‘Unfreezing’ EU Funds at a Whim? A Critical Assessment of the Institutional Practices in Unfreezing EU Funds in the Scope of Budgetary Conditionality Mechanisms

Table of Contents: 1. Introduction – 2. Protecting and strengthening the Rule of Law in the European Union through budgetary conditionality mechanisms – 2.1. The Conditionality Regulation – 2.2. The Recovery and Resilience Facility – 2.3. The Common Provisions Regulation – 2.4. Overview: which EU funds have been frozen under which Regulation? – 3. The institutional practices in ‘unfreezing’ EU funds – 3.1. The disbursement of funds under the RRF and CPR to Poland – 3.2. The unfreezing of funds under the CPR to Hungary – 3.3. Intermediary conclusion – 4. Who should guard the guardian? Improving institutional compliance with existing budgetary conditionality mechanisms – 4.1. The potential role of civil society actors in enhancing EU institutional compliance with budgetary conditionality mechanisms – 4.2. The role of the CJEU in reviewing institutional decision-making with elements of political discretion – 5. Conclusion.

Abstract: Budgetary conditionality mechanisms have been widely praised to constitute effective tools to address Rule of Law backsliding within EU Member States. However, recent institutional practices have raised concerns about the legality of the application of such mechanisms, most notably with regard to the Commission’s decisions to unfreeze EU funds for Hungary and Poland without the prior implementation of the requisite national reforms. These cases, now the subject of pending litigation before the Court of Justice of the European Union, raise important questions concerning the scope of the Commission's discretion in the (un)freezing of EU funds and the extent to which such discretion is amenable to judicial review. This Article argues that, in contrast to the initial decision to freeze EU funds, the Commission’s institutional discretion in the unfreezing of these funds is strictly circumscribed by substantive and procedural limitations originating from both the general principles of administrative law and the specific legal obligations enshrined in the budgetary conditionality mechanisms themselves. It further contends that a broader interpretation of standing under Article 263(4) TFEU would enhance judicial oversight of institutional conduct in this area of EU law through a more bottom-up approach. Ultimately, the Articledemonstrates that judicial review by the CJEU of decisions to unfreeze EU funds rests on concrete and reviewable legal standards, thereby reinforcing the legality and accountability of the Commission’s conduct in the application of budgetary conditionality mechanisms.

Keywords: EU budget – rule of law crisis – conditionality – margin of discretion – Court of Justice – European Union.

1.   Introduction

On the 19^th of September 2025, the Financial Times published a piece entitled: ‘[The] EU plans to unlock €550mn for Hungary to secure Russian energy sanctions’.[1] In essence, the piece reports that the Commission seeks to unfreeze millions of EU funds to secure Hungarian support for new EU sanctions against Russia. Such support is indispensable, given the unanimity requirement for the adoption of EU restrictive measures. This Article will demonstrate that this would not mark the first instance in which the Commission, under the pressure of a Rule of Law backsliding Member State, has released previously frozen EU funds without the prior implementation of the required reforms at the national level. Paradoxically, the Commission, driven by underlying political considerations, thereby undermines its original efforts to protect the Rule of Law inside the Member States. These cases ultimately raise important questions concerning the limits of the Commission’s discretion in the (un)freezing of EU funds and the extent to which such discretion can be reviewed by the Court of Justice of the European Union (CJEU).

The Rule of Law,[2] one of the EU’s foundational values,^[3] has faced significant challenges in recent years due to Rule of Law backsliding in various Member States.^[4] While many existing EU instruments aimed at increasing compliance with EU values have proven rather ineffective,[5] the EU institutions opted for a new approach to safeguard these values: ‘budgetary conditionality’. This approach ties the transfer of EU funds to a Member State’s continued adherence to EU values, with a particular emphasis on compliance with the Rule of Law.[6] Developed within the Multiannual Financial Framework (MFF) 2021-2027,[7] budgetary conditionality was principally formalised through three legislative acts: The Conditionally Regulation,[8] the Recovery and Resilience Facility (RRF),[9] and the Common Provision Regulation (CPR)[10]. 

Four years after the original adoption of these instruments, stock can be taken of their practical impact on the protection of the Rule of Law. As a preliminary point, it can be noted, on the one hand, that the various conditionality mechanisms, implemented against Poland and Hungary, have prompted some changes at the national level, highlighting their potential to influence Member States' adherence to EU values.[11] On the other hand, however, recent institutional practices of the Commission have raised questions about the consistent application of these mechanisms. This can be illustrated through the following example, which bears striking similarities to the currently ongoing dispute with Hungary concerning the unblocking of EU funds.[12] In December 2023, the Commission decided on whether it should continue blocking EU funds directed to Hungary under both the Conditionality Regulation and the CPR. On the one hand, it concluded under the Conditionality Regulation that ‘the situation leading to the adoption of the measures has not been remedied and the Union’s budget remains at the same level of risk’.[13] Consequently, €6.3 billion remained blocked under this Regulation. However, on the very same day, the Commission released €10.2 billion previously frozen under the horizontal enabling conditions of the CPR. The Commission justified the release of funds with regard to ‘sufficient guarantees’ provided by Hungarian authorities that judicial independence will be strengthened within the country.[14] The content of these ‘sufficient guarantees’ was left undefined and remains ambiguous to this date. This lack of clarity was arguably among the factors that led the European Parliament to subsequently introduce an annulment action against the decision of the Commission to unblock these funds, claiming, inter alia, that the Commission made a manifest error of assessment in the application of the CPR and breached its duty to state reasons.[15]

Thus, the institutional practices concerning the unblocking of EU funds provoke broader questions about the legality of the application of budgetary conditionality mechanisms within the EU. In particular, the capacity of these mechanisms to protect the Rule of Law may be compromised if the institutions succumb to the pressure from illiberal regimes, leading to the adoption of non-transparent and legally unjustified decisions to unblock EU funds. Consequently, this Article aims to explore the following research questions: ‘To what extent do the institutional practices of the Commission and the Council reveal legal deficiencies in the application of budgetary conditionality mechanisms, and how could the lack of institutional compliance with these mechanisms be judicially addressed?’.

Kilpatrick recently highlighted the ‘general absence of the budget in EU Law legal scholarship’.[16] While this statement is deemed correct,[17] it should be noted that academic engagement with the field increased following the adoption of unconventional budgetary instruments during the Covid-19 crisis.[18] Scholarly attention has particularly centred on the concept of ‘budgetary conditionality’, especially concerning a ‘negative’ funding approach of the EU.[19] This concept can be broadly defined as linking the disbursement of funding programmes to the fulfilment of specified rules or standards.[20] While this approach has generally been perceived as an effective tool to protect the Rule of Law in the EU Member States, such findings have adopted an abstract and theoretical analysis of these mechanisms.[21] Therefore, an assessment of the concrete institutional practices in unfreezing EU funds remains underexplored in the legal literature, with only recent engagements,[22] indicating a general gap in the academic discourse and highlighting the relevance of the current research. It should be noted that this research focuses on the legality of institutional practices concerning the (un)freezing of EU funds, rather than on the broader question of the overall effectiveness of these mechanisms in strengthening EU values. A comprehensive assessment of the latter would require a longer observation period of the Regulations’ application though an empirical research approach. 

To address the research questions comprehensively, the Article is divided into three sections. The first section engages in a descriptive examination of the existing budgetary conditionality mechanisms and examines to what extent these mechanisms circumscribe institutional discretion. Subsequently, the second section shifts the research approach to a concrete examination of the institutional practices in unfreezing EU funds. This is done by means of an examination of two case studies that occurred during the last three years. The concluding part of the second section seeks to draw comparative insights from these case studies by critically highlighting legal concerns around the institutional practices in the unfreezing of EU funds. The third section aims to provide a concrete ‘path forward’ that goes beyond merely advocating for changes in institutional practices. At its core, it raises the fundamental question of ‘who should “guard the guardian” in the unfreezing of EU funds?’.[23]

This research adopts a descriptive and evaluative doctrinal methodology. The first part applies a descriptive doctrinal approach to ‘map out’ the currently existing regulatory attempts to condition the disbursement of EU funds to compliance with the Rule of Law. Subsequently, the approach shifts to an analysis of the impact of institutional practices in unfreezing EU funds on the protection of EU values. As De Witte argued, doctrinal research is not strictly limited to a descriptive analysis of the law and can also adopt a critical and evaluative approach, including an analysis of institutional practices, in light of a higher norm.[24] The higher norm, or the ‘theoretical framework’, in the present research is substantiated, on the one hand, by general principles of administrative law, and, on the other hand, by the specific legal obligations enshrined in the budgetary conditionality mechanisms that circumscribe institutional practices in the (un)freezing of EU funds. Within the EU’s multi-level legal order, respect for the Rule of Law is an obligation incumbent not only upon the Member States but also upon the EU institutions themselves. Indeed, institutional non-compliance with the Rule of Law could ultimately undermine efforts to enforce the value against the Member States.[25]

A meaningful interpretation of key principles of constitutional law, such as democracy and the Rule of Law, is inherently political.[26] Consequently, the legal sources are approached in their political context.[27] The choice for this approach is based on the assumption that in order to fully understand the implications and effectiveness of conditioning EU funding on compliance with the Rule of Law, it is necessary to examine the political circumstances in which EU values operate. Indeed, the institutional practices of (un)freezing EU funds are deeply embedded in political considerations and many decisions can only be understood if the underlying political context is taken into account. 

2.   Protecting and strengthening the Rule of Law in the European Union through budgetary conditionality mechanisms

The first section of this Article delves into existing mechanisms that connect the EU budget with the Rule of Law. The primary objective is to systematically outline and analyse the various regulatory efforts to condition the disbursement of EU funds on adherence to the Rule of Law. The analysis places particular emphasis on examining how the EU institutions’ executive actions in the application of the Regulations are circumscribed by these legislative acts themselves. The section concludes with an overview of the amounts of EU funds frozen under each Regulation.

Over time, the EU institutions appeared to have realised that Rule of Law backsliding is not effectively countered by the use of the existing Rule of Law ‘toolbox’.[28] In particular, Rule of Law backsliding States continued to receive EU funding without being held (financially) accountable for their failure in upholding EU values.[29] Therefore, against the background of the MFF 2021-2027 and the EU’s financial recovery from the Covid-19 pandemic, a consensus emerged among EU Member States that the disbursement of EU funds should be made conditional upon compliance with EU values.[30] This shift was primarily realised through three Regulations: The Conditionality Regulation, the Recovery and Resilience Facility, and the Common Provision Regulation. The remainder of this section provides a descriptive overview over these three regulatory pieces that establish, in essence, financial deterrence mechanism for failing to meet the obligations emanating from the Rule of Law. 

2.1.  The Conditionality Regulation

Conditionality mechanisms in relation to the EU budget are not a new phenomenon.[31] However, in 2018, the Commission proposed a more direct protection of the EU budget against ‘general deficiencies’ of the Rule of Law within Member States on the basis of Article 322(1)(a) TFEU.[32] Subsequent amendments to the Commission proposal by the Council and the European Parliament established a stronger link between, on the one hand, the Rule of Law deficiencies within the Member State and, on the other hand, their effects on the financial management of the EU budget.[33] To be more precise, the amendments implied that only those violations of the Rule of Law that ‘seriously risk affecting the sound financial management of the EU budget’ in a ‘sufficiently direct way’ are taken into account under the scope of the legislative act.[34] This ‘compromise on the compromise’[35] reached by the EU institutions arguably transformed the general ‘Rule of Law’ conditionality mechanism within the Regulation, which was its original purpose according to the Commission proposal, to one of ‘budgetary’ conditionality by, firstly, limiting the scope of Rule of Law violations that can be taken into account by the institutions in the scope of the Regulation, and, secondly, strengthening the link of those violations to the EU budget.[36]

The Conditionality Regulation provides a broad definition of the ‘Rule of Law’ in Article 2(a) by including elements that overlap with different values, such as democracy and the protection of fundamental rights.[37] At the same time, Articles 3 and 4 of the Regulation establish a non-exhaustive list of indicators signifying breaches of the Rule of Law that are linked to the implementation of the EU budget. Thus, the value is enforceable only in a limited number of situations under the Regulation.[38] The subsequent Article 5 lists the appropriate measures that can be adopted under the Conditionality Regulation to protect the EU budget. If the Commission perceives there to be a relevant Rule of Law breach, it must issue a written notification to the Member State concerned, in which it outlines its findings.[39] The Member State must then provide the necessary information, may comment on the Commission’s findings, and may propose corrective measures to address them.[40] After considering these submissions, the Commission may decide to propose an implementing decision with appropriate measures.[41] This proposal is then submitted to the Council, which, acting by a qualified majority, has the power to amend the Commission’s proposal and to adopt the revised version as an implementing act.[42] Such a decision may include any measures deemed necessary to protect the EU budget, such as the freezing of EU funds.

Turning towards the unfreezing of funds, Article 7 specifies that the Commission must reassess the situation within the Member State if the State so requests of its own initiative or one year after the adoption of the initial measures by the Council. Concerning the substantive dimension of this assessment, Article 7(2) explicitly requires the Commission to take into account two elements. Firstly, the institution must base its assessment on the existence of concrete evidence submitted by the Member State.[43] Secondly, it must determine, in light with the principle of proportionality, whether the proposed measures are adequate to remedy the Rule of Law breaches that affected the sound financial management of the EU budget in the first place.[44] In this regard, the Commission must consider ‘relevant information from available sources’, such as decisions and recommendations from EU institutions, and may even request additional information from the Member State.[45] Furthermore, it must observe the principles of objectivity, non-discrimination, and equal treatment between the Member States in the scope of its examination.[46] Thus, it appears that the Commission must carry out its assessment on the basis of evidence submitted by the Member State and determine whether the national reforms effectively remedy the initial Rule of Law deficiencies, identified in its original decision to freeze EU funds. If the Commission deems the two conditions fulfilled, it can submit a proposal for an implementing decision to lift the measures to the Council, which might then finally approve the unfreezing of EU funds.

2.2.  The Recovery and Resilience Facility

The Recovery and Resilience Facility (RRF) forms part of the ‘Next Generation EU’ (NGEU) instrument, a temporary recovery instrument launched by the European Union in response to the economic impact of the COVID-19 pandemic, and encompasses a value of up to €750 billion.[47] The NGEU was adopted on the basis of Article 122 TFEU and is essentially a programme of financial assistance to the Member States.[48] As the main implementing and spending instrument of the NGEU instrument, the RRF was adopted on the basis of Article 175(3) TFEU and establishes the procedure for the disbursement of the funds.[49] It provides financial support for an extensive variety of national measures, covering ‘nearly all’ public policy sectors.[50]

The RRF establishes a maximum monetary amount each Member States can access.[51] To access these funds, Member States are required to prepare National Recovery and Resilience Plans (NRRPs), which must be duly reasoned and outline in detail how they provide a comprehensive response to the economic and social challenges the State is facing.[52] In the adoption of NRRPs, they must take into account a variety of factors, inter alia, the country-specific recommendations issued by the Council in the scope of the European Semester.[53] The Commission examines these plans based on a rating system that leaves substantial discretion to the institution, which is subject to the principles of transparency and equitability.[54] It might either give a positive or negative opinion.[55]In this assessment, the Commission, together with the Member State, agree on ‘milestones’ that serve as triggering mechanism for the disbursement or suspension of EU funding.[56] After the Commission expressed a positive view on the NRRP, the plan is finally endorsed by a Council implementing decision.[57]

A Member State may request the disbursement of payments upon achieving the milestones specified in the NRRP. The Commission evaluates compliance with these milestones to determine whether to disburse the funds. It should be noted here that the RRF has a broader scope than the other Regulations since it might also address audit and public procurement issues, aside from the ‘traditional’ Rule of Law concerns. Concerning the substantive aspect of this assessment by the Commission, Article 20(3) specifies that the release of funds presupposes that the relevant milestones and targets have been satisfactorily fulfilled and that previously satisfactorily fulfilled milestones have not been reserved.[58] A literal interpretation of this Article leads to the conclusion that this is a backward-looking assessment and that the Commission can only release funds if the necessary reforms at the national level have already been implemented.[59] If the Commission determines that the milestones have not been fulfilled, it is able to suspend the funds until the necessary measures are taken.[60]

In summary, the disbursement of funds under the RRF is essentially a bilaterial dialogue between the Commission and the individual Member State, with the Council exercising only a marginal supervisory function,[61] and the European Parliament remaining formally excluded from the procedure.[62] This governance structure confers considerable discretion on both the Commission and Member States, while, at the same time, imposing concrete limitations on such discretion by, inter alia, requiring the Commission to engage in a backward-looking assessment and to base itself on the availability of concrete evidence submitted by the Member States. In other words, while the Commission enjoys considerable discretion in defining the national milestones, which condition the release of EU funds, its discretion is constrained in the assessment of the actual fulfilment of these milestones.

2.3.  The Common Provision Regulation

The Common Provision Regulation (CPR) effectively connects the EU budget to the Charter of Fundamental Rights of the European Union (CFR), empowering the Commission to withhold EU money from the cohesion fund and seven other programmes within the 2021-2027 MFF.[63] In general, the CPR aims to ensure that the necessary preconditions for efficient and effective spending exist on the national level before the disbursement of EU funds occurs.[64] It thus enshrines an ex-ante control mechanism, but the disbursements of EU funding might equally be examined at a later stage (ex-post). Thereby, the CPR increased the enforceability of the CFR, conferring upon it a ‘protective’ function over the EU budget in cases Member States disregard fundamental rights.[65]

Under the procedural framework of the CPR, Member States are first required to outline their investment priorities and implementation strategies in alignment with the Regulation’s overarching objectives in a ‘Partnership Agreement’. The Commission subsequently engages in negotiations with Member States to conclude specific programmes, during which it may offer recommendations and highlight potential shortcomings. Based on these programmes, the Commission is empowered to suspend the disbursement of funds in instances it identifies concrete evidence of significant deficiencies, including breaches of the Rule of Law or the Charter, while respecting the principles of proportionality and equality among the Member States.[66] The Commission ‘shall’ end the suspension of the payments only if the Member State in question has taken measures remedying the situation that led to the initial suspension of funds.[67] The procedural framework under the CPR suggests a significant procedural advantage for the Commission: unlike the Conditionality Regulation or the Recovery and Resilience Facility, the CPR empowers the Commission to de facto unilaterally withhold funding.

In addition, the CPR introduces a set of ‘[horizontal] enabling conditions’ that Member States must fulfil in order to access EU funding.[68] Perhaps most notably, Member States must ensure that all funding complies with the Charter. Article 2(2) defines these conditions as a ‘prerequisite’ for the effective and efficient implementation of the Regulation’s objectives. Thus, before EU funds are disbursed or unfrozen, it must first be established that the enabling conditions are fulfilled.[69] If enabling conditions are not fulfilled, the Commission adopts a decision outlining in detail the reasons justifying the freezing of EU funds. An important difference between the CPR and the RRF must be highlighted at this point. Under the CPR, the Commission can, for example, establish that a Member State has violated Article 47 CFR (right to an effective remedy) and withhold EU funding on this basis. This conclusion might be drawn even if the Commission earlier accepted that the Member State fulfilled the milestones set out in the NRRP, as these milestones do generally not require the Member State to remedy all of the Rule of Law deficiencies.[70]

After the Member State has implemented efforts to remedy the initial deficiencies concerning the fulfilment of the enabling conditions, the Commission is required to carry out a reassessment within three months.[71] Here, it must make reference to its initial decision, in which it determined that certain elements at the national level led to the suspension of EU funds, and assess if these elements have been remedied in the meantime. Indeed, a literal interpretation of Article 2(2) leads to the conclusion that the Commission is required to carry out a backward-looking assessment and cannot accept political promises of future alignment with enabling conditions. For example, and as will be illustrated in more detail in Section 2, in its decision of 13 December 2023 to unfreeze Hungarian funds under the CPR, the Commission made reference to the conditions established in the earlier decision of 22 December 2022 that lead to the initial freezing of these funds.[72]

In summary, a literal interpretation of the Regulation indicates that, although the Commission enjoys a certain margin of discretion in establishing the requirements that condition the disbursement of EU funds, its discretion is significantly more constrained when assessing whether those conditions have subsequently been remedied. In her Opinion of 12 February 2026 in Parliament v Commission (C-225/24), concerning the unblocking of funds under the CPR to Hungary, a case whose factual background will be set out in more detail in the following section, Advocate General (AG) Ćapeta draws a similar distinction between these two Commission decisions. As a starting point, the AG underscores the importance of determining the extent to which the CPR framework leaves discretion to the EU institutions, in order to identify the appropriate standard of judicial review to be applied.[73] One the one hand, AG Ćapeta acknowledges that, in the scope of establishing the specific requirements under which payments can be disbursed to the Member States, ‘the Commission enjoys discretion to assess the situation in a Member State and decide which conditions are necessary and sufficient to safeguard the European Union’s budgetary interests’.[74] This discretion is circumscribed only by the Articles of the CPR itself, such as the obligation to respect the Charter. On the other hand, concerning the assessment of whether national measures adopted to satisfy, for example, Charter related horizontal enabling conditions, the Commission ‘does not, in principle, enjoy any discretion’.[75] Subsequently, judicial review can determine the correctness of this assessment by the Commission, which is in essence of factual nature, and a mere error of assessment, rather than a manifest error of assessment, suffices to warrant the annulment of the decision.[76]

Lastly, one might wonder if the Commission is strictly required to make a backward-looking assessment, or whether it might also take into account ‘new developments’ within Member States. Article 15(6) CPR specifies that the Commission must review whether the Member State has adopted new reforms that would undermine enabling conditions. This second element is crucial, as the State might, on the one hand, implement the reforms required to comply with the initial decision that led to the freezing of EU funds, while, on the other hand, adopting new legislative measure that endanger other enabling conditions. In such a scenario, it would fall to the Commission to take these new developments into account when reassessing the fulfilment of the enabling conditions and to conclude, if appropriate, that the deficiencies at the national level have not been fully remedied. As specified by the AG, this discretion is necessary to account for situations which cannot be predicted in advance.[77] Importantly, however, any departure from the original requirements conditioning the release of EU funds must be duly justified and clearly explained by the Commission.[78]Such reasoning enables not only the Member State concerned, but also EU citizens at large, to understand the basis on which public money is (un)frozen. Notably, the AG links this this obligation of justification to broader structural deficiencies underlying the Commission's current practises, most prominently the fact that individual decisions authorising the release of EU funds are not published. AG Ćapeta considers this omission problematic from the perspective of the principle of transparency and, ultimately, democratic accountability, insofar as it prevents public authorities from being meaningfully scrutinised by (civil) society.[79] These transparency concerns will be examined in greater detail in section 4.1.

2.4.  Overview: which EU funds have been frozen under which Regulation?

In conclusion, this section has outlined the functioning of the budgetary conditionality mechanisms embedded in the three examined Regulations. Two principal observations emerge. Firstly, each Regulation confers a degree of discretion upon the Commission in administering these mechanisms, particularly in decisions concerning the initial freezing of EU funds. Secondly, and more critically, this discretion is circumscribed by a normative ‘framework’ that imposes substantive constrains on institutional actions, particularly, in the decision to unfreeze these funds. As demonstrated, the Commission is required to base its decisions on verifiable evidence and to act in accordance with fundamental principles derived from the Rule of Law, namely legality, transparency, objectivity, proportionality, and the prohibition of arbitrariness. These substantive limitations are not merely formal safeguards, but constitute legally binding conditions that ground and legitimise institutional actions. This section concludes by providing an overview of the funds that were frozen or withheld from Hungary and Poland under the different Regulations. 

On the one hand, with regard to Poland, it must firstly be noted that the Conditionality Regulation has not (yet) been applied against the Member State.[80] Under the RRF, Poland was unable to access €59.8 billion due to its failure to meet the required milestones.[81] Lastly, in the context of the CPR, Poland concluded a Partnership Agreement with the European Union in June 2022, which enshrined necessary reforms in the area of gender equality (Article 21 CFR) and judicial independence (Article 47 CFR). These milestones were the conditions for Poland to gain access to the cohesion funds.[82] When Poland failed to implement these reforms, the Commission subsequently withheld €76.5 billion from the country. In total, €136.3 billion in EU funds were withheld from Poland. 

On the other hand, concerning Hungary, all of the three Regulations have been used against the country. Firstly, under the Conditionality Regulation, the Commission originally proposed to freeze 65% of the covered cohesion programmes,[83] but the Council reduced it to 55%, corresponding to approximately €6.3 billion.[84] Secondly, concerning the RRF, several ‘super’ milestones relating to reforms on judicial independence and corruption were established by means of Council Implementing Decision 2022/0414.[85] The failure to meet these milestones subsequently led to the suspension of €5.8 billion in grants, €3.9 billion in loans, and €0.7 billion of non-repayable financial support under the REPowerEU chapter, amounting to a total of €10.4 billion.[86] Thirdly, with regard to the CPR, and subject to the EU-Hungary Partnership Agreement, the disbursement of funds under 11 different cohesion programmes was made subject to horizontal enabling conditions and, consequently, to reforms of the national judiciary (Article 47 CFR), reforms in the area of academic freedom (Article 13 CFR) and LGBTQ+ rights (Article 21 CFR), and compliance with EU law in the area of asylum (Article 18 CFR). This subsequently led to the freezing of €21.9 billion under the cohesion programmes. Here, it should be noted that there is an overlap between the material scopes of the funds frozen under the Conditionality Regulation and the CPR. Thus, the previously frozen €6.3 billion under the Conditionality Regulation fall within the €21.9 billion frozen under the CPR and effectively became ‘double-frozen’.[87] In summary, a total of €32.3 billion were withheld from Hungary.

3.   The institutional practices in ‘unfreezing’ EU funds

The fundamental challenge of the effectiveness of the EU's budgetary conditionality mechanisms, which aim at safeguarding the Rule of Law, lies in their application. While many authors generally deemed the instruments as ‘effective tools’ to protect EU values, such assessments are largely based on abstract analyses.[88] The present research advances the hypothesis that these mechanisms can only effectively protect the Rule of Law if financial deterrents are applied and enforced in a legal and non-arbitrary manner.[89] On the contrary, an inconsistent or even unlawful implementation not only weakens their effectiveness but also exacerbates the erosion of the Rule of Law at both the national and EU level. Subsequently, the second section tests this hypothesis by means of two concrete case studies: the unfreezing of funds under the RRF and the CPR to Poland in February 2024, and the partial unblocking of funds under the CPR to Hungary in December 2023. Finally, the section aims to draw comparative conclusions from both case studies.

3.1.  The disbursement of funds to Poland under the RRF and CPR to Poland

The Rule of Law crisis in Poland has been the subject of extensive jurisprudence from both the CJEU and the European Court of Human Rights (ECtHR),[90] as well as numerous academic publications.[91] In response to these developments, the EU institutions attempted to address the situation in Poland through the use of various tools at their disposal. Notably, the Commission initially blocked the disbursement of EU funds under both the RRF and the CPR. This Section scrutinises two potentially problematic aspects surrounding the (un)freezing of EU funds under these financial instruments. It begins by examining the adoption of the Polish milestones under the RRF by the Commission and the Council in 2022, and then turns to the subsequent unfreezing of funds under both the RRF and the CPR in 2024.

As a reminder, the RRF allocates to each Member State a maximum financial envelope, made available following the submission and approval of a National Recovery and Resilience Plan (NRRP).[92] The Commission assesses these NRRPs and may express either a positive or negative view.[93] During this assessment, the Commission and the Member State can jointly define ‘milestones’, which condition the release of funds. The Polish NRRP received approval from the Commission in June 2022, but the disbursement of funds was made conditional upon Poland meeting specific milestones.[94] The Polish milestones, adopted by the Commission in June 2022, received substantial academic criticism, as they did not require Poland to comply with all the judgements issued by the CJEU on judicial independence.[95] Moreover, the timing of the Commission’s decision has been the subject of considerable scrutiny, as the institution endorsed the final version of Poland’s recovery plan prior to its formal adoption by the Polish Parliament.[96] This sequencing arguably undermined the Commission’s negotiating leverage, effectively weakening its capacity to condition disbursement on the implementation of more robust Rule of Law reforms. Notwithstanding these controversies, the Council approved the Commission’s proposal via an implementing decision.[97] Against this backdrop, four European judicial organizations brought an annulment action against the decision adopted by the Council and, more particularly, against the content of the milestones. The General Court dismissed those actions, concluding that the applicants lacked standing,[98] but an appeal is currently pending before the ECJ.[99]

Initially, the Commission rejected attempts by the Polish government to comply with the milestones set out in the NRRP, which entailed, inter alia, the closing of the Disciplinary Chamber of the Supreme Court. From a broader perspective, Poland’s non-compliance with EU law and the resulting suspension of billions in EU funds sparked an intense public debate and played a significant role in the 2023 parliamentary elections.[100] In particular, the Civic Platform, headed by former European Council President Donald Tusk, explicitly campaigned with the promises to restore compliance with EU Law and to secure the release of frozen EU funds,[101] which was arguably one of the decisive factors contributing to the coalition’s success in obtaining a parliamentary majority. Nonetheless, the subsequent restoration of the Rule of Law has proven to be legally and politically challenging.[102] One of the principal reasons is the possibility of veto which President Andrzej Duda may use against legislative acts that aim to restore the Rule of Law within Poland.[103] As a result, constitutional constraints, particularly the presidential veto, stand in the way of implementing the legislative changes necessary to restore the Rule of Law in Poland, which is, in turn, necessary to unblock EU funding. 

However, even though the necessary reforms have not been implemented, on 29 February 2024, the Commission adopted the decision to unfreeze €137 billion in EU funds previously withheld from Poland.[104] This amount is composed of funds from two instruments. Firstly, of €59.8 billion under the RRF, which were released due to the fulfilment of two super milestones relating to the reinforcement of judicial independence and the adoption of anti-fraud safeguards. Secondly, the Commission equally considered that Poland fulfilled the horizontal enabling condition under the CPR, thereby authorising the release of an additional €76.5 billion. This decision of the Commission was adopted after the Polish Minister of Justice Adam Bodnar presented his ‘Action Plan for restoring the Rule of Law’ both to the Council and Commission.[105] The Action Plan outlines the government’s political commitment to halt and reverse previous Rule of Law backsliding and to initiate systemic reforms of the judiciary and executive.[106] Crucially, however, the Commission’s decision was taken in the absence of any tangible legislative implementation of these proposed reforms. Rather, it was grounded in political assurances and the stated intention of the new government to re-align Poland with EU values. This hardly seems in line with, inter alia, Article 20(3) of the RRF, which specifies that the release of funds presupposes that the relevant milestones and targets have been satisfactorily fulfilled.[107] As argued above, a literal interpretation of this Article leads to the conclusion that this requires a backward-looking assessment and that the Commission can only release funds if the necessary reforms at the national level have already been implemented, which is also confirmed by the Recitals of the Regulation.[108]

In conclusion, while the credibility of the current Polish government’s commitment to restoring the Rule of Law may be considerable and the lack of the implementation of reforms might, to some extent, be attributable to national constitutional limitations, it remains a fact that the Commission unfroze the entirety of the previously blocked EU funds without requiring the implementation of tangible reforms from the Polish government. Thus, €137 billion EU funds were unfrozen based on a political promise of future alignment with the Rule of Law. The Commission was therefore essentially taking a bet, as there was no guarantee that the Civic Platform will win the Polish presidential elections in June 2025, although election polls suggested this outcome for several months before the final electoral round took place. On 1 June 2025, the results of these elections were officially published, which revealed that Karol Nawrocki, who was backed by PiS, obtained 50,9% of the vote and, consequently, became the next Polish President.[109] At the same time, this means that things are looking grim for the necessary reforms in Poland, as Nawrocki’s main intention is described as not trying to conciliate between different political positions, but to explicitly block actions by the Tusk government.[110] Therefore, the Commission lost its gamble and the political deadlock between Parliament and President will persist in the future, effectively stalling reforms, despite Poland already having received billions in EU funds that should have been conditioned on these reforms in the first place.

3.2.  The unfreezing of funds under the CPR to Hungary

On 13 December 2023, the Commission undertook an assessment concerning the continued suspension of EU funds to Hungary under both the Conditionality Regulation and the CPR. In relation to the Conditionality Regulation, it concluded that ‘the situation leading to the adoption of the measures has not been remedied and the Union’s budget remains at the same level of risk’.[111]Consequently, €6.3 billion remained frozen under this instrument. However, on the very same day, the Commission adopted a decision authorising the release of €10.2 billion, which had been previously frozen pursuant to Hungary’s failure to comply with the horizontal enabling conditions under the CPR. This partial unfreezing was grounded on Hungary having met the third horizontal enabling condition, specifically concerning judicial independence. As a result, Hungary gained access to €10.2 billion of the originally suspended €21.9 billion, leaving a significant portion of the funds still frozen. 

Turning to the substantive reasons underpinning the Commission’s decision, the release of funds was premised on the assertion that the Hungarian authorities had provided ‘sufficient guarantees’ that judicial independence will be strengthened.[112] Since the Commission’s decision was never published,[113] the Opinion of AG Ćapeta in Parliament v Commission (C-225/24) provides the most detailed insight into the rationale underlying the unfreezing of EU funds. According to the AG’s account, the decision effectively reiterates the conditions originally attached to the release of the funds and concludes that, in light of the legislative amendments adopted by Hungary, the deficiencies relating to judicial independence had been remedied.[114] This finding was deemed sufficient to justify the partial unfreezing of the funds, and adopted despite the fact that prominent civil society organisations (CSOs), such as the Hungarian Helsinki Committee, publicly criticised the Hungarian judicial reforms adopted in May 2023, which served as the basis for the Commission’s assessment.[115] According to the criticism, the Hungarian judicial reforms not only failed to enhance judicial independence, but in fact even further diminished it.[116] The precise content of the ‘sufficient guarantees’, which seemingly satisfied the Commission, remains ambiguous to this date and was arguably one of the factors that led the European Parliament to introduce an annulment action against the decision of the Commission to unblock the funds.[117] In its application, the Parliament contented, inter alia, that the Commission made a manifest error of assessment in the application of the CPR and breached its duty to state reasons. Indeed, as was outlined above, the wording in the CPR is clear in this regard, as Article 92(2) CFR states that: the Commission ‘shall’ end the suspension of the payments only if ‘the Member State in question has taken the measures remedying’ the situation that led to the initial suspension of funds.^[118] In contrast, this Article does not allow the Commission to end the suspension of funds in light of measures that might in the future be able to remedy the situation. Furthermore, the Commission was obliged, in line with Article 15(6) CFR, to assess whether the Member State has adopted new reforms that would undermine enabling conditions. In this regard, it must be noted that Hungary was, inter alia, in the process of adopting the Sovereignty Law, of which the Commission was already aware in December 2023 and which subsequently became the object of an infringement action.[119] Therefore, it seems that the legality of the Commission’s conduct went beyond the margins of its discretion under the CPR. 

These findings broadly align with the deficiencies identified in AG Ćapeta’s Opinion in Parliament v Commission (C‑225/24). The AG concluded that the Commission incorrectly assessed the fulfilment of its own enabling conditions relating to judicial independence in Hungary, conditions which, in her view, had not been remedied in practice. She further observed that the Commission failed to provide adequate reasoning for its decision, neglected to take into account the adoption of the new Sovereignty Law, and did not request additional information from the Hungarian government.[120] Accordingly, she maintained that the Commission should not have concluded that Hungary had satisfied the pre‑established conditions and, consequently, proposed that the Court of Justice should annul the Commission’s decision lifting the suspension on the disbursement of funds to Hungary.

The ambiguity surrounding the ‘sufficient guarantees’ is not the sole factor casting doubt on the Commission’s decision to release EU funds. An additional dimension relates to the broader political context in which the decision was taken. In this regard, it must be noted that the release of the funds coincided with a vote in the European Council on financial assistance to Ukraine and the formal opening of EU accession talks. This vote required the unanimous support of all the Member States. In the lead-up to the vote, the Hungarian Prime Minister Viktor Orbán, threatened to block the vote on the basis of national foreign policy concerns.[121] Notably, Orbán carefully refrained from explicitly linking the threat of a veto to the frozen EU funds under the conditionality mechanisms.[122] The Hungarian Prime Minister even stated explicitly that ‘Hungary has always rejected a packaged approach’ and that ‘[Hungary] never accepted [...] the idea of linking EU matters that are different in nature’.[123] Nonetheless, despite the fact that many of Hungary’s substantive concerns remained unresolved, the European Council ultimately approved the launch of accession talks with Ukraine at its summit of 14-15 December 2023.[124] This was made possible as Orbán left the room when the vote was taken, allowing the vote to be conducted by ‘unanimity’.[125]

The timing of the Commission’s decision to unfreeze €10.2 billion under the CPR and Orbán’s ‘change of mind’ raises serious concerns about the legality and effectiveness of the application of the budgetary conditionality mechanisms in the EU. Indeed, it remains a fact that, just one day after the Commission decided to unfreeze EU funds, Orbán’s intent to block the European Council’s vote abruptly vanished. The evident question thus becomes if the timing of these decisions was indeed a pure ‘coincidence’,[126] or if a certain ‘trade-off’ occurred. It seems that there is more to the case than a simple ‘coincidence’, as the Commission neither provided (convincing) legal justifications for the sudden release of funds, nor has it explained the nature of the ‘sufficient guarantees’ allegedly provided by the Hungarian authorities regarding the improvement of judicial independence. Rather, the sequence of events suggests a political trade-off: a legally unjustified decision to release funds under the CPR appears to have been exchanged for Hungary’s procedural acquiescence at a moment of critical geopolitical importance. While one might argue that the Commission’s actions were politically necessary, as they were taken with the aim to continue the support of Ukraine in the scope of the Russian war of aggression, the decision to unfreeze the funds remains insufficiently reasoned. This line of argumentation is very dangerous as unlawful institutional practices cannot be deemed legally justifiable in light of a ‘good’ political objective.[127] Furthermore, responding to the threats of an illiberal government by relaxing the enforcement of budgetary conditionality mechanisms risks undermining the credibility and coherence of these mechanisms in the first place.

In conclusion, the Commission’s decision to release EU funds to Hungary without verifiable implementation of the required judicial reforms sets a dangerous precedent. It signals a willingness to ‘give in’ to the threats of illiberal regimes, without the country having to implement the necessary reforms, and thereby undermining one of the EU’s most powerful leverages against Rule of Law backsliding regimes. This de facto inverts the underlying logic of the conditionality mechanisms, as the Hungarian government is strategically ‘taking hostage’ the unanimous voting threshold in the European Council, and conditions its support for vital decisions on the unfreezing of EU funds.[128] Such practice undermines both the credibility and the coherence of the conditionality mechanisms. To preserve the deterrent function of budgetary conditionality, EU institutions must consistently apply these mechanisms and strictly avoid any linkage to decision-making procedures in different policy fields. Rather than making concessions to threats from illiberal regimes, the institutions should confront them by ‘doubling down’ on the conditionality approach,[129] for instance, by threatening to suspend the remaining EU funds.

3.3.  Intermediary conclusion

The three instruments under consideration, each of which incorporates a budgetary conditionality mechanism in response to breaches of Rule of Law obligations, collectively create a technical and partially overlapping legal framework. This complex legal structure makes it challenging to maintain a clear overview, particularly regarding the specific amounts blocked from each Member State under individual instruments. By means of the preceding examination of the two case studies, it has become apparent that the principal challenges confronting the effective use of these Regulations lie, on the one hand, in their consistent enforcement and, on the other hand, in ensuring that the actions of the EU institutions, in aiming to protect the Rule of Law, remain themselves fully consistent with the very principles that substantiate the value. 

In particular, the section has illustrated that the Commission has unblocked EU funds without ensuring the full implementation of previously demanded reforms. This tendency was particularly apparent when the Commission released €10.2 billion under the CPR to Hungary, relying on ‘sufficient guarantees’ provided by the national authorities concerning the strengthening of judicial independence.[130] Crucially, however, the ‘sufficient guarantees’ were left undefined and were accepted despite the fact that prominent CSOs had publicly criticised the judicial reforms as weakening, rather than strengthening, judicial independence.[131]Furthermore, the Commission unfroze €137 billion previously withheld from Poland under the CPR and the RRF, based principally on politically assurances and not tangible reforms. 

Thus, in both cases, the release of funds was not conditioned on the verified and effective implementation of the required reforms, but rather on political promises or guarantees of compliance. Moreover, as illustrated by the Hungarian case study, even where certain reforms were adopted, the Commission should have exercised greater vigilance to avoid being misled by instances of ‘fake compliance’ of Rule of Law backsliding Member State.[132] In this regard, it is important to recognise that the persons sitting in the Polish and Hungarian governments often possess considerable legal expertise, enabling them to design a vast amount of reforms that appear to align with EU demands, but, in practice, merely create the illusion of compliance.[133]

While the initial freezing of EU funds may constitute an effective mechanism for the protection of EU values, it is not sufficient in itself.[134] Instead, the Commission must carefully monitor the subsequent reforms on the national level and only release funds if the required reforms have been fully enacted. Failure to adopt a careful and stringent follow-up approach risks undermining the effectiveness of conditionality mechanisms as a tool for protecting the Rule of Law. Moreover, it exposes the Commission to political pressures and opens the door for potential ‘trade-offs’, whereby backsliding Member States may seek to leverage superficial reforms in exchange for the unfreezing of critical EU funding.[135] From a broader perspective, these case studies confirm a point emphasised by Möllers: ‘transforming’ the Rule of Law/democracy crises within the Member States, which are deeply political in nature, into concrete administrative standards will not make the underlying political issues disappear.[136] On the contrary, the implementation of administrative procedures, such as the budgetary conditionality mechanisms, inevitably leads to a the (re)politicization of the conflict between the EU institutions and the Member States.[137]

Accepting that serious legal concerns arise from the institutional practices surrounding the unfreezing of EU funds, the question emerges as to how the institutions can be held legally accountable. Consequently, the last section aims to provide a concrete ‘path forward’, by not merely calling for improved administrative practices, but by interrogating the legal architecture through which institutional accountability might be ensured. At its core, it explores how the accountability of these institutions might be improved and what specific role the CJEU is positioned to play in this.

4.   Who should guard the guardian? Improving institutional compliance with existing budgetary conditionality mechanisms

Building on the institutional shortcomings outlined in the preceding pages, the final section seeks to develop two lines of inquiry. Firstly, it examines who might initiate judicial review of institutional decisions to (un)freeze EU funds. While the European Parliament, as a privileged applicant, might be in such a position, the persistence of institutional non-compliance raises the broader issue of whether more expansive mechanisms of accountability are available. Accordingly, section 3.1 analyses the potential role of civil society actors in controlling the institutional practices in (un)freezing EU funds. Secondly, irrespective of the applicant’s identity, the question arises as to what role the CJEU should play in adjudicating disputes that involve inherently political elements of institutional discretion. Thus, section 3.2 raises deeper constitutional questions concerning the boundaries of judicial review and the extent to which the Court may engage with politically sensitive matters. 

4.1.  The potential role of civil society actors in enhancing EU institutional compliance with budgetary conditionality mechanisms

The first Section addresses a central dilemma: what avenues exist when EU institutions themselves fail to adhere to the legal standards that they are bound to uphold? Naturally, accountability might be achieved if the institutions are able to control each other. However, the budgetary conditionality mechanisms enshrined in the three Regulations generally operate on the basis of a bilateral dialogue between the Commission and the Council. Thus, it is rather unlikely that these two institutions bring each other before the Court. An exception to this de facto institutional accountability insulation may lie with the European Parliament. Although the Parliament has been structurally marginalised in the design of the conditionality instruments, its recent action in the case Parliament v Commission (C-225/24) demonstrates a willingness to scrutinise the legality of the Commission’s conduct in the unfreezing of EU funds.

However, relying on institutional actions alone may be insufficient. Consequently, this raises the question of whether CSOs can play a more prominent role in holding institutions legally accountable. The pending case Medel and Others v Council (C-555/24 P) directly engages this issue, with the applicants arguing that they, in defending the general good, should be granted relaxed standing conditions. This line of argumentation is certainly worth exploring, as granting CSOs, which are ‘genuinely qualified and representative’ to act on behalf of judges affected by adverse effects to the Rule of Law,[138] standing in such cases could enable them to adopt a ‘watchdog’ role over the disbursement of EU funds, thereby potentially increasing compliance and effectiveness of budgetary conditionality mechanisms through a bottom-up approach.[139]

This proposal finds support in the recent KlimaSeniorinnen judgement, in which the ECtHR accepted that associations have standing, even if their individual members do not have standing, when three cumulative conditions are met: (i) the association is lawfully established in the jurisdiction concerned or has standing to act there; (ii) it pursues a dedicated purpose in accordance with its statutory objectives in the defence of the human rights of its members or other affected individuals; and (iii) it can be regarded as ‘genuinely qualified and representative’ to act on behalf of members or other affected individuals.[140] In adopting these conditions, the ECtHR successfully avoided the creation of an actio popularis, but instead limited standing to associations that meet tailored and objectively verifiable criteria.[141]

Although KlimaSeniorinnen emerged in the context of climate change litigation and under the auspices of the ECHR, its reasoning may offer a ‘template’ for adapting the standing rules in the EU legal order. Importantly, any adaptation must take account of the distinct constitutional structure of the EU legal order and the specific features of budgetary conditionality cases. A key issue is the definition of ‘genuinely qualified and representative’ associations in the context of budgetary conditionality cases. This category could plausibly include associations directly affected by decisions to (un)freeze EU funds. Relevant examples include judicial associations directly impacted by Rule of Law reforms tied to EU funding, or academic organisations affected by the subsequent suspension of research grants. In both cases, Charter rights are at stake. In more detail, the judicial associations may rely on restrictions of the right to an effective remedy (Article 47 CFR), while the academic organisations could see their right to academic freedom (Article 13 CFR) limited. Therefore, decisions to (un)freeze EU funds, although formally addressed to Member States, are able to have a direct and substantial impact on certain CSOs, potentially restricting the exercise of their fundamental rights or even threatening their continued existence. In light of this, enabling these associations to challenge institutional decisions to (un)freeze EU funds before the CJEU would be consistent with the principle of effective judicial protection, as enshrined in Article 19(1) TEU and Article 47 CFR, thereby protecting the often-referenced ‘complete system of legal remedies’ in the EU.[142] This systemic concern is particularly acute for bodies such as the Polish judicial associations in the case Medel since the alternative route to the CJEU via a preliminary reference was effectively obstructed, given that national courts risked being subjected to disciplinary sanctions for engaging with the CJEU. Thus, where both paths of access to the Court are effectively foreclosed, the completeness of the EU system of remedies becomes difficult to defend.

Situating the argument within the Charter framework provides a necessary ‘normative anchor’, which reinforces the associations’ claim for standing under EU law. It should be recalled that, as a matter of doctrine, the Charter must be interpreted in light of the ECHR.[143] Thus, through the ‘activation’ of the Charter, the CJEU should consider, by analogy, the broader standing requirements accepted by the ECtHR in KlimaSeniorinnen, which would ultimately allow for an effective judicial protection of EU fundamental rights. Against this background, three factors emerge as particularly relevant: (i) the representative nature of the associations; (ii) the presence of a concrete interference with a Charter right; and (iii) the effective impossibility for these associations to engage with the CJEU via the preliminary‑reference mechanism. Taken together, these elements may provide compelling reasons for the Court to interpret the standing requirements under Article 263(4) TFEU more flexibly in such specific circumstances. Importantly, such an approach would not amount to opening the gates of the CJEU to all CSOs. Rather, it would establish lex specialis conditions for standing under Article 263(4) TFEU applying only in narrowly defined situation.[144] Ultimately, this enable the control of institutional conduct in the (un)freezing of EU funds through a bottom-up approach.

While broader standing criteria under Article 263(4) TFEU are considered favourable to strengthen institutional compliance with budgetary conditionality mechanisms, the issue boils down to an old question:[145] Is the CJEU willing to revise its case law on standing of non-privileged actors under Article 263(4) TFEU? Since Plaumann, the Court has consistently resisted to broaden the standing criteria for non-privileged applicants.[146] However, in Venezuela v Council, the CJEU demonstrated some openness to interpret Article 263(4) TFEU in the light of the principles of effective judicial review to arrive at a broader reading of the standing conditions.[147] This broadening of the standing conditions was principally based on the assertion that ‘the very existence of effective judicial review designed to ensure compliance with provisions of EU law is inherent in the existence of the Rule of Law’.[148]

While it is true that the Court has repeatedly held that the principle of effective judicial protection cannot set aside the express wording of the Treaty, [149] it must also be recognised that the criteria of ‘individual’ and ‘direct’ concern are not defined in the Treaty but rather shaped through the jurisprudence of the Court.[150] Consequently, the Court could also adapt the definition of these terms through a change in its case law.[151] At this juncture, two opposing arguments emerge: one adopts a more optimistic outlook, while the other reflects a more realistic interpretation. Accordingly, it could be argued, on the one hand, that the approach of the CJEU, in light of the case Venezuela v Council and under the influence of the ECtHR judgement in KlimaSeniorinnen, is potentially shifting, paving the way for more flexible standing conditions for CSOs under Article 263(4) TFEU. On the other hand, one might equally argue, taking into account the past jurisprudence of the CJEU,[152] that it seems rather unlikely that the Court is willing to depart from its current approach under Article 263(4) TFEU. This position of the Court was even recently reaffirmed in Carvahlo, a case with a similar factual pattern than KlimaSeniorinnen.[153] Ultimately, the latter argument would mean that legal accountability of the institutions in the (un)freezing of EU funds cannot be guaranteed through a bottom-up approach by CSOs. 

If the CJEU would indeed be unwilling to revise its standing criteria under Article 263(4) TFEU, emphasis must be placed on strengthening the transparency of institutional practices concerning the (un)freezing of EU funds. Meaningful public accountability cannot exist without intelligible and accessible information being made available. Yet, as documented by the case studies enshrined in section 2, institutional decisions on the (un)freezing of EU funds are currently characterised by opacity. Indeed, under the existing approach, the reasoning behind decisions to (un)freeze EU funds are very difficult to understand. To acquire even a partial understanding of the legal and factual context of these decisions, assembling fragmented information from scattered press releases, journalistic reports, and academic publications is needed. The institutional decisions themselves rarely provide a clear account of the justifications for the final conclusion on whether to (un)freeze EU funds. To address this deficit, the Commission could be tasked with maintaining a centralised and continuously updated transparency platform for frozen EU funds. This platform should give a precise public account of the currently frozen EU funds under each instrument, with corresponding justifications, procedural updates, and links to relevant legal documents. This would allow citizens, journalists, and civil society actors to monitor budgetary conditionality enforcement in real time, thereby fostering (political) accountability. Furthermore, it would increase the pressure on the Commission to act in strict compliance with the applicable legal framework, as any future action taken under these instruments would be subject to close scrutiny and public exposure by CSO and the press. In this regard, the role of the European Ombudsman should not be overlooked, as the institution successfully exercised pressure in the past to improve the transparency of the Commission’s institutional practices.[154]

4.2.  The role of the CJEU in reviewing institutional decision-making with elements of political discretion

The decisions adopted under the three examined Regulations constitute acts amenable to judicial review. This is evidenced by a number of currently pending cases, including Parliament v Commission (C-225/24) and Medel and Others v Council (C-555/24 P). These cases reaffirm the fundamental role of the CJEU in ensuring that decisions adopted under the relevant regulatory frameworks comply with the values enshrined in Article 2 TEU and that the EU institutions remain within the bounds of their margins of discretion when adopting decisions concerning the (un)freezing of EU funds. In particular, the case studies of the second section demonstrate that not too much trust should be placed within the EU administration. In this regard, it is the role of the Court to control the exercise of administrative authority, which is necessary in a democratic society that is governed by the Rule of Law.[155]

It is conceivable that the Commission might contend before the CJEU that it benefits, in principle, from a broad political discretion in the decision whether to (un)freeze EU funds. This line of reasoning could be advanced by analogy to the Commission’s full discretion in deciding whether to initiate an infringement action under Article 258 TFEU.[156] If accepted, this position would effectively isolate such decisions from substantive judicial scrutiny, thereby raising a broader and more fundamental question: What can be the CJEU’s role in examining the legality of institutional decisions to (un)freeze EU funds? 

These questions touch upon a broader theoretical debate reflected in the so-called ‘political question doctrine’, a doctrine rooted in US constitutional law, which recently gained renewed scholarly and political attention in light of the actions by the second Trump administration.[157] The doctrine holds that certain matters, due to their inherently political nature, fall outside the scope of judicial competences.[158] Accordingly, it implies the non-justiciability of highly political questions arising before a court, which will then be declared inadmissible.[159] Rooted in the principle of separation of powers, it seeks to prevent courts from interfering in politically sensitive decisions of the legislative and executive branch.[160] The doctrine seems to be of particular relevance in constitutional systems that allocate strong prerogatives to the legislature, particularly in common law jurisdictions. Whether and to what extent a similar conceptual framework might be transposed into the EU legal order remains a contested and evolving question. In the EU, the starting point of the discussion is outlined in Article 19(1) TEU, which confers general jurisdiction on the CJEU to observe the interpretation and application of the Treaties. Limitations to this rule, for example as they are enshrined in Article 24(1) TEU, must be interpreted narrowly.[161] Furthermore, Article 19(1) TEU not only provides a broad definition of the Court’s jurisdiction, but also a certain discretion for the Court to define its own jurisdiction.[162] Indeed, in the past, the CJEU aimed to guard its prerogative of exercising judicial review, even in relation to legal questions that are inextricably linked to politically sensitive subject matters.[163]Against this background, authors concluded that there is, at the current state of EU law, no explicit political question doctrine in the EU.[164]

The discussion around the doctrine in the EU legal order picked up again after the AG Opinion and the judgement in the case KS and KD. In her Opinion, AG Ćapeta rejected the existence of such a doctrine for the review of fundamental rights compliance of any Common Foreign and Security Policy (CFSP) measures, including political or strategic ones.[165] As stated aptly, ‘in a Union based on the Rule of Law, it could not have been the intention of the authors of the Treaties to allow for breaches of fundamental rights in the CFSP. As the breach of a fundamental right cannot be a policy choice, the EU Courts must be able to control whether that limit was crossed’.[166] Thus, while not completely rejecting the potential existence of a political question doctrine in EU law,[167] the AG concluded that such a doctrine can never preclude fundamental rights review of a political or strategic decision. The Court did not follow the AG’s reasoning and drew a distinction between, on the one hand, political or strategic decisions, and, on the other hand, administrative measures.[168] Subsequently, it concluded that it only has jurisdiction over measures not directly related to political or strategic choices made in the context of the CFSP.[169] In conclusion, the Court seems to have implicitly recognised the political question doctrine in EU law for certain decisions which require political or strategic choices.[170]

Thus, acknowledging the existence of this development under EU law, the Commission might invoke this doctrine in light of its alleged broad discretion in the application of conditionality mechanisms and its general responsibility for implementing the EU budget.[171] Consequently, the final part of this Article aims to illustrate why this doctrine is not applicable in cases concerning budgetary conditionality. Firstly, the application of budgetary conditionality mechanisms is naturally not situated in the area of CFSP, and the judicial reasoning of KS and KD cannot just be transposed to the current case. Indeed, a decision whether to apply a budgetary conditionality instrument is not of a ‘purely political nature’ and its review would also not be ‘difficult to reconcile […] with the separation of powers’.[172] In this regard, authors advanced the argument,[173] by analogy to the CJEU’s existing jurisprudence concerning EU budgetary spending, that based on the aim of preventing the use of EU funds for national objectives contrary to EU law, the Court observed in the past that conditional measures ‘do not constitute [coercive] penalties’, but rather ‘financial corrections’.[174] Accordingly, these measures are not only designed to secure the sound management of EU resources, but also to prevent the Commission from exercising its discretion in a way that would lead to imposing excessive and disproportionate financial adjustments.[175] This argument was equally presented by AG Campos Sánchez-Bordona in his Opinion to the case Hungary v Parliament and Council (C-156/21) in the scope of establishing the differences between the infringement procedure, under which the Commission benefits of full discretion, and budgetary conditionality mechanisms, where there is no discretion for the Commission in its decision to trigger the mechanism.[176] This lack of discretion is justified by the aims of guaranteeing a level playing-field among the Member States and enforcing the effectiveness of the instrument.[177] Secondly, the analogy with infringement proceedings is ill suited because, as the first section illustrated, in the scope of unfreezing EU funds, the Commission’s practices are strictly circumscribed by substantive and procedural conditions enshrined in the legislative acts themselves.

Furthermore, apart from the concrete provisions in the budgetary conditionality mechanisms, the Commission must observe general principles of administrative law, particularly when it possesses a certain margin of discretion. The Court’s approach with regard to the judicial review of institutional discretion can be traced back to its early case law in Netherlands v High Authority and Remia.[178] Accordingly, such discretion is circumscribed by, perhaps most importantly, the duty to state reasons and the duty of care, both of which are closely intertwined.[179] On the one hand, the duty to state reasons demands the institutions to disclose in a clear and unequivocable fashion the reasons for the adoption of the measure.[180] This enables the institutions to be more effective and to have greater legitimacy in a democratic system, by allowing divergences to be openly debated.[181] On the other hand, the duty of care requires the institutions, even when adopting technical decisions, to examine carefully and impartially all the relevant aspects of the individual case.[182] Apart from this quantitative aspect (i.e. to consider all relevant aspects), the duty of care equally has a qualitative aspect, consisting of the obligation to base the complex economic assessment on ‘factually accurate, reliable and consistent’ evidence.[183] By requiring these two aspects and thereby linking judicial review to reviewable evidence, the Court increases the intensity of its review and, ultimately, guarantees that the institutions do not take arbitrary decisions.[184] However, the Court even goes one step further as it analyses whether the final decision can logically be substantiated on the basis of the information the institution was relying on.[185]

This latter aspect further blurs the line between the review of procedural and substantive elements. A recent example for this is the case Stevi and the New York Times v Commission, in which the General Court explicitly pointed out the flaws and contradictions in the Commissions reasoning and that it was, consequently, in violation of the principle of good administration, which enshrines the duty of care, to take the contested decision.[186] As it was aptly summarised by Hofmann, under the duty of care, the Court determines ‘whether the quantity and quality of information used for decision making was adequate, and whether the latter was actually taken into account in [the] decision-making’.[187] On a broader level, it aims to strike a balance between, on the one hand, guaranteeing an effective judicial protection through the exercise of judicial review and, on the other hand, exercising the necessary judicial restraint in view of the discretionary powers conferred on the other branches of government.[188] In this regard, the Court’s review of the Commission’s assessment is limited as to whether there was a ‘manifest error of assessment’.[189] While the Court cannot go so far as to substitute its own assessment for that of the Commission, it must undertake a full and objective review of whether administrative principles have been observed.[190] Therefore, the evolving interpretation of these principles by the CJEU substantially increased the intensity of judicial review over decisions where institutions benefit from a discretion, partially even blurring the line between the review of procedural and substantive aspects.[191] Accordingly, the exercise of the Commission’s administrative conduct in the application of budgetary conditionality mechanisms is strictly delineated by administrative principles amenable to judicial review.

In addition to these general administrative principles, and as was outlined in the first section, the Regulations themselves impose concrete substantive and procedural limitations on institutional discretion. Accordingly, the Commission is, inter alia, required to base its decisions on verifiable evidence and to act in accordance with fundamental Rule of Law principles, including legality, transparency, objectivity, and proportionality. Moreover, a literal interpretation of the relevant Articles of the Regulations indicates that the assessment underlying the decision to unfreeze EU funds must, in principle, be backward-looking, and, consequently, requires the necessary reforms to already be implemented before funds are unfrozen.

In summary, the findings of this section enable a nuanced complement to the analysis offered by AG Ćapeta in Parliament v Commission (C-225/24). To reiterate, the AG acknowledged that, in the scope of establishing the specific requirements under which payments can be disbursed to the Member States, ‘the Commission enjoys discretion to assess the situation in a Member State and decide which conditions are necessary and sufficient to safeguard the European Union’s budgetary interests’.[192] This discretion is, according to the AG, circumscribed by the Articles of the CPR itself, such as the obligation to respect the Charter.[193] To this, it must be added that the Commission’s discretion is equally constrained by the general principles of EU administrative law. By contrast, with regard to the Commission’s assessment of whether national measures adopted to satisfy the requirements it has set are indeed compliant, the Commission ‘does not, in principle, enjoy any discretion’.[194] Subsequently, judicial review can determine the correctness of this assessment by the Commission, which is in essence of factual nature, and a mere error of assessment, rather than a manifest error of assessment, suffices to warrant the annulment of the decision.[195] As the Opinion later makes clear, such an error of assessment may also stem from a breach of the administrative principle of the duty to state reasons.[196] This section has therefore demonstrated that the Commission’s actions in the (un)freezing of EU funds are far from being shielded by a doctrinal veil of non-justiciability. On the contrary, the Commission’s conduct under budgetary conditionality mechanisms remains within the remit of judicial review, ensuring that executive discretion is not exercised at the expense of accountability.

5.   Conclusion

How can the European Union effectively and lawfully confront Rule of Law backsliding Member States? This question continues to cause headaches inside the Commission, with no definitive resolution in sight. At the heart of this dilemma lies a fundamental (institutional) tension: Should it be the role of the CJEU to ‘guide the way’ and illustrate methods for ‘operationalising’ the Rule of Law, as it did in the seminal Portuguese Judges case,[197] or should the primary responsibility in finding novel mechanisms to strengthen the value within the Member States lie with the Commission? Past experiences with budgetary conditionality mechanisms hint at a blurred division of roles in this regard. Initially, the EU institutions took the initiative, effectively linking money to values. The CJEU later affirmed the legality of this approach.[198] However, while the mechanisms were initially praised as a powerful and effective tool to safeguard the Rule of Law, subsequent institutional practices cast doubts on such effectiveness. As enforcement appears increasingly vulnerable to political compromises and legally unreasoned decisions, the spotlight turns, once again, from Brussels to Luxembourg, with the CJEU now seized with multiple actions challenging the legality of the application of conditionality instruments.[199] In essence, the central question of these cases can be boiled down to the following: Have the institutions applied the budgetary conditionality mechanisms within their margin of discretion, or has political pragmatism undermined the very principles they initially aimed to protect?

Against this backdrop, this Article addressed the following research questions: To what extent do the institutional practices of the Commission and the Council reveal legal deficiencies in the application of budgetary conditionality mechanisms, and how could the lack of institutional compliance with these mechanisms be judicially addressed? The first section examined the extent to which the Commission’s institutional discretion in the (un)freezing of EU funds is circumscribed by the budgetary conditionality mechanisms themselves. Within the frameworks of the CPR and the RRF, it has been demonstrated that while the Commission possesses considerable discretion in deciding on what grounds EU funds are frozen, that discretion is significantly more limited when deciding whether such funds should subsequently be unfrozen. Under the CPR, for example, a literal interpretation of Articles 2(2), 15(3)-(6), and 97(2) indicates that, in the context of unfreezing EU funds, the Commission is, firstly, required to carry out a backward-looking assessment of whether necessary reforms have been effectively implemented, and may not rely on mere political promises of future alignment. Secondly, it must also verify whether the Member State has adopted new reforms that would undermine the fulfilment of enabling conditions. Accordingly, the regulatory frameworks impose concrete substantive and procedural constraints on the Commission’s discretion, the observance of which is subject to judicial scrutiny by the CJEU. 

The second section analysed how the Commission’s institutional practices reveal legal deficiencies in the application of budgetary conditionality mechanisms. In this regard, it examined two case studies concerning the unfreezing of EU funds to Poland and Hungary. It was essentially demonstrated that the Commission’s enforcement approach is plagued by internal inconsistencies. In particular, the Commission was evidently willing to unfreeze EU funds not on the basis of verifiable evidence that previously demanded reforms were implemented, but rather on political promises of future alignment. Thus, both case studies highlight institutional failures to adopt a stringent and consistent approach within the ‘follow-up’ phase after EU funds were initially frozen, which risks undermining the legality and effectiveness of budgetary conditionality mechanisms. Moreover, it exposes the Commission to political pressures and opens the door for potential political ‘trade-offs’, whereby backsliding Member States may seek to leverage their support of a different political project in exchange for the unfreezing of critical EU funding. 

Building on these institutional shortcomings, the final section outlined a potential ‘way forward’ that could improve the current (lack of) EU institutional compliance with existing budgetary conditionality mechanisms. Two principal avenues were explored. Firstly, the role of CSOs as ‘watchdogs’ over EU funds disbursement was examined. The main counter-argument against this proposal, concerning the strict standing requirements under Article 263(4) TFEU was embraced in this regard. Accordingly, it was suggested that the current approach of the CJEU, in light of the case Venezuela v. Council and under the influence of the ECtHR judgement in KlimaSeniorinnen, is potentially shifting, paving the way for more flexible standing conditions under Article 263(4) TFEU. If sustained, this jurisprudential (r)evolution could significantly enhance the capacity of CSOs to challenge institutional failures and assert the right to an effective judicial remedy. Secondly, this Article engaged with the intensity of judicial review in this area of EU law. The so-called ‘political question doctrine’, while arguably now accepted under EU law subsequent to the KS and KD judgement, does not apply in budgetary conditionality cases. Furthermore, it was argued that although the Commission generally enjoys a certain margin of discretion in establishing the requirements that condition the disbursement of EU funds, its discretion is significantly more constrained when assessing whether those conditions have subsequently been remedied. Thus, judicial review by the CJEU is anchored in concrete and reviewable substantive and procedural standards. 

In conclusion, in light of pending litigation before the CJEU concerning the legality of specific applications of budgetary conditionality mechanisms, the Court will soon be called upon to clarify the permissible scope of institutional discretion and to delineate the procedural safeguards necessary for legitimate enforcement. Given the evidence reviewed in this Article, it would be surprising if the Court were to conclude that the Commission has complied with all its procedural and substantive obligations in these cases. The stakes are high: a judgement affirming the importance of compliance with administrative principles in the application of budgetary conditionality mechanisms would not only strengthen the Rule of Law within the EU, reaffirming that these legal obligations also apply to the institutions themselves, but also reassert the Court’s indispensable role in ensuring that legality prevails over politically motivated decision making. Ultimately, the EU’s credibility as a ‘Union founded on the Rule of Law’ depends not only on the enactment of innovative mechanisms to protect the value, but also on its principled, consistent, and legally sound application.