by Pier Paolo Poggioni

With Regulation 2020/2092 of the European Parliament and Council of December 16, 2020, a truly disruptive principle was introduced, given its approach. Assuming that the rule of law is one of the founding values of the European Union, its observance is - among others - indispensable for the proper financial management of the Union's budget and the effective use of its funding. Based on this consideration, the Regulation introduced an additional layer of protection in cases where violations of the principles of the rule of law harm or are likely to harm the EU's financial interests. This was achieved through a general conditionality regime for the protection of the EU budget. This mechanism allows the EU to take measures such as suspension of payments or financial corrections to protect the budget. At the same time, there is the provision that final recipients and beneficiaries of EU funds should continue to receive payments directly from the member states involved. It is provided that the aforementioned safeguard measures may be proposed only if the Commission finds that violations of the principles of the rule of law directly affect or seriously threaten the proper financial management of the Union budget or the Union's financial interests in a sufficiently direct manner. This disruptive instrument serves a complementary function to other mechanisms for protecting the EU budget (for example, audits, financial corrections, or investigations by the EU Anti-Fraud Office, OLAF).

Poland and Hungary's appeals

Against this Regulation, Poland and Hungary brought an action for annulment under Article 151(1) of the Rules of Procedure before the CJEU on the grounds that they believed it violated, among others, the principle of legal certainty.

In relation to the alleged violation of the principle of certainty in the law, Poland, supported by Hungary, argued that the regulation fails to meet the requirements of clarity and precision arising from the principle of certainty in the law because the regulation does not clearly specify the requirements that must be met by Member States in order to retain funding from the Union budget granted to them and gives the Commission and the Council too wide a discretionary power . It would pose difficulties in this regard, first, the notion of "rule of law," as defined in Article 2(a), of the contested regulation. This notion could not, in principle, be the subject of a universal definition since it would contain a non-exhaustive number of principles whose meaning may differ from one state to another, depending on its constitutional characteristics or specific legal traditions.

The rulings of the Court of Justice of the European Union of Feb. 16, 2022

With regard to these grievances, the EU Court observed that the principle of legal certainty requires, on the one hand, that rules of law be clear and precise and, on the other hand, that their application be foreseeable for the subjects of the system especially when they may have unfavorable consequences. This principle requires, in particular, that a piece of legislation should enable the persons concerned to know exactly the scope of the obligations it imposes on them, and that they should be able to know unambiguously their rights and obligations and regulate themselves accordingly. However, these requirements cannot be understood in the sense that they preclude the Union legislature, in the context of a rule it adopts, from using an abstract legal notion, nor in the sense that they require such an abstract rule to mention the various concrete hypotheses in which it may be applied, since the legislature cannot determine in advance all such hypotheses. Consequently, the fact that a legislative act confers discretionary power on the authorities responsible for its implementation does not in itself disregard the requirement of foreseeability, provided that the scope and manner of exercise of such a power are defined with sufficient clarity, in view of the legitimate objective at stake, to provide adequate protection against arbitrariness.

Considerations on the pronouncement of the EU Court of Justice in light of the principle of certainty of law

The Court's reasoning does not appear convincing. The Commission, in fact, despite the dismissal of the appeals, likely aware of the existence of an existing flaw in the regulation in terms of legal certainty, a few days after the issuance of the judgment (March 2, 2022), felt the need to supplement the regulatory measure - therefore deemed insufficient - through "guidelines on the application of the regulation on a general system of conditionality for the protection of the Union budget." In addition to providing procedural guidance, Annex 1 of these "guidelines" contains, "Indicative examples of violations of the principles of the rule of law."

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Having felt the need to make important supplementary elements to the Regulation, it certainly confirmed retrospectively the perplexities about the content of the decision given that - rebus sic stantibus - the Regulation was evidently deficient in defiance of the fundamental requirement of legal certainty and that is one of the flaws complained of by the plaintiffs. As it turned out, the "guidelines" did not incorporate mere elements of procedure or secondary detail, but the very operability of the legal mechanism represented by the conditions of operation of the - very serious - budget safeguards.

The principle of certainty in the law is one of the pillars informing the European system and has been recalled several times by the CJEU. It is fair to observe that the Court has disregarded these cornerstone principles. To assert, as the Court does, that the requirements of certainty cannot be understood as precluding the Union legislature, in the context of a rule it adopts, from using an abstract legal concept because the legislature cannot determine in advance all of the aforementioned hypotheses, and that, consequently, the fact that a legislative act confers a discretionary power does not in itself disregard the requirement of foreseeability, provided that the extent and manner of exercise of such a power are defined with sufficient clarity, leads to several possible consequences. Possible violations may have an unpredictable extent as they may originate from the most diverse sources even of a non-binding nature and may have uncertain and changing content also in view of the structural mutability of the objectives and contents of the budget. The aforementioned aside - contained in the Court's "guidelines" - according to which the indications are merely simplifying in nature, certainly leaves open any other application scenario with the consequent and concrete risk that the operation of the very dangerous inhibitory financial mechanism may also be characterized by extra-legal considerations.

Even the requirement - contained in the Rules - that it is necessary that the violation of the rule of law can lead to the protection mechanism becoming relevant if it directly affects the protection of the budget, is a limitation only in appearance given the very wide operating space of the provisions of the budget.

Since EU acts are to be adopted in accordance with the rules in force at the time of their adoption, it would be contrary to the principle of legal certainty to take into account, in determining the legal basis of an act, an alleged development of relations between institutions that is not yet enshrined in the legal texts or that results from the provisions that are not yet operational. It must also be considered that the principle of certainty in the law has been applied by the Court to test the ability of national systems to guarantee legal positions of Community derivation equivalent protection to that provided at the national level and, above all, effective protection.

Therefore, the ruling does not appear to be agreeable but-and this is the most relevant aspect-not even the hasty "guidelines" solve the flaw in the requirement of certainty in law. Without wishing to state or address here the possible distorted applications for political or meta-legal considerations, there is no doubt that the domestic budgetary policies of states are subjected - in this context - to a serious, looming and mutable threat.

pier paolo poggioni

A lawyer, he has taught at the University of Siena and is currently a lecturer at Cusano University in Rome. Co-author of Documenti per una finanza sostenibile- verso una finanza di sostenibilità ambientale (2020) and Circular Economy (2022).