Transparency International Hungary, with co-organiser Connect Europe Association, held a full-day conference on “Protecting EU values and the EU budget” on Monday 4 November. Hosted in partnership with the Central European University’s Democracy Institute, the highly attended event brought together politicians and senior officials from EU institutions, as well as foreign and Hungarian experts to assess the Hungarian EU Presidency’s performance so far in advancing the EU’s rule-of-law, democracy and anti-corruption agenda. The speakers also reflected on the state of the rule of law and corruption in Hungary. The opening speeches of the conference were given by the leaders of TI Hungary and Connect Europe, followed by János Bóka, Hungary’s minister for EU affairs, Vera Jourová, vice-president of the European Commission for values and transparency, and Tineke Strik, member of the European Parliament’s Committee on Civil Liberties, Justice and Home Affairs and permanent rapporteur on the rule of law situation in Hungary.
The fundamental values of the European Union, including the rule of law and democracy, are in serious crisis in Hungary, said József Péter Martin, executive director of Transparency International (TI) Hungary, in his opening speech. TI Hungary has been sounding the alarm for over a decade that the Hungarian state is “captured”, meaning that most state institutions serve the will of the central government and thus promote particularistic interests and private gains rather than the common good.
The government extends far beyond the executive, intertwining with the state and the ruling party. It subjugates much of the media and civil society and intrudes into segments of the economy where it would have no place in a well-functioning market economy. By exercising absolute control over the parliament and the legislature and turning them into a law factory, by putting pressure on the judiciary and using the prosecutor’s office for political purposes, by holding unfair elections, by distorting the media market and putting pressure on the independent press and NGOs, and by pursuing market-distorting economic policies, the government is defying EU values, above all the rule of law, Martin said.
In the twenty years since Hungary joined the EU, it has received 22 thousand billion forints of EU funds at current prices, making it one of the biggest beneficiaries of the common budget. However, this enormous amount of money has not been spent efficiently; just think of the world-famous canopy walkway without any trees in its vicinity, built with EU funds, Martin said. The fact that at least a third of Hungary’s EU funds have been spent unduly has also contributed to Hungary becoming the second poorest EU country in terms of per capita consumption, and we are now in third place from behind in terms of GDP, lagging behind the other EU countries, Martin added.
“If the rule of law is violated in one member state, then the whole European cooperation is undermined. If the full independence of the judiciary is not guaranteed in one member state, if legal certainty is not absolute, then this is not only a problem for that particular member state and its citizens, but also a violation of the interests of others,” István Szent-Iványi, the president of the Connect Europe Association, said in his opening speech.
He said that in countries where the rule of law is firm, corruption cannot become systemic; in other words, it cannot abuse the socio-economic system. The efficient functioning of the rule of law is the best protection against the spread of corruption, he added.
János Bóka, Hungary’s minister for European affairs, dismissed the theme of the conference as a “rule of law game” and said that by highlighting rule of law issues EU member states do nothing else but aim to attack the Hungarian government. Furthermore, he accused EU institutions and rule-of-law NGOs of acting inconsistently and using double standards, which harms the Hungarian sovereignty, Bóka said.
He argued that the highlighting of the rule of law challenges has caused political friction in the EU and created a deep and mutual distrust, which this conference cannot reverse. Among the achievements of the Hungarian EU Presidency, the minister mentioned the continuation of the dialogue on the rule of law challenges and the fulfilment of the rule of law criteria by candidate countries.
Minister Bóka cautioned against what he saw as attempts to over-centralize national competencies at EU level. He also called on EU institutions to equally adhere to the rule of law principles in their operations. The minister concluded by encouraging everyone to actively engage in the ongoing research and debate on the subject and significance of the rule of law.
Minister Bóka is right in saying that there is a need for a dialogue on the restoration of the rule of law in Hungary and a strong fight against corruption, which includes the implementation of the related milestones set by the European Commission, Vera Jourová, vice-president of the European Commission responsible for values and transparency, told our conference on “Protecting EU values and the EU Budget”. However, contrary to what Minister Bóka said, the milestones have not been arbitrarily set by the Commission; they are fully in line with the provisions of the EU Treaty and the relevant judgments of the European Court of Justice, she said.
So, it is not the Commission that dictates what the rule of law is, but the Treaty establishing the European Union. The Commission, within the limits of its competence, applies the rule of law in full respect of the Treaty provisions, she said. The annual rule of law report published by the Commission – contrary to the criticism directed at the Commission by the Hungarian and the former Polish governments – consistently assesses the fulfilment of EU rule of law conditions in each member state, covering areas like the independence of the judicial system, checks and balances and the freedom of the press, on the basis of the same methodology, Vice-President Jourová stressed.
Vera Jourová also mentioned the Article 7 procedure against Hungary. According to her, Minister Bóka was wrong to state that the process had become politicised; on the contrary, she said, the procedure had been conducted impartially. She stressed that the process is not an attack on the Hungarian people, but a reaction to certain political developments in Hungary. Furthermore, extensive negotiations have been a key part of the process, she added.
With regards the European Commission blocking Hungary’s access to some of the EU funds, Vera Jourová said the Hungarian government had undertaken to meet a number of conditions to unblock these funds; however, the funds will be released only when all the conditions have been fully met. She added that mutual trust would be essential, but this is undermined by the fact that the Hungarian government makes completely different statements in public than in the course of the negotiations.
Responding to questions from the press, Commission Vice-President Jourová recalled that the Commission had been strongly criticised by the European Parliament for unblocking part of the EU funds after the judicial reform in Hungary. According to her, the Commission has always been expecting full compliance with EU requirements. However, the Hungarian government must also meet these requirements in practice, not just on paper, and the government must guarantee the sustainability of the measures it has taken, Commission Vice-President Jourová said.
Tineke Strik, a member of the European Parliament’s (EP) Committee on Civil Liberties, Justice and Home Affairs, listed a number of shortcomings with regards the rule of law situation in Hungary. Acting as the EP’s permanent rapporteur on this issue, she said the Commission has a strong toolbox to defend the rule of law, but Hungarian Prime Minister Viktor Orbán has so far managed to shirk the requirements and has shown that the implementation of reforms depends solely on his will. It is therefore important that the member states also express their opposition to, and protest against the rule of law problems prevailing in Hungary.
In addition to highlighting the limitations to market competition and media freedom in Hungary, Tineke Strik called for urgent action to avert the chilling effect the country’s Sovereignty Protection Act is poised to have on NGOs. She recalled that during her working visits, she had observed the prominent role played by the NGO sector in Hungary. It would be important for the EU institutions to give adequate support to these organisations and to apply precise and measurable criteria in the course of monitoring the implementation of the measures outlined in the rule of law recommendations to the member states, she added.
Could the European Commission use the rule of law instrument more effectively? How can we start rebuilding the rule of law once it has been abused? These and other similar issues were in the focus of the first panel discussion of our conference, moderated by Miklós Ligeti, the legal director of TI Hungary.
Márta Pardavi, co-chair of the Hungarian Helsinki Committee, called our conference an important milestone in launching a dialogue on rule of law issues. She also criticised the speech of EU Affairs Minister János Bóka for failing to mention the steps taken by the Hungarian government to unblock billions of euros worth of EU funds.
Michal Wawrykiewich, a member of the European People’s Party (EPP) and vice-coordinator of the Committee on Civil Liberties, Justice and Home Affairs (LIBE) in the European Parliament, stressed that the European Commission’s powers alone are insufficient to prevent the erosion of the rule of law. He called for more instruments to maintain confidence as well as more vigorous and effective action.
The European Commission’s annual rule of law reports are too general and too permissive, according to Krzysztof Izdebski, a member of the board of directors of the Polish Stefan Batory Foundation. Also acting as the foundation’s senior expert on advocacy and development, he said the problems stemming from unresolved rule of law issues could eventually pose a long-term threat to the survival of the European Union, and consequently to any enlargement ambitions.
Bálint Magyar, a senior research fellow at the CEU’s Democracy Institute, said that while in Poland autocracy was only attempted, in Hungary the ruling party has achieved a real political monopoly and established a mafia state which allows autocratic decisions to be made behind the façade of seemingly democratic institutions.
MEP Tineke Strik stressed the need for activism and radicalism in addressing the rule of law related problems. She also called for actions that serve the interests of the Hungarian citizens.
“Establishing a direct link between the respect for the rule of law and access to EU funds is a big step forward. I am very pleased to see this achieved, because the Article 7 procedure and the possible suspension of a member state’s voting right that it entails is too strong a measure, a kind of “nuclear weapon”, while the conditionality mechanism is an intermediate solution. But it certainly needs to be fine-tuned,” said Annemie Turtelboom, chair of the European Court of Auditors’ Audit Chamber II (Investment for Cohesion, Growth and Inclusion), during the second panel discussion of our conference on the protection of EU funds moderated by József Péter Martin, executive director of TI Hungary. Elaborating on the way forward, Turtelboom pleaded the European Commission not to treat the rule of law criteria as mere checkboxes to be ticked.
She also noted that little experience is available so far regarding the application of the rule of law mechanism, as Hungary is the only member state so far that has been subjected to this procedure. And there is the fact that blocking the use of funds is more complicated than unblocking them, because the former is a legal decision while the latter is typically a political one. This duality represents an inherent risk, she said.
On the whole, there are still some inconsistencies in the system, so we need to be careful, Turtelboom said. The conditionality mechanism and the fulfilment of expectations linked to the recovery fund, RRF, should be better coordinated at the EU level. It is also important that ex-post monitoring should enable the long-term viability of measures. In this context, it is important to increase the ‘oversight capacity’ within the European Commission.
Nicholas Aiossa, director of Transparency International EU, agreed that increasing the oversight capacity of the Commission and extending its mandate could help improve the results in tackling corruption in the member states. That, however, would require greater commitment from EU decision-makers.
The creation of the current rule of law toolbox was a very important first step, but it is far from sufficient, Aiossa said. He pleaded for timely action before another member state might fall victim to state capture, as it happened in Hungary. In recent years, Viktor Orbán has been blackmailing EU decision-makers and holding the European Union as a whole hostage to his whims, but still there is not enough political will to tackle such threats, Aiossa added.
Katalin Cseres, an associate professor of European law at the Amsterdam Centre for European Law and Governance, outlined an alternative approach. Cseres said that the EU’s rule of law toolbox not only includes the ‘nuclear option’ of the Article 7 procedure, but also compliance with non-binding recommendations. Also, the European Commission under Ursula von der Leyen represents a new policy direction in some respects. According to Cseres, important questions have been raised and substantive solutions to common problems have been found in the past, but one substantive question has been avoided: what does or does not the competition authority in a given member state do?
Free competition is a fundamental value of the European Union, and the Hungarian government does not question that openly. Furthermore, the Commission as one of the EU’s top bodies has the right to intervene and monitor free competition. The most important question, according to Katalin Cseres, is whether the Commission will continue to be content to monitor formal compliance with the conditions it imposes, or whether the new Commission – the second one under the leadership of Ursula Van der Leyen – will be willing to look beyond formal compliance and take stronger action to ensure real competition. The Hungarian example has shown us in recent years what results the former attitude can produce. The Hungarian government is also very creative in this area, and so we have to ‘keep up with them’.
Miroslav Cák, a partner at AGM Law Firm in Slovakia, gave an insight into recent developments in the public procurement markets in Slovakia and the Czech Republic. According to Cák, the oversight bodies in both countries used to be led by professionals who took competition in public procurement seriously; but recently, there has been a change in the attitude of the Slovak government, which manifests itself in new legislation and a number of new measures that open the door to abuses in public procurement, he said.
Public procurement calls can be discriminatory, you can play around with the value thresholds, and the authorities may bend the rules to facilitate a certain outcome. There is also the ‘capture’ of public institutions through institutional restructuring or staff changes. In addition, the government can label any investment as a project of strategic priority and thus exempt it from competition and public procurement rules. Although such decisions can be challenged, the complaints are handled by people who are close to the government, Cák added.
In the closing session of the conference, moderated by István Szent-Iványi, Julia Gross, Germany’s ambassador to Hungary, stressed the importance of making the rule of law and conditionality ‘toolbox’ fit for purpose. We should also learn to use them properly by first credibly assessing what has been achieved and whether the requirements themselves have been appropriate. This is how we can avoid the procedure turning into a ‘ticking the box’ exercise, the ambassador said. But it is also important to see and acknowledge the positive results, because that is what makes these instruments legitimate. In Hungary, a key achievement was the reform of the judiciary, which had been effective, according to Julia Gross.
Pertti Anttinen, the ambassador of the Republic of Finland to Hungary, said it was a priority for Finland to fully enforce the rule of law requirements. He stressed the need to strengthen the principle of the rule of law both inside and outside the EU. Full use should be made of the rule of law aspects and instruments in the context of the various EU funding instruments. He believes that governments should welcome Transparency International’s work, as TI detects and exposes corruption. Anttinen disagreed with Hungary’s EU Affairs Minister János Bóka, who spoke in the opening session of the conference, that the debate on the rule of law serves the interest of net contributor countries. In his view, strengthening the rule of law is in our common interest and is not limited to net contributors. Ambassador Gross and Ambassador Anttinen both welcomed the fact that Minister Bóka had agreed to take part in the conference, because despite differences of opinion, it is essential that there should be some kind of dialogue with the government.
According to Ambassador Gross, there is no doubt that there is systemic corruption in Hungary. She said investors in Hungary found that corruption here was different from corruption in other countries, because it was not just about bribes, but represented a much broader, deeper-rooted problem. The EU conditionality procedures can help us to fight corruption together. That is why the rule of law is not a distant, abstract concept, but something that affects the well-being of everyday people.
Ambassador Anttinen cited TI’s Corruption Perceptions Index, which shows that Hungary has been overtaken by all the other EU member states, and it lags behind many non-EU countries as well. Hungary also does not score well in media freedom reports. He also pointed out that the rule of law is also about building trust between the member states. Moreover, disregard for the rule of law, coupled with corruption, will certainly harm competitiveness, he concluded.
