The rule of law conditionality regulation provides that the European Council may, at the request of the European Commission, adopt measures in response to rule of law breaches such as the suspension of payments from the EU budget or the suspension of the approval of one or more programmes financed by that budget.

The regulation was adopted by the European Parliament and the European Council in December 2020 and has been in force since January 2021.

Hungary and Poland challenged the regulation on the basis of, inter alia, the alleged absence or inadequacy of the legal basis chosen for the regulation, the alleged incompatibility of the Regulation with Article 7 of the Treaty on European Union (TEU) and the alleged breach of the principle of legal certainty.

The two states supported each other’s challenges. Ireland, along with Belgium, Denmark, Germany, Spain, France, Luxembourg, the Netherlands, Finland, Sweden and the European Commission, intervened in the cases in support of the Parliament and the Council.

In judgments handed down this morning, the Court of Justice of the European Union (CJEU) dismissed the actions brought by Hungary and Poland in their entirety.

Responding to the judgments, Ursula von der Leyen, president of the European Commission, said: “I welcome these judgements, which follow the position that the Commission, the European Parliament, the Council and 10 member states defended in the procedure.

“The court upholds the legality of this important tool that enables us to protect better the EU budget and the financial interests of the Union against breaches of the principles of the rule of law. This mechanism ensures that the Union budget will be protected and implemented in line with the principles of sound financial management, for the benefit of all European citizens.

“The Commission will now analyse carefully the reasoning of the judgments and their possible impact on the further steps we will take under the regulation. Taking into account these judgments, we will adopt in the following weeks guidelines providing further clarity about how we apply the mechanism in practice.”