Principles and application of the conditionality mechanism

Respect for the rule of law is an essential precondition for sound financial management and effective EU funding. Therefore, a Regulation will set a new mechanism in the long-term budget 2021–2027 to protect the EU budget against breaches in the implementation of jointly agreed rules and regulations. The mechanism would allow the EU to suspend, reduce or restrict access to EU funding in a manner proportionate to the nature, gravity and scope of the breaches. It would not affect the obligations of the Member States concerned with regard to final recipients and beneficiaries.

The application of the conditionality mechanism under the Regulation will be objective, fair, impartial and fact-based, ensuring due process, non-discrimination and equal treatment of Member States. The mechanism will respect its subsidiary character. This means that measures under the mechanism will be considered only where other procedures set out in Union law would not allow to protect the Union budget more effectively. Such procedures include those under the Union financial legislation, the applicable sector-specific and financial rules (e.g. Common Provisions Regulation, the Financial Regulation) or infringement procedures under the Treaty on the Functioning of the European Union.

The Commission’s assessment for the identification of breaches will take into account relevant information, such as decisions by the Court of Justice of the European Union, reports from the European Court of Auditors, as well as conclusions of relevant international organisations. The Member State concerned will have the opportunity to set out its reasoning before any decision is taken.

At the end of the procedure set out in the Regulation, the measures to protect the EU budget will be proposed by the Commission and eventually adopted by the Council by qualified majority voting.

The Commission's Rule of Law Report

The Commission’s annual Rule of Law Report will also look into vulnerabilities in the rule of law. The first annual report is one of the major initiatives of the Commission’s Work Programme for 2020. It is part of the comprehensive European rule of law mechanism announced in the Political Guidelines of President von der Leyen, and covers all Member States with objective annual reporting by the European Commission. In particular, the annual Rule of Law Report monitors significant developments, both positive and negative, relating to the rule of law in Member States, and acts as a preventive tool to tackle rule of law issues.