Commission considers that Hungary's judicial reform addressed deficiencies in judicial independence

The European Commission adopts two decisions regarding Hungary and the rule of law situation in the country.

One relates to the horizontal enabling conditions in so far as the judicial reform in Hungary is concerned, and the other concerns the budget conditionality mechanism. With these decisions, the Commission is following up on various processes that were launched by the Commission and the Council in December 2022.

In its decisions of 22 December 2022, adopting Hungary's Cohesion Policy, Maritime and Fisheries funds, and Home Affairs funds, the Commission considered that Hungary did not fulfil the horizontal enabling condition on the EU Charter of Fundamental Rights because of several concerns, including on judicial independence. After a thorough assessment, and several exchanges with the Hungarian government, the Commission considers that Hungary has taken the measures it committed to take in order for the Commission to consider that the horizontal enabling condition on the EU Charter of Fundamental Rights is fulfilled in what concerns judicial independence. This means part of the Cohesion Policy funding would no longer be blocked, and therefore Hungary may start claiming reimbursements of up to around €10.2 billion.

Member States must ensure the fulfilment of enabling conditions throughout the whole Cohesion Policy period. The Commission will closely and continuously monitor, notably through audits, active engagement with stakeholders and in monitoring committees, the application of the measures put in place by Hungary. If, at any point in time, the Commission considers that this horizontal enabling condition is no longer fulfilled, it may again decide to block funding.

On 15 December 2022, based on a proposal from the Commission, the Council also adopted measures to protect the Union budget from breaches of the principles of the rule of law in Hungary under the budget conditionality mechanism. These measures relate to the principles of the rule of law in Hungary in the areas of public procurement, prosecutorial action, conflict of interest, the fight against corruption and public interest trusts. Despite regular exchanges with Hungary, the Commission considers that Hungary has not addressed the breaches of the principles of the rule of law that led to the adoption of measures by the Council in December 2022. Therefore, the Commission is not in a position to propose that the measures against Hungary be adapted or lifted. This means that three Cohesion Policy programmes, with a budget of €6.3 billion, remain suspended and that Hungary does not as of yet have access to those funds.

Also, on 15 December 2022, Council approved the Hungarian recovery and resilience plan (RRP). In its RRP, Hungary committed to 27 “super milestones” to ensure the protection of the Union's financial interests, and to strengthen judicial independence. These “super milestones” remain unchanged in Hungary's revised plan (approved by the Council on 15 December 2023), and also apply to the REPowerEU chapter. The 27 “super milestones” of the RRP include 4 “super milestones” on judicial independence, which correspond to the measures requested of Hungary by the Commission under the horizontal enabling conditions on the EU Charter of Fundamental Rights, and 21 “super milestones” which correspond to the remedial measures under the budget conditionality mechanism. Given that the super milestones have not been fully complied with, no payment request can be paid out for now.

Overall, the funding that remains locked for Hungary amounts to around €21 billion.

Reforms related to judicial independence

To address the deficiencies identified under the horizontal enabling condition on the EU Charter of Fundamental Rights in the area of judicial independence, Hungary has adopted legislation which significantly strengthens the independence of the judiciary in the country. This reform corresponds to the commitments taken by Hungary in its Recovery and Resilience Plan. 

On 18 July 2023, Hungary informed the Commission that it fulfils the enabling conditions on judicial independence. The Commission had 3 months to assess whether this was the case and, in this process, requested several clarifications from the Hungarian authorities. Having received information that the Commission deemed satisfactory, and after a thorough assessment, the Commission considers that Hungary has taken the measures it committed to take in order for the Commission to consider that the horizontal enabling condition on the EU Charter of Fundamental Rights is fulfilled.  

These measures to strengthen judicial independence include, in particular:

• increasing the powers of the independent National Judicial Council, to limit undue influence and discretionary decisions, and ensure a more objective and transparent administration of courts;
• reforming the functioning of the Supreme Court to limit risks of political influence;
• removing the role of the Constitutional Court in reviewing final decisions by judges on request of public authorities; and
• removing the possibility for the Supreme Court to review questions that judges intend to refer to the European Court of Justice. 

Despite Hungary's progress on judicial independence, the Commission maintains its concerns regarding other areas covered by the horizontal enabling condition on the EU Charter of Fundamental Rights. These concerns relate to Hungary's so-called child-protection law, serious risks to academic freedom and the right to asylum. Until these concerns are addressed, the horizontal enabling condition remains unfulfilled, and the Commission cannot reimburse the related expenditure under several programmes.

Budget conditionality mechanism

On 15 December 2022, the Council adopted a decision outlining measures to protect the Union budget from breaches of the principles of the rule of law in Hungary. These breaches related to the areas of public procurement, prosecutorial action, conflict of interest, and the fight against corruption.

These measures included a suspension of budgetary commitments from three operational programmes under Cohesion Policy for an amount of approximately €6.3 billion. The measures also prohibit entering into new legal commitments with so-called public interest trusts (and entities maintained by them) for EU funding implemented under direct or indirect management.

Today's decision lists all issues where remedies are still required, which includes, notably, improvements in the areas of the mandate of the Integrity Authority, public asset declarations, and the situation of public interest trusts.

The Commission can only propose to the Council to adapt or lift the measures taken against Hungary, once Hungary addresses the issues that led to these measures and notifies the Commission that it has taken remedial measures.

Hungary has not formally notified the Commission about any remedies taken since the Council adopted the decision on 15 December 2022. Therefore, following the procedure set out in the Conditionality Regulation one year after the adoption of the Council's decision, the Commission has re-evaluated Hungary's situation and confirms that the risk to the Union budget remains unchanged since December 2022, and the Council's measures should not be adapted or lifted.