Money Talks: The potential of an EU financial conditionality mechanism linked to the rule of law

Sammanfattning: Over the last decade, the status of the rule of law as a foundational value of the EU legal order has been questioned by the political developments in certain EU member states. Particularly Poland and Hungary have seen a rapid dismantling of central state institutions, in a process which has become known as rule of law backsliding. In 2021, the EU legislator introduced a new mechanism to counter the troubling trend: a financial conditionality mechanism linked to the rule of law. This mechanism empowers the EU institutions to withhold EU funds from member states that do not respect fundamental principles of the rule of law. The purpose of this thesis is to investigate what effects a rule of law-based financial conditionality mechanism may have upon the EU legal framework for the protection of the rule of law. Firstly, I depict different theoretical and comparative approaches to the rule of law, to explain the EU’s conception of the notion. Secondly, I assess the EU legal framework for protection of the rule of law and developing CJEU case law on the rule of law. Thirdly, I analyse the new rule of law-based conditionality mechanism and the CJEU’s verdicts in Case 156/21 and Case C-157/21, regarding the mechanism’s compatibility with central provisions of the treaties. In my analysis, I find that the financial conditionality mechanism has a two-fold purpose – to protect the EU budget against breaches of the rule of law and to uphold respect for the rule of law per se – and that there is a direct link between the rule of law and corruption. Moreover, I argue that the financial conditionality mechanism will be applied when a member state’s illiberal actions threaten the solidarity within the Union. However, to ensure efficient EU level protection of the rule of law, I believe that the mechanism ought to be combined with other measures.