The European Commission has written to Hungary and Poland saying that problems with the independence of the judiciary, ineffective prosecution of corruption, and deficiencies in public procurement could pose a risk to the EU’s financial interests.
The two letters, seen by POLITICO, are an informal first step toward triggering a mechanism that allows for EU money to be cut for countries because of rule-of-law concerns. They were signed by Director-General for Budget Gert-Jan Koopman and sent to Hungary and Poland on Friday.
The mechanism, which came into effect at the beginning of this year but has yet to be formally used, allows the bloc to cut funding to member countries in cases when certain rule-of-law breaches affect the bloc’s financial interests or the sound financial management of the EU budget.
In the letter to Budapest, the Commission described systemic problems and lack of accountability for corruption in Hungary, posing 16 specific questions to the Hungarian authorities on issues such as conflicts of interest, who benefits from EU funding, and how judicial review by independent courts is guaranteed.
The Commission pointed out that the bloc’s anti-fraud office, OLAF, found that in the period 2016 to 2020, Hungary’s financial recommendations in the areas of regional development and agriculture were “almost eight times the EU average.”
It also raised concerns that “on a number of occasions in recent years, Hungary withdrew a large amount of irregular projects or expenditure from Union funding following Commission’s services audits and OLAF investigations” while continuing to finance these projects with national funding, a move that has a “negative impact on the deterrent effect of Commission controls and audits, and of OLAF investigations given the frequency of such practices.”
In a nod to concerns that Prime Minister Viktor Orbán’s close friends and family members are given a large portion of Hungary’s EU funding, the Commission asked the Hungarian authorities to “indicate the amounts from Union funds that were used to finance projects in the Lake Balaton area” and “provide the list of the ten groups of physical persons or undertakings receiving the highest share of EU area-related direct payments from the Union Common Agricultural Policy in Hungary.”
The Commission also pointed to concerns about possible conflicts of interest involving members of the Hungarian government itself, noting that current ministers and state secretaries are members of boards of trustees of controversial “public interest trusts” — including higher education institutions that could be recipients of EU funding.
Moreover, the Hungarian government was asked to indicate what measures were taken “to prevent and manage possible conflict of interests concerning the possible sales of shares of Budapest airport.”
And in a section devoted to problems with the independence of the judiciary, the Commission raised questions about judicial review, the “excessive powers” of the president of the National Office for the Judiciary, and the fact that questions Hungarian judges submit to the Court of Justice of the EU may be declared unlawful.
“The issues identified in this section could affect the effectiveness and impartiality of judicial proceedings on cases related to the irregularities in the management of the Union funds, and this could create a serious risk to the protection of the financial interests of the European Union,” the Commission wrote.
“This could create a serious risk to the protection of the financial interests of the European Union,” it added.
In the letter addressed to Warsaw, the Commission expressed its concerns with the lack of independence of judges and the lack of effectiveness and impartiality of the prosecution service, as well as with the latest ruling from Poland’s Constitutional Tribunal, which said the Polish Constitution takes precedence over some of the key provisions of the EU law.
According to Brussels, the contested judiciary reforms carried by Poland’s conservative Law and Justice Party government “could affect the effectiveness and impartiality of the judicial proceedings on cases related to the irregularities in the management of the Union funds, creating a risk to the protection of the financial interests of the European Union.”
The Commission stressed that “endangering the independence of the judiciary may be indicative of a breach of the principles of the rule of law.”
In the letter addressed to Warsaw, the Commission expressed its concerns with the lack of independence of judges and the lack of effectiveness and impartiality of the country’s prosecution service, as well as with the latest ruling from Poland’s Constitutional Tribunal, which said the Polish Constitution takes precedence over some of the key provisions of the EU law.
The Commission also asked the Polish government how it’s going to guarantee the respect of relevant provisions of EU law and the judgments of the EU’s courts — including those regarding the protection of EU financial interests — in the light of the tribunal’s ruling.
Brussels is also inquiring how Warsaw can protect the prosecution service “from undue interference from the Minister of Justice,” given that the minister is also the country’s prosecutor general, stressing this is important “in relation to investigation and prosecution of fraud, corruption or other breaches of Union law.” It also expressed its concern with Poland’s effectiveness in the fight against high-level corruption.