To Halt Poland’s PiS, Go for the Euros

The Polish government has been largely impervious to EU legal and political pressure. But cutting off EU funding is likely to be more persuasive and the Commission has clear legal grounds to do so.

Judicial independence in Poland seems to have been granted a partial reprieve as Polish President Duda vetoed two out of three controversial laws regulating the courts last week. The ruling PiS (Law and Justice) party has said that it will, nonetheless, push forward with its plans to bring the country’s judiciary further under government control.

If this happens, then the EU needs to respond with more than just warnings that it will deliver further warnings. The EU has failed to persuade PiS to stop undermining judicial independence. The Commission has issued a fresh recommendation as part of its investigation into the reforms, but the Polish government has so far ignored all the Commission’s recommendations. The Commission has stated that if certain parts of the vetoed laws are put into effect, it will immediately trigger Article 7(1) of the EU Treaty. But even if the Commission activates Article 7, the most that can emerge from the Council of the EU will be more words. That’s because there remain a number of stages to pass (which might be blocked by a Hungarian veto) before sanctions become available. The Commission has also started legal proceedings over the independence of the judiciary. But a similar case against the Hungarian government in 2012 shows that even if the Commission wins, this is unlikely to result in a genuine reversal by the government of the measures under dispute. And indications are that PiS is in no mood to comply with EU court judgments anyway.

Even though it is a powerful and readily available alternative, the Commission seems to have rejected the possibility of using EU funds to induce a change of heart in PiS. There have been suggestions by some governments and EU Commissioners that when a member state flouts the rule of law, it should have EU funding (specifically, ‘cohesion funds’) cut off. EU money flows to national governments in a number of different ways. Cohesion funds represent the biggest chunk, designed to help governments with investments in infrastructure and employment. Poland is set to receive 86 billion euros between 2014 and 2020 - almost 19% of the total funds (545 billion) available for all 28 EU countries.

Some have suggested that cutting off EU money is undesirable because it could sour relations and cause divisions between EU governments. Others have said that cutting off EU funds to a government for flouting the rule of law would require a change to EU law or even to the EU treaties to create a new mechanism.

The truth is that the EU rules that regulate cohesion funds already require governments to respect the rule of law as a condition of getting the money. The rules (the Common Provisions Regulation, for short) require governments to have systems in place to ensure that cohesion funds are spent in line with EU law and national law. Governments are required set up a number of bodies to manage, spend and check that EU funds are spent according to EU and national law. And it is the courts that provide a final check over whether there has been compliance with EU and national law.

The European Commission was already of the opinion that there was a systemic threat to the rule of law in Poland in July 2016. Already, then, the Polish government has arguably been in serious breach of its obligations under the Common Provisions Regulation for some time. Last week the Commission started legal proceedings over the law that Polish President Duda did not veto, saying that it violated the country’s obligation under EU law to maintain the independence of the judiciary.

Clearly, then, the Commission considers that Poland no longer has independent courts, which are required to ensure that national authorities are managing EU funds in compliance with the law. This puts the Polish government in serious violation of the Common Provisions Regulation. And the Common Provisions Regulation says that if a government is in serious violation of its obligations under this same regulation, then the Commission is entitled to cut off funding until that problem is fixed. Such a move is not without precedent – in 2013, the Commission ‘suspended’ cohesion funds to the government of Hungary because of problems with its systems for managing and checking how EU money was being spent.

While the Commission is concentrating on taking measures that seem unable to make PiS budge, economic pressure would hit the regime where it hurts: in the euros. PiS thinks it can afford to laugh in the face of Brussels because it still commands public support at home. But the continued popularity of PiS is partly due to what some have characterised as a government bribe to the public in the form of increased payments of certain benefits, made possible by a one-off windfall in government revenue. It’s not that the EU is directly funding these benefits. But perhaps the regime would think twice about splashing out on a sweetener for the electorate that is financially unsustainable if the Commission pulled the plug on billions of euros that the government can no longer guarantee will be spent legally. If the government knows that the EU can and will cut off funding, it might feel less free to ignore the Commission’s recommendations in future.