On 25 January the CEU Democracy Institute hosted Commissioner Didier Reynders and MEP Katalin Cseh for a debate on the new EU Regulation on Rule of Law conditionality. In this first editorial of the RevDem Rule of Law section, editor Oliver Garner and assistant editor Teodora Miljojkovic reflect on the implications for constitutional democracy of the impression that the Rule of Law comes at a price.

By Oliver Garner and Teodora Miljojkovic

From 1 January 2021 the EU boasts a new ‘general regime of conditionality for the protection of the Union budget’. At first glance, the Regulation appears to be a technical financial measure. However, the political rhetoric surrounding the new legislation has made it the latest tool in the EU’s existential values crisis. Could a ‘regulation designed to protect EU funds from being misused by EU governments who bend the Rule of Law’ risk creating the perception that a price can be placed on the Rule of Law and the EU’s values?

The legal text of the Regulation is clear that it targets specific breaches of Rule of Law characteristics. Tension over the objectives of the new Regulation were evident in the constitutionally controversial interpretative declarations made by the European Council in December. The heads of state or government appeared cautious to stress that the measure seeks to protect the Union budget, rather than persecute the values deviant Member States. 

However, the political context of the last five years of clashes between the EU institutions and Hungary and Poland is inescapable. Previous legal flash-points over protection of the EU budget – such as Italy’s Taricco saga concerning VAT fraud and the domestic Statue of Limitations –  were not enveloped into the Rule of Law crisis. 

Material Leverage?

Strategically, the new regime may be regarded as an intelligent use of the EU’s material leverage over the dissident Member States in the values crisis. Commissioner Reynders has observed that, in his political experience, financial pressure is very effective during budgetary discussions. Does the latest battle-front of the half-decade struggle suggest that each side is learning from the other’s playbook?

Hungary and Poland’s resistance during the European Council, based on legal arguments, shows that the Member States may be playing the EU at its own game through engaging in ‘lawfare’. On the other hand, the perception that the EU institutions will target the pockets of the nationalist governments to ensure compliance may indicate a resort to Realpolitik by ‘normative power Europe’. 

The Regulation may indeed prove to be a ‘game-changer’ in targeting actors who misuse EU funds by bringing supranational power to bear on corruption. Commissioner Reynders’ coupling of the Regulation with the European Public Prosecution’s Office suggests that budget conditionality exists within the EU’s criminal law toolbox. Katalin Cseh also evoked this link, by proposing the further measure of a European ‘black-list’ to exclude those guilty of corruption from further access to funds.

The price for such practical effectiveness, however, could be a transformation from intersubjective agreement on shared foundational values between equal constituent actors, towards domination and submission. Antonia Baraggia argues that ‘conditionality implies a relational but not equal position: the subject who poses the conditions exercises power over the recipient’. Such power relations evoke the pre-political ‘state of nature’ in international relations ‒ the anathema of the EU’s aspiration towards values-based constitutionalism beyond the nation state. 

The Rule of Law must function as the collectively presumed foundation stone for all public activity within a polity, including economic relations. It must not be perceived as existing within the national or transnational ‘market-place’ as a commodity that can be bought and sold between economic actors domestically, or sovereign actors acting in international fora. 

It is normatively undesirable and ineffective to try to demand compliance with the foundational values of a community through financial punishment. The limitation of the Rule of Law conditionality mechanism to situations that concern misuse of the Union budget may, however, prevent such a naked power situation. 

Do Values Have a Price?

But then the problem is the risk that every EU mechanism designed to address specific breaches of legal rules – such as misappropriation of EU funds, fraud, and corruption – is inflated into a weapon in the battle over foundational constitutional values. The real price of Rule of Law conditionality may not be measured in euro, but in the damage of the perception that values can be bought and sold.

This is particularly relevant to the work of the EU institutions and the Western Balkan states to ensure values convergence ahead of accession in the 2020s. Budget conditionality must not create a material incentive for the candidate states to enshrine foundational values solely to receive EU funds. This risks establishing a transactional relationship, and the perception that the remuneration for Rule of Law adherence is the amount received from the EU budget.

When actors within a polity are at a point of such fundamental disagreement over its foundations that resort to financial pressure is regarded as an appropriate strategy, the time may have come to question whether there is sufficient consensus between constituent partners to enable progress forward on ‘ordinary’ politics and policies. 

If budget conditionality secures adherence to the Rule of Law, but solely through financial incentives, then we do not have constitutional consensus. Instead, the Rule of Law is instrumentalized as a power tool and is deprived of its inherent transcendental value. The Conference on the Future of Europe, if it is genuinely an open forum for debate, may illuminate the genuine theoretical disagreements over the EU – supranational constitutional order or intergovernmental organization? – that are fueling the current values crisis.S

Conclusion – The Lesser of Two Evils?

The Regulation on Rule of Law conditionality will add teeth to the bite of EU Rule of Law enforcement. But this may come at the expense of the impression that EU values transcend the messy reality of intergovernmental bargaining. Following half a decade of Rule of Law backsliding, those seeking to protect the Rule of Law in the EU may regard any such reputational damage as the justifiable lesser of two evils.