Funds to Hungary, EU Parliament is serious: Juri committee backs Court action against EU executive

Brussels – The December agreement between the European Commission and Viktor Orban that led to the unfreezing of €10.2 billion of cohesion funds for Hungary is under the EU Parliament magnifying glass. And it may soon come under that of the European Court of Justice. The European Parliament’s Legal Affairs Committee (Juri) has followed up on the MEPs’ request and, in a closed session, decided to pursue the case.

The go-ahead was given with 16 votes in favour, one against, and no abstentions. Now, according to the provisions of article 149 of the EU institution’s Rules of Procedure, it will be up to Roberta Metsola to present the appeal on behalf of the Parliament ” by the recommendation of the committee responsible for legal matters.” Parliamentary sources confirm that “as a general rule, the president always follows the commission’s recommendations” and that Metsola “will inform the group leaders at the meeting of the Conference of Presidents on Thursday” March 14. In any case, the Court set the deadline for filing the appeal to March 25.

“EU decisions cannot be bought and sold for cash. The commission’s Dec. 2023 decision allowing payments of more than ten billion euros to Hungary was an act of extortion on behalf of Orbán, not an accurate assessment of reforms in Hungary,” commented Sergey Lagodinsky, shadow rapporteur on the Juri committee. The “faux pas” dates back to December 13, when, just hours after the European Council had given the green light to open accession negotiations for Ukraine and Moldova, the EU executive announced that it would unfreeze some of the Cohesion Policy, Fisheries and Home Affairs funds previously frozen pending Budapest’s implementation of reforms to improve the rule of law situation.

In return, Orban gave up getting in the way in opening accession negotiations with Ukraine and Moldova. “We want the legitimacy of what happened in December to be checked, but also to be absolutely clear in the future that the European Parliament is very firm when it comes to the rule of law conditionality,” warned the Greens’ co-chair in the Eurochamber, Terry Reintke.

This is not the first time the parliament has initiated legal action against the EU executive. Also based on a recommendation of the Legal Affairs Committee drafted by Lagodinsky, the European Parliament had filed a motion against the commission in 2021 for failing to activate the so-called conditionality mechanism against Hungary. The action was withdrawn at the last minute because the commission decided to backtrack. Instead, the Court in Luxembourg considered dismissing an action by the Parliament against the Commission on a matter related to the failure to suspend visa exemptions for US citizens.

EU funds to Hungary frozen and unfrozen

According to the more accurate data provided in May 2023 from the Commission services, the EU funds for Hungary frozen by Brussels stood at €28.6 billion, divided into three macro-areas: National Recovery and Resilience Plan (5.8 billion), Cohesion Policy Funds (22.6 billion) and Home Affairs Funds (223 million). The three paths proceed in parallel, each with a specific procedure (or several, depending on the nature of the funding). The first considers the “27 super-objectives” on the rule of law established on November 30 last year by the Commission to release Hungary’s NDP funds, i.e. 5.8 billion in grants. What is expected from Budapest is that judicial independence will be strengthened so that judges’ decisions will be “protected from outside political interference.”

The second chapter—the most complex-—is about the cohesion policy funds, which for Hungary are worth €22.6 billion as funding from the EU budget. Of these funds, 6.3 billion were frozen through the rule of law conditionality mechanism by a decision of the council in Dec. 2022 (and which remain frozen). This is a separate procedure involving 55 per cent of the funds allocated to Hungary from three operational programs financed by the European Regional Development Fund (ERDF), the Cohesion Fund, the Just Transition Fund (JTF), and the European Social Fund Plus (ESF+): “Environmental and Energy Efficiency Plus”, “Integrated Transport Plus”, and “Territorial and Settlement Development Plus”.

Of the remaining 16.3 billion, 12.9 billion were tied only to the implementation of judicial reforms (without additional criteria) and are the ones that Brussels partly unblocked after the review request. The remaining 3.4 billion are blocked for non-compliance with horizontal enabling conditions—that is, the necessary conditions as far as the EU Charter of Fundamental Rights is concerned—in three disputes between the Commission and Hungary: the “child protection” law (the anti-Lgbtq+ law), the academic independence law, and the treatment reserved for asylum seekers law. The first issue is responsible for stalling 3 per cent of the cohesion policy budget (i.e., 678 million), the second by 9 per cent (over 2 billion), and the third by an additional 3 per cent (another 678 million). To unlock these funds it is not enough to put an end to the issues related to the independence of the judiciary (although it remains a pre-requisite for all of these), since the pending issues regarding the other horizontal enabling conditions must also be resolved.

Finally,  the last issue to consider is the €223.1 million from three Home Affairs Funds programs. As learned by Eunews in February from sources inside the EU executive (and then confirmed again in mid-November), it is about 69.8 million from the Asylum, Migration and Integration Fund (AMIF), 102.8 from the Border Management and Visa Instrument (BMVI) and 50.5 from the Internal Security Fund (ISF). Although the Commission’s lack of transparency makes it complex to figure out exactly which funds have been unfrozen, sources close to the dossier report that it would be both ISF and BMVI funds (tied exclusively to judicial matters according to implementation decisions), as well as AMIF funds linked to access to asylum (integration) while those related to nonrefoulement would remain blocked.