Changes from adopted text to adopted text

AddedANNEX TO THE LEGISLATIVE RESOLUTION

RemovedPosition of the European Parliament adopted at first reading on 4 April 2019 with a view to the adoption of Regulation (EU) .../… of the European Parliament and of the Council on the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States

AddedJoint statement by Parliament, the Council and the Commission

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

AddedWithout prejudice to the Commission's right of initiative, the European Parliament, the Council and Commission agree to consider including the content of this Regulation into Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 (the "Financial Regulation") upon its next revision.

RemovedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 322(1)(a) thereof,

AddedCommission statement

RemovedHaving regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

AddedThe Commission agrees to consider accompanying the report to the European Parliament and the Council on the application of this Regulation by appropriate proposals where necessary.

RemovedHaving regard to the proposal from the European Commission,

RemovedAfter transmission of the draft legislative act to the national parliaments,

RemovedHaving regard to the opinion of the Court of Auditors,

RemovedActing in accordance with the ordinary legislative procedure,

RemovedWhereas:

Removed(1) The rule of law is one of the essential values upon which The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, enshrined in Article 2 of the Treaty on European Union (TEU) and in the criteria for Union membership. As recalled by Article 2 of the Treaty on European Union TEU, these those values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail. [Am. 1]

Removed(1a) Member States should uphold their obligations and set an example by genuinely fulfilling them and move towards a shared culture of the rule of law as a universal value to be applied by all concerned even-handedly. Full respect for and promotion of those principles is an essential prerequisite for the legitimacy of the European project as a whole and a basic condition for building citizens' trust in the Union and ensuring the effective implementation of its policies. [Am. 2]

Removed(1b) In accordance with Article 2, Article 3(1) and Article 7 TEU, the Union has the possibility to act in order to protect its constitutional core and the common values on which it was founded, including its budgetary principles. Member States, Union institutions, bodies, offices and agencies, and candidate countries are obliged to respect, protect and promote those principles and values, and they have a duty of sincere cooperation. [Am. 3]

Removed(2) The rule of law requires that all public powers act within the constraints set out by law, in accordance with the values of democracy respect for and fundamental rights, and under the control of independent and impartial courts. It requires, in particular, that the principles of legality, including a transparent, accountable and democratic process for enacting law, legal certainty, prohibition of arbitrariness of the executive powers, separation of powers, access to justice and effective judicial protection by before independent and impartial courts are respected. Those principles are reflected inter alia at the level of the Venice Commission of the Council of Europe and also on the basis of the relevant case law of the European Court of Human Rights. [Am. 4]

Removed(2a) The accession criteria, or Copenhagen criteria, established by the Copenhagen European Council in 1993 and strengthened by the Madrid European Council in 1995, are the essential conditions that all candidate countries must satisfy to become a Member State. Those criteria include the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; a functioning market economy and the capacity to cope with competition and market forces; and the ability to meet the obligations of Union membership. [Am. 5]

Removed(2b) The failure of a candidate country to meet the required standards, values and democratic principles results in that country’s accession to the Union being delayed until it fully meets those standards. The obligations incumbent on candidate countries under the Copenhagen criteria continue to apply to Member States after joining the Union by virtue of Article 2 TEU and the principle of sincere cooperation enshrined in Article 4 TEU. Member States should therefore be assessed on a regular basis in order to verify that their laws and practices continue to comply with those criteria and the common values on which the Union is founded, thereby providing a sound legal and administrative framework for the implementation of Union policies. [Am. 6]

Removed(3) While there is no hierarchy among Union values, respect for the rule of law is a prerequisite essential for the protection of the other fundamental values on which the Union is founded, such as freedom, democracy, equality and respect for human rights. Respect for the rule of law is intrinsically linked to respect for democracy and for fundamental rights: there can be no democracy and respect for fundamental rights without respect for the rule of law and vice versa. Coherence and consistency of internal and external democracy, rule of law and fundamental rights policy is key to the credibility of the Union. [Am. 7]

Removed(4) Whenever the Member States implement the Union’s budget, and whatever method of implementation they use, respect for the rule of law is an essential precondition to comply with the principles of sound financial management enshrined in Article 317 of the Treaty on the Functioning of the European Union.

Removed(5) Sound financial management can only be ensured by the Member States if public authorities act in accordance with the law, and if breaches thereof are effectively pursued by investigative and prosecution services, and if decisions of public authorities can be subject to effective judicial review by independent courts and by the Court of Justice of the European Union.

Removed(6) Judicial bodies Independence and impartiality of the judiciary should act independently and impartially always be guaranteed and investigation and prosecution services should be able to properly execute their function. They should be endowed with sufficient resources and procedures to act effectively and in full respect of the right to a fair trial. These conditions are required as a minimum guarantee against unlawful and arbitrary decisions by public authorities that could impair these fundamental principles and harm the financial interests of the Union. [Am. 8]

Removed(7) The independence of the judiciary presupposes, in particular, that the body concerned is able to exercise its judicial functions wholly autonomously, without being subject to any hierarchical constraint or subordinated to any other body, and without taking orders or instructions from any source whatsoever, and that it is thus protected against external interventions or pressure liable to impair the independent judgment of its members and to influence their decisions. The guarantees of independence and impartiality require rules, particularly as regards the composition of the body and the appointment, length of service and the grounds for rejection and dismissal of its members, in order to dismiss any reasonable doubt in the minds of individuals as to the imperviousness of that body to external factors and its neutrality with respect to the interests before it.

Removed(7a) The independence of the prosecution and the judiciary comprises both the formal (de jure) and actual (de facto) independence of the prosecution and the judiciary and the individual prosecutors and judges. [Am. 9]

Removed(8) Respect for the rule of law is not only important essential for citizens of the Union, but also for business initiatives, innovation, investment, economic, social and territorial cohesion and the proper functioning of the internal market, which will flourish most sustainably only where a solid legal and institutional framework is in place. [Am. 10]

Removed(8a) Integrating existing Union monitoring mechanisms, such as the Cooperation and Verification Mechanism, the Justice Scoreboard and the Anti-Corruption reports, into a broader rule of law monitoring framework could provide more efficient and effective control mechanisms for the protection of the financial interest of the Union. [Am. 11]

Removed(8b) Lack of transparency, arbitrary discrimination, distortion of competition and an uneven playing field within and outside the internal market, impact on the integrity of the single market and on the fairness, stability and legitimacy of the tax system, increased economic inequalities, unfair competition between states, social dissatisfaction, mistrust and democratic deficit are some of the negative effects of harmful tax practices. [Am. 12]

Removed(9) Article 19 TEU, which gives concrete expression to the value of the rule of law stated in Article 2 TEU, requires the Member States to provide effective judicial protection in the fields covered by Union law, including those relating to the implementation of the Union’s budget. The very existence of effective judicial review designed to ensure compliance with Union law is the essence of the rule of law and requires independent courts. Maintaining the independence of the courts is essential, as confirmed by the second subparagraph of Article 47 of the Charter of Fundamental Rights of the European Union. This is true, in particular, for the judicial review of the validity of the measures, contracts or other instruments giving rise to public expenditure or debts, inter alia in the context of public procurement procedures which may also be brought before the courts.

Removed(10) There is hence a clear relationship between respect for the rule of law and an efficient implementation of the Union budget in accordance with the principles of sound financial management.

Removed(10a) The Union has at its disposal a multitude of instruments and processes for ensuring full and proper application of the principles and values laid down in the TEU, but there is currently no swift, effective response coming from the Union institutions, in particular to ensure sound financial management. The existing instruments should be enforced, evaluated and complemented in the framework of a rule of law mechanism to be adequate and effective. [Am. 13]

Removed(11) Generalised deficiencies in the Member States as regards the rule of law which affect in particular the proper functioning of public authorities and effective judicial review, can seriously harm the financial interests of the Union. Efficient investigations into such deficiencies, and the application of effective and proportionate measures when a generalised deficiency is established, are needed not only to secure the financial interests of the Union, including the effective collection of revenue, but also to ensure public trust in the Union and its institutions. Only an independent judiciary that upholds the rule of law and legal certainty in all Member States can ultimately guarantee that money from the Union budget is sufficiently protected. [Am. 14]

Removed(11a) The scale of tax evasion and avoidance is estimated by the Commission to be up to EUR 1 trillion a year. The negative impacts of such practices on the Member States' and Union budgets and on citizens are evident and could undermine trust in democracy. [Am. 15]

Removed(11b) Corporate tax avoidance has a direct impact on Member States’ and Union budgets and on the breakdown of the tax effort between categories of tax payers as well as between economic factors. [Am. 16]

Removed(11c) Member States should fully apply the principle of sincere cooperation in matters of tax competition. [Am. 17]

Removed(11d) The Commission, as the guardian of the Treaties, should ensure that Union law and the principle of sincere cooperation between Member States are fully complied with. [Am. 18]

Removed(11e) Assessing and monitoring Member States' tax policies at Union level would ensure that no new harmful tax measures are implemented in Member States. Monitoring compliance of Member States, their jurisdictions, regions or other administrative structures with the common Union list of non-cooperative jurisdictions would safeguard the single market and ensure its proper and coherent functioning. [Am. 19]

Removed(12) The identification of a generalised deficiency requires a thorough qualitative assessment by the Commission. That assessment could should be objective, impartial and transparent and be based on the information from all available relevant sources, taking into account the criteria used in the context of Union accession negotiations, in particular the chapters of the acquis on judiciary and fundamental rights, on justice, freedom and security, on financial control and on taxation, as well as the guidelines used in the context of the Cooperation and Verification Mechanism to track the progress of a Member State, and recognized from recognised institutions, including judgments of the Court of Justice of the European Union and the European Court of Human Rights, resolutions of the European Parliament, reports of the Court of Auditors, and conclusions and recommendations of relevant international organisations and networks, such as the bodies of the Council of Europe, and including in particular the Venice Commission’s Rule of Law Checklist, and of relevant international networks, such as the European networks of supreme courts and councils for the judiciary. [Am. 20]

Removed(12a) An advisory panel of independent experts in constitutional law and financial and budgetary matters should be established with the objective to assist the Commission in its assessment of generalised deficiencies. That panel should undertake an independent annual assessment of the issues as regards the rule of law in all Member States that affect or risk affecting the sound financial management or the protection of the financial interests of the Union, taking into account information from all relevant sources and recognised institutions. The Commission, when taking a decision about adopting or lifting of possible measures, should take relevant opinions expressed by that panel into account. [Am. 21]

Removed(13) The possible measures to be adopted in the event of generalised deficiencies and the procedure to be followed to adopt them should be determined. Those measures should include the suspension of payments and of commitments, a reduction of funding under existing commitments, and a prohibition to conclude new commitments with recipients. [Am. 22]

Removed(14) The principle of proportionality should apply when determining the measures to be adopted, in particular taking into account the seriousness of the situation, the time which has elapsed since the relevant conduct started, its duration and its recurrence, the intention, and the degree of cooperation of the Member State concerned in putting an end to the generalised deficiency as regards the rule of law, and the effects of that deficiency on the respective Union funds.

Removed(14a) It is essential that the legitimate interests of final recipients and beneficiaries are properly safeguarded when measures are adopted in the event of generalised deficiencies. When considering the adoption of measures, the Commission should take into account their potential impact on final recipients and beneficiaries. To strengthen the protection of the final recipients or beneficiaries, the Commission should provide information and guidance via a website or internet portal, together with adequate tools to inform the Commission about any breach of the legal obligation of government entities and Member States to continue making payments after measures on the basis of this Regulation are adopted. Where necessary, in order to ensure that any amount due by government entities or Member States is effectively paid to final recipients or beneficiaries, the Commission should be able to recover payments made to those entities, or, as appropriate, to make a financial correction by reducing support to a programme, and to transfer an equivalent amount to the Union reserve to be used for the benefit of final recipients or beneficiaries. [Am. 23]

Removed(15) In order to ensure uniform implementation of this Regulation and in view of the importance of the financial effects of measures being imposed pursuant to this Regulation, implementing powers should be conferred on the Council which should act on the basis of a Commission proposal. To facilitate the adoption of decisions which are required to protect the financial interests of the Union, reversed qualified majority voting should be used. [Am. 24]

Removed(15a) In view of their effect on the Union budget, measures imposed pursuant to this Regulation should only enter into force after the European Parliament and the Council have approved a transfer to a budgetary reserve of an amount equivalent to the value of the measures adopted. To facilitate the adoption of decisions which are required to protect the financial interests of the Union, such transfers should be considered to be approved unless, within a set period, the European Parliament or the Council, the latter acting by qualified majority, amend or reject them. [Am. 25]

Removed(16) Before proposing the adoption of any measure pursuant to this Regulation, the Commission should inform the Member State concerned why it considers that a generalised deficiency regarding the rule of law might exist in that Member State. The Commission should without delay inform the European Parliament and the Council about any such notification and its contents. The Member State concerned should be allowed to submit its observations. The Commission and the Council should take those observations into account. [Am. 26]

Removed(17) The Council Commission should lift measures with suspensive effect on a proposal from the Commission and propose to the European Parliament and the Council to lift in full or in part the budgetary reserve of the measures in question, if the situation leading to the imposition of those measures has been sufficiently remedied. [Am. 27]

Removed(18) The Commission should keep the European Parliament informed of any measures proposed and adopted pursuant to this Regulation, [Am. 28]

RemovedHAVE ADOPTED THIS REGULATION:

RemovedArticle 1 Subject matter

RemovedThis Regulation establishes the rules necessary for the protection of the Union’s budget in the case of generalised deficiencies as regards the rule of law in the Member States.

RemovedArticle 2 Definitions

RemovedFor the purposes of this Regulation, the following definitions apply:

Removeda) 'the rule of law' refers shall be understood having regard to the Union value values enshrined in Article 2 of the Treaty on European TEU and in the criteria for Union which membership referred to in Article 49 TEU; it includes the principles of legality, implying a transparent, accountable, democratic and pluralistic process for enacting laws law; legal certainty; prohibition of arbitrariness of the executive powers; access to justice and effective judicial protection by before independent and impartial courts, including of fundamental rights as stipulated in the Charter of Fundamental Rights of the European Union and in international human rights treaties; separation of powers; non-discrimination and equality before the law; [Am. 29]

Removedb) 'generalised deficiency as regards the rule of law' means a widespread or recurrent practice or omission, or measure by public authorities which affects the rule of law, where it affects or risks affecting the principles of sound financial management or the protection of the financial interests of the Union; a generalised deficiency as regards the rule of law may also be the consequence of a systemic threat to the Union values enshrined in Article 2 TEU that affects or risks affecting the principles of sound financial management or the protection of the financial interests of the Union; [Am. 30]

Removedc) 'government entity' means all any public authorities authority at all levels of government, including national, regional and local authorities, as well as Member State organisations within the meaning of [point 42 of Article 2] of Regulation (EU, Euratom) No […] 2018/1046 of the European Parliament and of the Council (the ‘Financial Regulation’). [Am. 31]

RemovedArticle 2a Generalised deficiencies

RemovedThe following shall, in particular, be considered generalised deficiencies as regards the rule of law where they affect or risk affecting the principles of sound financial management or the protection of the financial interests of the Union:

Removeda) endangering the independence of judiciary, including setting any limitations on the ability to exercise judicial functions autonomously by externally intervening in guarantees of independence, by constraining judgement under external order, by arbitrarily revising rules on the appointment or terms of service of judicial personnel, by influencing judicial staff in any way that jeopardises their impartiality or by interfering with the independence of attorneyship;

Removedb) failing to prevent, correct and sanction arbitrary or unlawful decisions by public authorities, including by law enforcement authorities, withholding financial and human resources affecting their proper functioning or failing to ensure the absence of conflicts of interests;