particularly brilliant, has already welcomed 5,000 American soldiers to the country and as many more are expected to arrive. Warsaw thereby confirms its role as an essential cornerstone of the Atlantic Alliance on Europe’s eastern border. That is one additional element leading one to doubt that the alliance between Poland and Hungary is as solid as it once was, as Coratella concludes, “At the moment Russia represents a divisive factor, as do migration issues. Morawiecki has said he is ready to welcome Ukrainian refugees, while Hungary’s positions on immigration are well-known to us. These are issues that create division. What is certain is that controversies concerning Euroscepticism and the battle against the EU are not going away because  they play to mutual interest, while others have now disappeared from the common agenda.”


Cover Photo: Dursun Aydemir / Anadolu Agency via AFP.

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