Explanatory Memorandum to COM(2018)324 - Protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2018)324 - Protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States. |
|---|---|
| source | COM(2018)324  |
| date | 02-05-2018 |
1. CONTEXT OF THE PROPOSAL
• Reasons and objectives
As explained in the Communication from the Commission from February 2018 'A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020' 1 , the Union is a community of law and its values constitute the very basis of its existence. They permeate its entire legal and institutional structure and all its policies and programmes. Respect for these values must therefore be ensured throughout all Union policies. This includes the EU budget, where respect for fundamental values is an essential precondition for sound financial management and effective EU funding. Respect for the rule of law is important for European citizens, as well as for business initiatives, innovation and investment. The European economy flourishes most where the legal and institutional framework adheres fully to the common values of the Union.
The potential of the EU budget can only be fully unleashed if the economic, regulatory and administrative environment in the Member States is supportive. Under the current Multiannual Financial Framework, all Member States and beneficiaries are already required to show that the regulatory framework for financial management is robust, that the relevant EU regulation is being implemented correctly, and that the necessary administrative and institutional capacity exists to make EU funding a success. In addition, policy conditionality can foster the cooperation between Member States in areas where economies of scale or externalities are significant. New provisions were also introduced under the Multiannual Financial Framework 2014 – 2020 to avoid situations where the effectiveness of EU funding is undermined by unsound economic and fiscal policies.
Effective respect for the rule of law is a prerequisite for confidence that EU spending in Member States is sufficiently protected. As explained in the Communication from the Commission from 2014 'A new EU Framework to strengthen the Rule of Law', 2 the rule of law is the backbone of any modern constitutional democracy. It is one of the founding principles stemming from the common constitutional traditions of all the Member States of the European Union. As such, it is one of the main values upon which the Union is based, as recalled by Article 2 of the Treaty on European Union, as well as by the Preambles to the Treaty and to the Charter of Fundamental Rights. It ensures that actions by the state take place under an effective and reliable legal framework, that they can be scrutinised and challenged if needed, and that effective redress can follow.
The different constitutions and judicial systems of the EU Member States are in principle well designed to ensure the rule of law and equipped with in-built safeguards to protect citizens against any threat to the rule of law. However, a number of recent events have demonstrated generalised weaknesses in national checks and balances and have shown how a lack of respect for the rule of law can become a matter of serious and common concern within the European Union. The result has been a clear request from institutions such as the European Parliament as well as from the public at large for the EU to take actions to protect the rule of law.
Such action has been taken with the available tools and results have been achieved. However, considering the link between the respect for the rule of law and mutual trust and financial solidarity amongst Member States of the European Union, and that control mechanisms cannot be effective unless supported by an effective application of administrative and legal control and remedies in the case of wrongdoing, existing obligations to ensure effective control systems should be supplemented by measures to ensure respect of the rule of law.
In order to protect the Union's financial interests from the risk of financial loss caused by generalised deficiencies as regards the rule of law in a Member State, the European Union should be granted the possibility to adopt appropriate measures in such cases. This should be on the basis on a Council decision following a proposal from the Commission. The decision shall be deemed to have been adopted by the Council, unless it decides, by qualified majority, to reject the Commission proposal within one month of its adoption by the Commission. The European Parliament should also be fully involved at all stages.
Measures need to be adopted in full respect of the principles of transparency and proportionality. It is also important to ensure that the consequences of measures have a sufficient connection with the aim of the funding. This also points to the need to ensure that the consequences fall on those responsible for identified shortcomings. It should therefore reflect the fact the individual beneficiaries of EU funding, such as Erasmus students, researchers or civil society organisations, cannot be considered responsible for such breaches.
This proposal establishes the rules necessary for the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States. It could be integrated into the Financial Regulation, which is based on the same legal basis, at the occasion of its future revision.
• Consistency with existing policy provisions
The proposal will contribute to ensuring the respect for the rule of law in all Member States in accordance with Article 2 TEU and to protecting the budget of the Union.
• Consistency with other Union policies
By contributing to ensuring respect for the rule of law and proper implementation of the budget of the Union the proposal will come in support of all other Union policies, notably when the use of Union funds is concerned.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Article 322(1)(a) of the Treaty on the Functioning of the European Union and Article 106a of the Treaty establishing the European Atomic Energy Community.
• Subsidiarity (for non-exclusive competence)
Financial rules governing the Union budget under Article 322 of the Treaty on the Functioning of the EU could not be adopted at the level of the Member States.
•Proportionality
The proposal envisages measures proportionate to the generalised deficiencies as regards the rule of law, including the suspension, and reduction of funding under existing commitments, or the prohibition to conclude new commitments with specific categories of recipients. Proportionality will be ensured in particular by taking into account the seriousness of the situation, the time which has elapsed since the relevant conduct, its duration and its recurrence, the intention and the degree of collaboration of the Member State in putting an end to the violation of the rule of law and the effects of that deficiency on the respective Union funds.
• Choice of the instrument
Considering that the objective is to contribute to the proper implementation of the general budget of the Union; the proposal takes the form of a self-standing Regulation based on Article 322 TFEU, the same legal base as the Financial Regulation. 3
3. RESULTS OF RETROSPECTIVE EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Retrospective evaluations/fitness checks of existing legislation
There is no comparable current programme. There is however experience gathered from addressing at European Union level issues concerning the rule of law in Member States. This has demonstrated that, whilst some tools exist, they are not specifically designed to address situations where the implementation of Union funds could be put at risk by deficiencies as regards the rule of law.
• Stakeholder consultations
No specific stakeholder consultation has taken place, but the subject matter has been widely debated, including at the European Parliament and the Council.
• External expertise
External sources, in particular the Council of Europe, have been considered when designing the current rules. The use of external expertise from the Council of Europe is also envisaged, where appropriate, when implementing the proposed measures.
• Impact assessment
No impact assessment has been carried out as the measure has as its sole objective to avoid that the Union budget is harmed by situations where a generalised deficiency as regards the rule of law in a Member State affects or risks affecting the sound financial management and the protection of the financial interests of the Union. The options were therefore to either maintain the status quo, with no specific financial procedure in case of problems relating to the rule of law and potentially affecting the sound management of Union funds, or to develop such a procedure.
• Fundamental rights
By increasing the current level of protection against deficiencies as regards the rule of law, the proposal will have a positive impact on fundamental rights
4. BUDGETARY IMPLICATIONS
By increasing the protection against possible practices, omissions or measures of public authorities which affect the rule of law in that Member State and which affect or risk affecting its capacity to implement its budgetary obligations, the proposal will have a positive impact on the sound financial management of the general budget of the Union.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Commission will assess the situation in the Member State concerned in order to decide whether a lifting of measures can be proposed.
• Detailed explanation of the specific provisions of the proposal
The proposal draws upon the Communication from the Commission from 2014 'A new European Union Framework to strengthen the Rule of Law', 4 and the Communication from the Commission from February 2018 'A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020' 5 as well as standards and principles developed by the Council of Europe.
Article 1 explains the subject matter and the need to protect the Union budget against generalised deficiencies as regards the rule of law in a Member State, which could affect or risk affecting the sound financial management and the protection of the financial interests of the Union.
Article 2 sets out the definitions.
Article 3 details the measures to be taken to address a situation of generalised deficiencies as regards the rule of law. It explains what particular functions of the state might be affected and negatively impact the sound financial management of Union funds.
Article 4 lists the type of measure that can be taken and clarifies that these should be addressed to Member States as recipients of the Union funds.
Article 5 sets out the procedures that should be followed by the Commission when proposing measures to the Council, who should decide in accordance with a reversed qualified majority vote.
Article 6 sets out the procedure to lift measures when the situation it targeted has been addressed in a given Member State, and the consequences of the lifting in terms of budgetary terms.
Article 7 concerns the information provided to the European Parliament.
Article 8 contains the final provisions.