Rule of Law Chickens Coming Home to Roost

Ongoing assaults by Viktor Orbán’s Fidesz administration on the rule of law in Hungary have produced manifold reactions, generally of depressingly limited effectiveness. Last week, on 13 June 2024, in Case C-123/22 European Commission v Hungary, the Court ordered a record lump sum payment of €200,000,000 and a penalty payment of €1,000,000 per day of delay until an earlier 2020 Court ruling is complied with. Hungary thus received a stinging reminder that the Court of Justice is not toothless when it comes to the rule of law.

Art.258 TFEU Commission prosecutions have been one means of combating rule of law breaches. Yet infringement proceedings have been relatively rare. One hurdle has been finding EU legal norms on which to base such prosecutions.¹⁾ In practice, proceedings have focussed formally on provisions of secondary legislation rather than broader underlying principles or values: e.g., breaches of central bank independence requirements (where Hungary legislated to take control of this national institution), instances of age discrimination (where Hungary lowered the retirement ages for judges); violations of data protection rules (where Hungary abolished the office of parliamentary ombudsman); or violations of various directives (where Hungary defied the EU common policy on asylum, subsidiary protection and temporary protection).²⁾

The December 2020 Court of Justice ruling in Case C-808/18 Commission v Hungary,involved such a narrow-focus Commission prosecution. Hungary had required, in defiance of Directive 2013/33, that international protection applications be lodged in person with the competent authority in “transit zones” bordering Serbia into which it allowed few persons to enter: by January 2018, only two per day (resulting in eleven-month delays for making applications). Hungary then required nearly all asylum seekers to remain in detention throughout the asylum procedure in facilities in “transit zones” and without safeguards required by Directive 2013/33. In defiance of the Directive, appeals had no suspensory effect, applicants were not allowed to remain in the territory and third-country nationals staying illegally in Hungarian territory were removed to a narrow strip of land without infrastructure on the other side of a border fence without safeguards required by Directive 2008/115, thereby effectively forcing them back into Serbia. Case C-808/18 was deemed sufficiently important to merit a Grand Chamber ruling. The ECJ held Hungary had infringed several provisions of both Directives.³⁾

Hungary responded by merely closing the two transit zones (para.16 et seq). A dissatisfied Commission subsequently launched Art.260 TFEU proceedings seeking a lump sum and penalty payments. Although heard by a five-member Chamber rather than by a Grand Chamber, the resulting Case C-123/22 ruling was arguably more significant than the earlier Art.258 ruling: first, because of the Court’s willingness to take Hungary’s failure to comply as seriously as this omission merited; secondly, because of the financial scale of the consequences the Court of Justice attached to what it held to be Hungary’s failure to comply with its 2020 ruling.

In Case C-123/22 Hungary were held to have failed to ensure effective, easy and rapid access to its international protection procedures (paras.64-65). It had also wrongfully maintained in force a provision permitting removal of illegally-staying third-country nationals. Hungary’s claimed post-2020 policy of not expelling anyone before a decision became final cut little ice: mere administrative practices “which by their nature are alterable at will by the authorities and are not given the appropriate publicity” did not constitute proper fulfilment of EU law obligations (paras.78-83).

The lump sum and penalty the Court now fixed was based on (a) the seriousness and (b) duration of the infringements and (c) the ability of the State to pay (paras.101,141). The Court identified no less than twelve reasons why Hungary’s misbehaviour was serious. First, the prolonged three-year failure to implement a ruling seriously undermined the principles of legality and res judicata (para.102). Besides, the provisions infringed themselves were important: compliance with of Art.6 of Directive 2013/32’s procedural requirements (secondly) ensured the operation of this entire Directive. Compliance with Art.6 was also (thirdly) required to protect the whole common policy on asylum, subsidiary protection and temporary protection. Fourthly, deliberate Member State evasion of a common policy constituted an unprecedented and exceptionally serious EU law infringement, which (fifthly) represented a significant threat to the unity of EU law and to the Article 4(2) TEU principle of Member State equality (para.107). Sixthly, systematic avoidance of applications for international protection undermined the international regime for protection of refugees and deprived those seeking international protection of their rights (para.107). Seventhly, non-compliance with the Directive 2013/32 right to remain violated the principle of effective judicial protection (enshrined in Art. 19 of the Charter) (para.108-110). Eighthly, Hungary’s removal of most third-country nationals violated a vital component of the common immigration policy. It was rendered more serious by its forming part of a general and persistent practice (para.112). Ninthly, Hungary’s conduct undermined the principle of solidarity and the fair sharing of responsibility (para.115) – the former constituting “one of the fundamental principles of EU law and […] one of the values common to the Member States on which the European Union is founded, pursuant to Article 2 TEU.” Such a failure in the duty of solidarity struck at the very root of the EU legal order (paras.116-7). Tenthly, the impact of all this on both public and private interests was “extraordinarily serious” (para.118). Eleventh, an aggravating factor was Hungary’s repetition of its unlawful conduct (para.120). Twelfth and finally, Hungary had subsequently violated the principle of sincere cooperation and undermined respect for Member State equality in seeking to rely on national law in violation of the duty of primacy and failing to put an end to the misconduct established by the ECJ in 2020. Such a violation of the duty of sincere cooperation was deemed an additional aggravating circumstance (paras.121-124).

Key to the Court’s approach therefore was acute awareness of the broader ramifications of Hungary’s misbehaviour. Far from being fixated by mere breaches of Directives, the Court understood the scale of Hungary’s misconduct: one EU law infringement was seen as containing, matrushka-like, another, more serious one within it: failure to comply with the 2013 Directive blocked the operation of the common policy on international protection, which in turn constituted a significant threat to the unity of EU law and seriously undermined the principle of solidarity.

The consequences were seen in the revolutionary scale of the lump sum and penalty payment imposed. The Court carefully reaffirmed its long-standing position that Article 260 empowered it to impose a penalty payment and a lump sum payment cumulatively.⁴⁾ It also stressed the extent of its discretion, stressing, for example, that “the Commission’s proposals regarding the amount of [the] penalty payment cannot bind the Court and are merely a useful point of reference”.⁵⁾

Whether a lump sum would be required would depended on the infringement’s characteristics and the Member State conduct.⁶⁾ Here, in the light of “in particular the exceptional seriousness of the infringements at issue and Hungary’s failure to cooperate in good faith in order to bring them to an end”, the Court ordered a record lump sum payment of €200,000,000 (para.132) – over 191 times what the Commission had sought.⁷⁾

The Court also ordered Hungary to pay a record-equalling penalty payment of €1,000,000 per day of delay in complying with the 2020 ruling;⁸⁾ over 61 times what the Commission had sought.⁹⁾

The financial impact of Case C-123/22 is enhanced by the fact that the Commission can forcibly recover these amounts by offsetting.¹⁰⁾ It is, however, reduced by the political reality that the prevalence of unanimity voting, particularly in the foreign affairs field, has enabled Hungary to weaponise its veto to its own advantage so as to fend off measures designed to enforce the rule of law. Striking recent evidence of this was the Commission decision to unlock €10 billion in funding to dissuade Hungary from blocking EU policy on Ukraine, a sum that dwarfs the amount at issue in Case C-123/22. Commission v. Hungary is nonetheless a significant precedent both in the willingness the Court showed to see repeated breaches of directives as symptomatic of wider violations of more fundamental EU norms, and its willingness to impose genuinely significant penalties in a rule of law case.