EU Triggers Mechanism to Cut Funds to Backsliding Hungary
Also — SLAPPs, Energy Security, Apple, and Migration.
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Commission Triggers Rule-of-Law Conditionality Mechanism Against Hungary
On 27 April, the European Commissioner for Budget Johannes Hahn formally activated the conditionality mechanism against Hungary by written notification — only days after Hungary’s Prime Minister Viktor Orbán secured a strong majority in parliamentary elections.
IN CASE YOU MISSED IT • The Conditionality Regulation allows the European Commission to suspend EU budget payments to particular Member States in case of established rule-of-law violations that affect or seriously risk the sound financial management of the Union budget or the protection of the financial interests of the EU.
THE GRIEVANCES • The Commission is accusing Hungary of irregularities in public procurement procedures — procedures with one bidder (generally) look suspicious. The Commission also points to the lack of effectiveness in investigations concerning corruption cases.
WHAT ABOUT THE JUDICIARY • However, the lack of independence of the judiciary, which remains a considerable concern, does not constitute an autonomous grievance. This is despite the fact that “endangering the independence of the judiciary”, according to the recitals and Article 3 of the Conditionality Regulation, may be indicative of breaches of the principles of the rule of law.
To pull the trigger of the Conditionality Regulation, the Commission must prove the existence of a causal link between the rule of law violations of and the risk for EU’s financial interests. While this causal link is easily established in corruption cases (Hungarian scheme), it is difficult to quantify, in financial terms, the costs of an infringement on the independence of the judiciary (Polish scheme).
Whether simply being a problem of evidence or a more general strategy from the part of the Commission, this attitude is worrying. Is the Commission restricting the scope of the conditionality regulation? What about the use of this mechanism against Poland, where the threats to the rule of law essentially consist of a clampdown on the judiciary?
“The Rule of Law Conditionality Regulation was supposed to allow the E.U. to suspend money flows on the basis of broad violations of rule of law principles, such as undermining the independence of judges and prosecutors. Instead, Hahn has indicated that he is interpreting the regulation narrowly and focusing only on proven corruption”, opined R. Daniel Kelemen, from Rutgers University, in a Washington Post op-ed dated 13 April.
BEHIND CLOSED DOORS • Some MEPs also criticised the Commission for its lack of transparency, as the notification letter sent to Hungary was not made public. Furthermore, although the Budget Commissioner had the opportunity to discuss the triggering of the mechanism with MEPs, the discussions took place behind closed doors. This is not the first time that Parliament meetings on conditionality have been held this way. In February 2021, the Legal Affairs Committee had to decide, in camera, whether to bring an action for annulment against the European Council's conclusions which made the activation of the mechanism conditional on its validation by the Court of Justice and the publication of guidelines by the Commission.
POLAND SPARED • Warsaw definitely seems to be on better terms with Brussels than Budapest. The Commission and Poland are in an intense legal standoff concerning the independence of the judiciary in Poland. However, timing is politically sensitive. Poland's leading role in welcoming Ukrainian refugees and in calling for a tougher stance against Russia has made it more difficult for the Commission to trigger the Conditionality Regulation against it. Poland has assured the Commission that it is taking steps to alleviate Brussels’ concerns. “Warsaw is giving us some signal that it is ready to move forward”, said European Commissioner Vera Jourova in an interview to Denik.cz and Visegrad Insight.
WHAT NEXT? • The Hungarian authorities now have two months to respond to the notification. Either they implement measures to put an end to the violations found by the Commission, or the procedure follows its course and will lead, after a qualified majority vote of the Council, to the suspension of European funds, for an estimated amount of 40 billion euros.
Legislation to Curtail Abusive Lawsuits Against Media and NGOs
The European Commission is taking action to protect journalists and NGOs against SLAPPs, or strategic lawsuits against public participation. SLAPPs are generally based on defamation on insult grounds.
DIRECTIVE • The directive covers SLAPPs in civil matters which have a cross-border element, and enables judges to dismiss those that are “manifestly unfounded”. The proposed directive also contains provisions establishing compensation for damages and penalties for abusive SLAPPs. It will be for the claimant to prove that the case is not manifestly unfounded. Abusive lawsuits will come at a higher cost for the claimants, as they will have to bear all costs when the case is deemed abusive, including the defendant's legal fees, compensation for damages, and potential penalties.
One interesting chapter is the “protection against third country judgements” — see Articles 17 and 18. Under the proposed Directive, EU Member States must refuse to recognize judgements coming from third countries against one of their nationals if the lawsuit would be deemed to be “manifestly unfounded or abusive” in the defendant’s Member State.
PROTECTING MEDIA • The Commission’s European Democracy Action Plan was adopted in 2020 and seeks to boost media pluralism and protect freedom. Abusive lawsuits are a way to intimidate and shut down journalists, something the Rule of Law Reports issued by the European Commission has identified as a “matter of serious concern” amidst a deterioration in the working conditions of journalists. The number of SLAPPs has increased more than fourfold between 2016 and 2020, from 24 to 114 according to a report by the Coalition Against SLAPPs in Europe (CASE). Poland, Italy, and Croatia are particularly fertile jurisdictions for SLAPPs.
“Together with increasing threats to their physical and online safety, legal threats and abusive litigation add to an environment where hostile activity against journalists is growing and can have a serious impact on their willingness and ability to continue their work. A tragic example of the use of SLAPP is the journalist Daphne Caruana Galizia who was facing more than 40 lawsuits at the time of her assassination in 2017” — European Commission
REACTIONS • “Good step forward in our fight against SLAPPs,” tweeted European Parliament President Roberta Metsola, “Journalists face too many abusive threats aimed at silencing them. We must stop this”. Metsola, a Maltese, was a driving force behind the legislative push for curtailing SLAPP. Malta has the highest number of SLAPPs relative to its population by a wide margin, with 8 cases for every 100,000 people, according to the CASE report — 800 times more than Germany (0,01).
Some are disappointed that the Directive only addresses cross-border cases, which “unfortunately limits its scope significantly” according to Julie Majerczak, from Reporters Without Borders. Out of the 570 SLAPPs identified in the CASE report, only 11% have a cross-border element.
WHAT’S NEXT • At this stage, the Directive is a proposal which will be discussed by the European Parliament and the Council of the EU, which gathers the 27 Member States. Once adopted, a Directive must be transposed in the national legal order of the Member States. The deadline for transposition is generally two years. The Commission also issued a recommendation, which is directly applicable. It warrants Member States to get their laws ready to “provide the necessary safeguards”.
Russia Shuts the Tap Off to Poland and Bulgaria; EU to Waive Import Duties on Ukrainian Goods
As Gazprom shut off the gas taps off Poland and Bulgaria, the European Commission has confirmed it was working on a sixth sanctions package, due to be announced on Tuesday – which would include a gradual phasing-out of Russian oil imports by the end of the year.
GAS IN RUBLES • On 27 April, Gazprom unilaterally stopped gas supplies to Bulgaria and Poland, as the countries refused to pay in rubles — following the Kremlin’s publication of a decree on 31 March mandating that all gas payments be made in rubles.
Poland had already announced it had prepared for such an event, and its gas reserves are filled at up to 80% — most of the country’s electric power already comes from coal. Poland's gas transmission system operator, Gas-System, explained that “the existing entrances to the system (...) make it possible to balance the gas system without supplies from the eastern direction”, relying instead on imports from other countries.
Bulgaria, however, faces a different situation, with a much more acute dependence on Russian gas — up to 90% of its total imports. Still, Bulgarian Energy Minister Alexander Nikolov claimed that the country had sufficient quantities of gas stored for the foreseeable future. “In the meantime, we will discuss supplies, transfer routes and further quantities with the European Commission,” he said.
Russia’s move has been heavily criticised by the Commission. Its President, Ursula von der Leyen, unequivocally spoke of “blackmailing”. The Commission explained it would offset immediate risks in gas shortages to these countries, and confirmed that “both Poland and Bulgaria are now receiving gas from their EU neighbours”. In the longer run, Von der Leyen is set to continue work on the Commission’s REPowerEU action plan, which aims to reduce the EU’s dependency on Russian energies by year end, notably through enhanced partnership with the US on Liquified Natural Gas (LNG) imports.
IMPORT DUTIES • The European Commission proposed to suspend import duties on all Ukrainian exports to the European Union. The suspension, which also includes the suspension of anti-dumping and safeguard measures on Ukrainian steel exports, is due to last at least a year. The proposal remains to be agreed by the European Parliament and all Member states.
EU takes steps to suspend all duties on imports from Ukraine, Press Release, 27 April
Most quotas and tariffs had already been brought down to zero to enhance trade between the EU and Ukraine through the 2016 bilateral Deep and Comprehensive Free Trade Agreement (DCFTA). The Commission proposed on Wednesday to suspend all remaining tariffs and quotas, notably on steel, industrial goods and agricultural products, which do not fall within the scope of the DCFTA. In a press statement, Valdis Dombrovskis, Commissioner for Trade, insisted that “such trade liberalisation measures […] are unprecedented in their scale: granting Ukraine zero tariff, zero quota access to the EU market.” These measures would help Ukraine’s economy going throughout the war “and [help Ukraine] get back on its feet post-war”. The EU is Ukraine’s largest exporting partner, representing up to 40% of the country’s exports.
Techlash — New Storm Ahead for Apple Pay in the EU
It’s never good news when Margrethe Vestager, the EU Competition Commissioner, tags you four times on Twitter. That’s what happened to Apple on May 2.
SO • The European Commission’s antitrust arm has sent a Statement of Objections to Apple. The Commission suspects Apple of abusing its dominant position for mobile wallets on iOS devices to favour Apple Pay, its in-house contactless payment service. “We have indications that Apple restricted third-party access to key technology necessary to develop rival mobile wallet solutions on Apple's devices”, said Margrethe Vestager.
The technology in question is Near-Field Communication (NFC), which allows secure in-store payments. Apple’s closed system is coming under increased scrutiny in the EU. Both the European Commission and national competition authorities, such as in the Netherlands, are looking closely at various aspects of Apple’s policies.
NEXT • The Statement of Objections is a formal step in the investigation of a case, laying down the grievances of the antitrust enforcement authority. It does not prejudge the outcome of an investigation. Apple can respond to the Statement of Objections before the Commission takes a decision on the case. The European Commission opened the investigation on Apple Pay’s practice in June 2020.
New Migration Rules Amid Ukrainian Migrants Crisis
On 27 April, the Commission proposed a new Legal Migration package, which seeks to establish a better governance structure at the EU level to attract skilled and talented people from non-EU countries. It also seeks to address the shortage of workforce in the EU, especially in the care sector.
Legal migration: Attracting skills and talent to the EU, Press Release, 27 April
Visa Digitalisation: Visa travel to the EU becomes easier, Press Release, 27 April
SIMPLIFICATION • The Legal Migration package provides changes to two existing policies, the Single Permit Directive and the Long-Term Residents Directive, with a specific focus on three critical economic sectors, namely care, youth mobility, and innovative entrepreneurship. Among other things, the altered rules would enable people to:
apply for work and residence permits in one, streamlined procedure
apply from both inside and outside the EU
move between Member States during their first five years in the EU before they can acquire the long-term resident status;
change jobs if necessary while keeping their right to stay in the EU country they reside in, and therefore be more protected from abusive and exploitative employers.
In line with the EU Talent Partnerships initiative, introduced by the Commission in June 2021, the proposed package would establish an EU Talent Pool, a platform matching people from non-EU countries with EU employers. A prototype of this platform is due to be tested with Ukrainian refugees before becoming permanent.
STAFF WANTED • Commissioner Johansson put it simply: the EU needs more legal migrants because there is a workforce shortage in many sectors across the EU, especially the care sector, a problem that will only worsen as time passes and the EU’s working age population continues to decline.
VISA 2.0 • On 27 April, the Commission also unveiled its proposal to fully digitalise the Schengen visa process and enable people to submit visa applications online. Not only will this simplify visa application procedures which, for the most part, remain paper-based, but it will also automatically determine which Member State is responsible for examining an application.
FRONTEX CHIEF OUT • On a related note, Frontex, the European Border and Coast Guard Agency, has announced the resignation of their Executive Director, Fabrice Leggeri. Following a joint investigation by various media, Frontex is accused of being involved in illegal pushbacks of migrants, thus preventing them from entering an EU country and exercising their right to seek asylum – though Leggeri has always denied such accusations. His sudden resignation can be linked to the publication of the initial findings of OLAF, the EU’s Anti-Fraud Office, which launched an investigation in December 2020 into Frontex over allegations of harassment and misconduct, in addition to illegal pushbacks of migrants. Frontex Deputy Executive Director Aija Kalnaja is due to take over the vacant role in the interim.
What’ve been reading this week
To the outside world, Germany’s relationship with Russia can often appear puzzling. Writing for the German Council on Foreign Relations (DGAP), Tyson Barker situates Berlin’s reaction to the conflict in Ukraine within the context of the culture of inertia that dominates German politics.
The CER’s Charles Grant looks at the significance of Emmanuel Macron’s reelection for the European Union.
The Mercator Institute has released a report, written under the direction of Bernhard Bartsch, on how dependence in Europe-China relations is perceived and discussed in 18 countries and in the EU institutions.
Der Spiegel’s Giorgos Christides and Steffen Lüdke investigate Frontex’s role in the illegal pushback of refugees in Greece.
The Institute of Public Affairs and the Migration Policy Group have published a report authored by Alexander Wolffhardt, Carmine Conte and Sinem Yilmaz comparing refugee integration across Europe.
This week’s newsletter is brought to you by Thomas Harbor, Théo Bourgery, Maxence de La Rochère, Andreea Irina Florea, Nastassia Maes (welcome!), Cyril Tregub. See you next Tuesday!