Commission's 2023 decision to unfreeze billions for Hungary should be 'annulled', ECJ Advocate General says

The European Commission's 2023 decision to consider the Hungarian judicial reform package completed should be anulled, the Advocate General at the Court of Justice of the European Union said in an opinion published on Thursday. The 2023 decision made more than €10 billion of funds available, but a total of more than €30 billion still depend on it. This is not yet the final judgment, but Advocate General opinions are influential in guiding the ECJ's final judgment.

It blocked almost everything that could be blocked

The judicial reform, which was finalised by the end of 2022, was the most valuable element of a complex set of conditions set for the Hungarian government that partially or completely overlapped. It blocked almost all of the €22 billion in cohesion funds (some of which are still unavailable for other reasons) and was also needed for regular payments from the €10.4 billion recovery fund.

According to EU requirements, the following conditions had to be met:

• strengthening the role and powers of the National Council of the Judiciary (OBT), which acts as an independent judicial oversight body;
• the independence of judges of the Kuria, i.e. the former Supreme Court, to make them more protected from political influence;
• the possibility for public authorities to challenge final judgments before the Constitutional Court had to be abolished;
• the obstacles preventing Hungarian judges from turning to the EU Court of Justice if they found that Hungarian and EU law were not in harmony, (the introduction of which violated EU law according to a previous ruling by the Court of Justice of the European Union) had to be removed.

Judit Varga, then Minister of Justice, announced the technical agreement on the terms in April 2023, but two rounds of minor amendments and clarifications requested by the European Commission were still needed. Meanwhile, Viktor Orbán himself made a casual comment in the summer of 2023 in an intellectual workshop of his party, when asked about bringing EU funds to Hungary, that "unanimity is needed for the budget increase. And then

we only have to hold the bag for the money, and that's it. That's it. That's the plan."

On another occasion, he explained why such blackmail could violate the principle of sincere or loyal cooperation enshrined in one of the EU's founding treaties – effectively its quasi-constitution. Since then, the government has been pursuing a similar, admittedly blackmailing strategy with the remaining blocked funds, although it is likely to run out of time even according to its own expectations, not to mention the annual loss of resources.

The European Commission deemed the reform complete at the end of 2023. The decision made more than €10 billion in cohesion funds available, which were not blocked by other professional and rule of law conditions, and this amount has since grown to over €12 billion.

Already at the time of the decision, the European Commission asserted that if it had not accepted the fulfilment, the Hungarian government could have taken legal action. However, the European Parliament (EP) did so with a 2024 resolution.

At last year's hearing, the body's representative concluded that there were only two options: either to extend the deadline or to say no. The 2023 assessment was "rushed, premature, and incomplete," and in the meantime, "new, relevant developments" had taken place, such as the creation of the Sovereignity Protection Office. (The Advocate General's opinion on the legislation was also issued on Thursday.)

The conditions are not intended to prescribe every detail and turn the European Commission into a "super-regulator," argued the body's lawyer.

The representative of the Hungarian government intervening on the Commission's side pointed out that the EP did not object to the justification for the introduction of the measure in 2022 and considered the expectations of the body to go far beyond that.

At last year's hearing, Advocate General Tamara Ćapeta asked, among other things, how the European Commission had concluded at the end of 2023 that the system was working well, given that an independent expert assessment of the distribution of cases in the Supreme Court was not completed until the summer of 2024, and she also sought an explanation for the Commission's reasoning.

The Advocate General found that there was a lack of adequate justification and that the legislation had failed to enter into force

n its press release on Thursday, the EU Court of Justice stated that the European Commission "may not disburse EU funds to a Member State until the required legislative reforms are in force and are effectively being applied." In any decision to disburse funds "the Commission must demonstrate that each condition has been satisfied – thereby protecting EU financial interests, enabling judicial review and informing not only the Member State concerned but all EU citizens"

The European Commission applied the requirements incorrectly “when it permitted, without any explanation, the disbursement of the budget before the required legislative reforms had entered into force or were being applied.”

“The Commission failed to carry out a proper assessment of the reforms relating to the independence of the Kúria, to judicial appointments of members of the Constitutional Court and to the removal of the obstacles to making preliminary references. It did not adequately address the legislative developments that could undermine or offset the objectives of the reforms Hungary had undertaken.”

According to Advocate General Ćapeta

“the Commission infringed its duty to state reasons by failing to provide any explanation for departing from the requirements set out in its 2022 approval decisions.”

"Even if such a decision is formally addressed only to the Member State concerned,

there are larger public interests behind such a decision, namely the disbursement of public money.

For that reason, and especially in a situation where the release of the funds had previously been suspended on account of concerns in respect of the rule of law, Advocate General Ćapeta considers that the Commission owes an explanation not only to Hungary, but to the EU citizens at large."

It was only in relation to the third plea of the European Parliament, that Advocate General Ćapeta concluded that the claims relating to the misuse of powers were not sufficiently substantiated and proposed that the Court reject that plea.

Even if the court were to rule in favor of the EP, the final judgment would not necessarily mean the immediate freezing or repayment of subsidies, as demonstrated by the case of state aid for Paks II. However, the opinion is diametrically opposed to the idea that the European Commission is withholding subsidies irregularly – according to the Advocate General's opinion, it was precisely the Commission that opened the way for them irregularly.