CJEU Case C-225/24 / Opinion

57. At that stage, as the parties to these proceedings have agreed, the Commission enjoys discretion to assess the situation in a Member State and decide which conditions are necessary and sufficient to safeguard the European Union’s budgetary interests. That discretion is, in the first place, limited by the purpose of the rule of law conditionality in the budgetary context, which is to ensure the proper use of EU funds. (51) In the second place, in the context of the CPR, that discretion is guided by Article 9(1) of the CPR, which requires both Member States and the Commission to ensure respect for fundamental rights and compliance with the Charter in the implementation of the funds, as well as by Article 15 of and Annex III to the CPR, which list the horizontal enabling conditions, including the Charter HEC. Those provisions require the Commission to ensure respect for the Charter, but are silent as to the precise means of doing so.

58. Therefore, the Commission enjoys certain discretion to determine what is necessary to ensure respect for the Charter HEC in an individual Member State and it can impose, within the boundaries of its discretion, the specific requirements which that State must fulfil before payment from the budget is allowed.

59. In relation to the 10 programmes proposed by Hungary, the Commission exercised such discretion when adopting the approval decisions. As the Commission stressed at the hearing, those decisions were not challenged. Therefore, how the Commission exercised its discretion when adopting those decisions and laying down concrete requirements for Hungary under the Charter HEC is not at issue in the present case. 

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61. In the second step, after the Member State that was required to take measures to conform to the Charter HEC informs the Commission that such measures have been taken, the Commission must, in accordance with Article 15(4) of the CPR, assess whether the conditions agreed upon have been fulfilled.

62. In that step, the Commission does not, in principle, enjoy any discretion. Article 15(2) of the CPR provides that an enabling condition is fulfilled where all the related criteria are met, which, to my mind, includes the specific Charter HEC requirements established for a particular Member State in approval decisions.

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66. To my mind, the answer to that question can be found only when considered in the light of the purpose of the imposition of the Charter HEC, which is to ensure that the financial interests of the European Union are safeguarded. In that respect, when it adopts a decision lifting the suspension of payments, the Commission should have some leeway when deciding whether or not there still exists a risk to the European Union’s financial interests, even if some of the concrete requirements are not (yet) – or at least not fully – fulfilled. Equally, the Commission must also take into consideration any other relevant developments – whether they be legislative or practical developments in the Member State under review – and have the power to refuse to release the funds on the basis that those developments diminish or undermine the concrete reforms undertaken under the Charter HEC. Such discretion must be available to the Commission in order to account for particular situations which cannot be predicted in advance.

67. However, the Court must be able to perform its judicial review by taking account of the Commission’s ‘adjustments for reality’. For that purpose, if the Commission, in its decision lifting the suspension of payment, departs from one of the concrete conditions set under the Charter HEC, it must provide reasons as to why it nevertheless considered each requirement to have been fulfilled in substance so that the financial interests of the European Union are not at risk.

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69. With that in mind, in the present case, the Court must assess whether the Commission, in fact, decided to release the funds despite the concrete requirements under the Charter HEC for Hungary not having been fulfilled, and whether its justification for departing from some of those requirements is sufficient to allow the Court to conclude that there no longer exists any risk to the financial interests of the European Union.

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78. Article 3(2) of the approval decisions provides that the Charter HEC will be considered fulfilled once Hungary has ‘put in place the [amendments listed therein] and those amendments are being applied’.

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93. The Commission, supported by Hungary, argues that the act on judicial reforms (Act X of 2023), which entered into force before the contested decision was adopted, introduced the necessary reforms, which focused on granting the NJC extended powers over the NOJ. The nine-month incubation period only concerned management and organisational issues, which did not prevent the NJC from exercising its new powers over the NOJ. The requirements relating to the election of NJC members were only marginal, and in any case, the Commission had no reason to consider that the capacity and independence of the NJC prevented it from exercising the required functions of control over the NOJ. Finally, the Commission does not consider that the fact that it did not require the points system to be changed by a specific deadline constitutes a flaw with respect to the Charter HEC, which is why it did not set that as a requirement in the approval decisions.

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101. According to Section 36(1) of the act on judicial reforms (Act X of 2023), (64) Hungary adopted the amendments which the Commission required in its approval decisions. Those amendments did not call for the removal of the incumbent President of the Kúria (Supreme Court), which the Commission, in any event, cannot demand as that would run counter to the principle of irremovability under EU law. (65) To my mind, the fact that the existing President could stay in office indefinitely provided that the necessary majority in the Országgyűlés (National Assembly) is not achieved for the purpose of appointing a new President is unduly hypothetical and does not warrant the conclusion that the Commission committed an error of assessment – by determining that the new legislation satisfied the requirements under the Charter HEC – which would justify the annulment of the contested decision. That is particularly so, as the approval decisions did not require that the system of the election of the President of the Kúria (Supreme Court) by the Országgyűlés (National Assembly) be changed.

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125. The Commission, supported by Hungary, submits that the issues raised by the Parliament are not relevant as they do not lead to the conclusion that the adopted amendments do not provide the necessary guarantees for ensuring compliance with the Charter in the implementation of Union funds. Moreover, the Commission asserts that the Parliament did not demonstrate that the law on the protection of national sovereignty (Law LXXXVIII of 2023) has any connection with judicial independence in Hungary. Next, in the Commission’s view, the Parliament failed to identify the new deficiencies raised within the framework of the European Semester and the 2023 Rule of Law Mechanism, and it did not explain how they could be considered systemic and sufficiently serious to conclude that the Charter HEC has not been fulfilled. Finally, for the Commission, the fact that the judicial reforms were undertaken without adequate stakeholder consultations could not legally justify an assessment that the Charter HEC is unfulfilled.

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127. The Commission was aware, in 2023, of the adoption of the law on the protection of national sovereignty (Law LXXXVIII of 2023), as confirmed at the hearing. (74) However, the Commission claims that it had no evidence, when adopting the contested decision, that that law was capable of undermining the effectiveness of the mechanisms designed to ensure compliance with the Charter in Hungary. The contested decision provides no evidence that the Commission took that law into account, nor does it explain how it concluded that those legislative developments do not undermine or offset the objectives of the reforms Hungary undertook after the approval decisions.

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141. The Parliament alleges that, although it could not examine the correspondence between the Commission and Hungary from 11 to 13 December 2023, the available indicia show that the Commission misused its powers when it gave a positive assessment of the Charter HEC. The Parliament contends that such a favourable assessment was given in exchange for the Hungarian Prime Minister’s decision to leave the room, thereby allowing the remaining members of the European Council to decide on opening accession negotiations with Ukraine on 14 and 15 December 2023. Supporting evidence includes the Prime Minister’s repeated linking of Ukrainian funding to the blocking of EU funds for Hungary, social media posts showing him exiting during the vote, statements from a Commission member, the decision being drafted solely in English and the payment to Hungary on 27 December 2023 – a day on which the Commission does not work. Finally, the Parliament argues that the Commission had no obligation to deliver its assessment by that date and that the contested decision fails to explain why it did not wait for the required reforms to become applicable.