Friday, January 29, 2021

On the erosion of the rule of law in the EU and its neighbourhood

Originally published on The European Post 

The launch this week of Transparency International’s annual corruption index highlights something that EU watchers cannot fail to have missed in the past year: across Eastern Europe, both members and neighbours of the EU have been backsliding when it comes to the rule of law. 

Whether it’s membership candidates like Bosnia, or well-established members of the EU like Hungary, the index charts a marked decline in standards.

Given recent developments in Poland and Hungary, this will not come as a surprise to even the most casual observer. For all the relative successes of the EU, it has failed to influence its Eastern European partners and neighbours and draw them in the right direction when it comes to the rule of law, even if these countries have benefited economically from the single market.  

At the end of last year, new Hungarian legislation was passed of which critics said that it was attempting to constrain opposition forces. A Hungarian law on foreign-funded NGOs was struck down by the EU’s top court last June. 

In Poland, a government-appointed chamber which was created in 2017 to sanction judges, is one of many controversial legal reforms. The European Commission thinks it “continues to take a grip on Polish judges and threatens their independence.” The ECJ has ordered Poland to suspend the chamber. 

Also media freedom in Poland and Hungary is a cause of concern. In Poland, state-controlled refiner PKN-Orlen has bought the ownership ofmost of the country’s regional newspapers, while a joint mission by several journalism bodies has concluded that “since 2010, the Hungarian government has systematically dismantled media independence, freedom and pluralism “.  

So far, the European Union has failed to do anything about this. Perhaps one should be careful to use the instruments that are in theory at the EU’s disposal, which including suspending voting rights in the Council of the EU and fundamentally, it may not be in the EU’s gift to change rule of law backsliding from the outside. 

However, one thing that the EU could do is not to financially fuel institutions that are vulnerable to corruption. Richard Sulík, who currently serves as Slovakia’s Economy Minister, once stated that “the more EU subsidies go to Slovakia, the more corruption there is”. 

There seems to some truth to that. Reports of government leaders in RomaniaHungary or the Czech Republic enriching themselves or their environment through EU funds have been abound. According to OLAF, the EU’s anti-fraud body, “the structural funds sector remains at the core of OLAF’s investigative activity”. 

Another EU body, the European Court of Auditors (ECA), has pointed outthat “cohesion policy represents one third of EU budget but accounts for nearly 40% of all reported fraud cases and almost three quarters of the total financial amounts involved in these cases”. In particular, it has criticized EU member states for not being effective enough to combat this, complaining that “in a significant proportion of cases OLAF closes with a recommendation to recover unduly paid EU money, either no such recovery takes place or the amount recovered is significantly lower than that recommended”. OLAF, on its turn, has also questioned the EU Commission’s statistics on fraud, noting that Hungary and Estonia have reported a lower level of EU funding irregularities than Belgium and the Netherlands, which they do not find credible given their lower ranking on international corruption indexes.

According to an analysis by Deutsche Welle, Hungary and Poland secured a “win” last December, when EU leaders agreed to delay implementation of the European Union’s so-called “Rule of Law Mechanism”, which is supposed to cut payouts of EU funds to member states violating the rule of law. 

Of course, it’s political science fiction that EU governments will ever seriously engage in condemning each other’s rule of law, also because the danger the employ a “double standard”. Spain’s tackling of Catalan nationalists has been often singled out as an example here, rightly or wrongly. The only way to prevent rule of law violations is to simply end large scale EU transfers. This may even benefit net receivers, counterintuitively. A 2016 study by the Centre for Economic Policy Research concluded that “EU structural funds [are] negatively correlated with regional growth” and “[do] not seem to contribute effectively to foster income convergence across regions.” 

Yet, with the EU’s “Next Generation” fund, meant to support EU countries suffering from the fall-out of Covid, EU member states with a bad “rule of law” track record are about to receive even more EU cash. 

Another example of the EU seemingly unable to seriously stand for its own values is its newly agreed “investment pact” with China. Of course doing business with China is a great idea, which not only benefits both sides but also does support the continuing emergence of a middle class in China, which ultimately is the best guarantee for a better protection of human rights. Then, the EU is not asking China to sign a ban on forced labor, an issue particularly problematic with the Uyghurs, before ratifying the investment deal, instead merely requesting a “calendar” for reforms. To attach all kinds of non-trade aspects to trade deals is a bad idea, as it would lead to never-ending discussions, but a ban on forced labour is such an obvious minimal condition to allow trade that it’s astonishing the EU did not obtain this.  

Also Turkey is still benefiting from EU cash. This despite the Turkish government tightening its control over civil society, whereby the interior ministry is able to stop the activities of NGOs under the pretext of vague terrorism charges. Again, it would be naive to think that the EU is able to stop the likes of Erdogan, but the EU could start with no longer hand over its cash to Turkey.

A similar issue is going on with Serbia, which only last year signed a deal with the EU to receive  138.5 million euro in “Pre-Accession Assistance”. This despite years of democratic backsliding.

Also EU hopeful Georgia, which just this past December reaffirmed its commitment to the membership process, has witnessed several notable lapses in standards. Voter intimidation, the politisation of business, undermining foreign investment through expropriations, and a lack of judicial independence continue to undermine its progress.

Also undermining of foreign investment is a concern in both EU member states and the EU’s neighbourhood. The EU has been accused of not doing much about Poland’s “repolonisation programme”, whereby private businesses would be pressured to sell their assets. It may not surprise then 

that few across the EU batted an eyelid when the Georgian government appointed a special manager to the foreign-owned internet company Caucasus Online, preventing it from paying its debts to Georgian banks and allowing the government to seize the company’s assets, while preventing its board and shareholders from challenging this decision in court. Never mind that this may amount to a violation of the EU-Georgia Association Agreement.

To sum up: in many cases, the EU has no powers to stop the rule of law from eroding within its borders, let alone in its neighbourhood. Nevertheless, the little it could do it often hasn’t been doing. The very minimal that we should expect from the EU, is at least a little bit of ambition. 

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