05 May 2023

The tools for protecting the EU budget from breaches of the rule of law

The Conditionality Regulation in context

Eulalia Rubio / Tamás Kiss-Gálfalvi / Thu Nguyen / Tomás Ruiz de la Ossa / Francesco Corti / Alba Forns Gomez

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The rule of law Conditionality Mechanism is a new instrument that entered into force in January 2021. It allows the EU to take measures in cases when breaches of the rule of law principles affect or seriously risk affecting the EU budget or the EU’s financial interests.

As the Conditionality Regulation was only adopted recently, some questions are left open on its potential scope of application. The European Commission has published guidelines, but without sufficient jurisprudence to go on they leave some room for interpretation. The fact that the Regulation has so far only been applied once makes it difficult to draw definitive conclusions on how it will be applied in the future.

The study discusses the potential scope of application of this new mechanism, in particular by analysing how it can be used either as an alternative to, or in combination with, other tools and mechanisms aimed at protecting the EU’s financial interests. To this end, the study

  • provides an overview of the institutional setup and processes linked to the application of the mechanism;
  • describes and analyses the European Court of Justice rulings and the Commission’s guidelines, focusing on the aspects most linked to the scope and application of the Regulation;
  • maps the various tools that already exist to protect the Union’s financial interests (‘layers of protection’) and describes their scope of application and effectiveness through the presentation of anonymised real case studies of their use; and
  • constructs a typology of hypothetical situations of breaches of the rule of law affecting the Union’s financial interests that could fall within the scope of the Conditionality Regulation.