The European Court of Justice (ECJ) ruled on Wednesday that the European Union has the right to cut funding to member states that violate the bloc's rule-of-law standards, thus rejecting Poland's and Hungary's challenge to the EU's "conditionality mechanism."
Earlier, the EU urged the ECJ to impose financial penalties against the two countries after voicing concerns over Warsaw's judicial reform and Hungary's alleged corrupt spending of EU funds. Poland and Hungary supported each other and brought an action before the ECJ seeking the annulment of the regulation that allows the European Council to "adopt protective measures such as the suspension of payments to be made from the Union budget or the suspension of the approval of one or more programs to be paid from that budget."
"The regulation is intended to protect the Union budget from effects resulting, in a sufficiently direct way, from breaches of the principles of the rule of law and not to penalize those breaches as such," the court ruled and noted the EU "must be able to defend" its values, that include the rule of law and solidarity, since respecting them is a "condition for the enjoyment of all the rights" given to member states.