Brussels approves Poland’s €35-billion recovery plan despite lingering rule of law concerns

The European Commission has given its assent to the Polish recovery plan, a key step to the country unlocking €23.9 billion in grants and €11.5 billion in low-interest loans.

The announcement represents a truce in a protracted stand-off between Brussels and Warsaw over controversial judicial reforms, which blocked the plan for more than a year and raised fears of a legal ‘Polexit’.

In a bid to break the impasse and comply with the Commission’s demands, Warsaw has agreed to make partial changes to the reforms, including by replacing the disciplinary regime of judges, deemed illegal by the European Court of Justice, with a new “Chamber of Professional Responsibility.”

The revision was introduced by President Andrzej Duda earlier this year and passed the Sejm, the lower house of the Polish parliament, in late May. “We don’t need this dispute,” Duda said, adding the disciplinary regime was working in an “absolutely irregular way.”

But critics say the tweaks are cosmetic and fail to match EU standards.

“The new disciplinary body as proposed in the draft bill falls short of complying with the decisions of the European Courts, and will not prevent the Polish executive to exert control over judges, thus further undermining their independence,” Iustitia, the largest association of judges in Poland, said in a written address to the Commission and the European Parliament.

For now, Brussels seems to be satisfied with the Polish commitments and has moved to endorse the €35.4 billion plan, based on the expectation the government will carry through the reforms.

“The plan contains several measures to improve the country’s investment climate, including a comprehensive reform of the judiciary aimed at strengthening judges’ independence,” European Commission President Ursula von der Leyen said in a statement. 

Von der Leyen will travel to Warsaw on Thursday in order to personally deliver the executive’s approval. The EU Council will then have four weeks to give the final blessing.

After that, Poland will begin receiving periodical tranches of grants and loans,contingent upon the completion of a set of milestones and targets, some of which involve judicial matters.

“The approval of this plan is linked to clear commitments by Poland on the independence of the judiciary, which will need to be fulfilled before any actual payment can be made,” Von der Leyen noted.

Brussels vs Warsaw

The legal dispute between Brussels and Warsaw dates back to December 2019, when the Sejm passed a bill that empowered the disciplinary chamber of the Supreme Court to punish magistrates who were suspected of engaging in “political activity.” Potential penalties included fines, salary cuts and outright suspension.

The chamber was immediately condemned by opposition parties, judges’ associations, the European Commission and the United Nations, who saw the reform as a dangerous encroachment by the executive branch upon the judicial arm of the state and, therefore, a threat to the separation of powers.

Changes to the way in which justices are appointed were also criticised for giving greater influence to politicians, to the detriment of professional judges.

Warsaw fought back, arguing the bill was necessary to eliminate the remains of the communist regime, tackle corruption and improve efficiency.

The European Court of Justice (ECJ) concluded the chamber was not compatible with EU law because, among other factors, it “does not provide all the guarantees of impartiality and independence and, in particular, is not protected from the direct or indirect influence of the Polish legislature and executive.”

The ECJ later ruled the system had to be dismantled and the suspension of judges reversed.

The Commission repeatedly asked Poland to comply with the ECJ rulings, a petition that went unanswered and resulted in a €1 million daily fine.

In an attempt to force Warsaw’s hand, Brussels withheld its endorsement of the €35.4 billion recovery plan, first submitted in May 2021, and put on the table three conditions to unlock the cash: dismantle the disciplinary chamber, reform the regime, and reinstate the suspended magistrates.

The amendments championed by President Duda appeared to have assuaged the Commission’s most pressing concerns, despite reservations by legal experts and MEPs. 

The establishment of a new ‘Chamber of Professional Responsibility’ tasked with vetting judges does not mean the automatic restoration of judges suspended by the disciplinary regime, says Jakub Jaraczewski, a legal officer at Berlin-based think tank Democracy Reporting International.

“I am afraid that the Commission might be falling for a feint by Warsaw,” he told Euronews. “A minor reform presented as a genuine solution to the Polish rule of law crisis and accepted by the Commission in other to score a win-win situation.”

The Polish government did not respond to a request for comment.

The European Parliament’s committee on civil liberties and justice has also expressed doubts, and extended an invitation to President von der Leyen for an “urgent exchange of views” on the Polish recovery plan and the rule of law situation in the country.

“This is a fake reform,” Daniel Freund, a German MEP who sits with the Greens, told Euronews. “We have no idea where EU money is going and if there’s a dispute or if there’s fraud or mismanagement, there is no longer an independent court that you can turn to in Poland.”

Veto power

Wednesday’s announcement provides Warsaw with much-needed economic relief. Soaring energy prices and record-breaking inflation have made the reception of recovery funds an imperative for the ruling right-wing Law and Justice (PiS) party.

The continued stalemate left Poland as one of the few member states without an approved plan, together with Hungary, which remains blocked over a rule of law dispute, and the Netherlands, which has yet to submit its programme.

The fund is now being re-designed to cope with the effects of the Ukraine war and support an ambitious roadmap to make the bloc completely independent from Russian fossil fuels.

Momentum around the Commission’s green light has been building in recent weeks as Poland took on a leading role in the EU’s response to the invasion of Ukraine.

The Polish government has advocated for stringent sanctions against the Kremlin and military support for Kyiv, while simultaneously opening the doors to millions of refugees fleeing the war-torn country.

Poland’s hard line has caused a schism with Hungary, a close ally that is also under close scrutiny. Budapest has defended a more moderate, and often divisive, course of action, going as far as diluting a sweeping ban on Russian oil to exempt pipeline supplies.

The Commission’s decision coincides with negotiations around an EU directive that would introduce a 15% minimum effective tax rate for large multinationals. The directive is meant to transpose a ground-breaking tax deal agreed last year by the international community.

But Poland has used its veto power to block the legislative proposal, becoming the only EU country in opposition. Tax matters require the unanimity of the 27 member states.

Warsaw says it wants the other pillar of the global deal – the physical reallocation of taxing rights – to be included in the same directive, but work on that element is more complex and has not yet been finalised.

There is growing suspicion in Brussels that Poland is exploiting its veto power on the tax deal to force the approval of the stalled recovery plan.

The approval of the recovery plan is expected to facilitate the tax discussions, a top priority for the French presidency of the EU Council.

“Poland should respond to EU’s blackmail with a veto on all matters that require unanimity,” Polish Justice Minister Zbigniew Ziobro said in December while discussing the withholding of funds.