Untangling the inextricable – Advocate General Sánchez-Bordona’s proposal for a new standard of review of Charter infringements in Commission v Hungary (C-78/18)
In his recent Opinion Advocate General Sánchez-Bordona (hereinafter ‘the AG’) gave his assessment of a crucial question of European Union law. How should the Court of Justice of the European Union (hereinafter ‘CJEU’ or ‘the Court’) handle infringements of the freedoms of the single market which at the same time also impinge on the fundamental rights enshrined in the Charter of Fundamental Rights of the European Union (hereinafter ‘the CFR’)? This question will set the trajectory of the CFR in the EU legal order for cases to come. The Court eventually has to clarify if the CFR should apply to national laws that are not directly implementing EU law but are restricting the EU’s fundamental freedoms. In his Opinion, AG Sánchez-Bordona made a proposal to overcome this caveat and untangle the intertwined Treaty and CFR claims.
In 2009, with coming into force of the Treaty of Lisbon, the CFR, via Article 6 Treaty on European Union (hereinafter ‘the TEU’), gained legal significance. However, this legal effect is limited by Article 51 CFR, which famously proclaims that the CFR should only be applicable when EU Member States (hereinafter ‘MS’) implement EU law. The CJEU understood this provision as meaning that the CFR could only be invoked in case national law provisions, which were enacted in light of EU law provisions, conflicted with the fundamental rights guaranteed by the CFR. Subsequently, C-617/10 Åkerberg Fransson (discussed here) modeled the outer boundaries of fundamental rights protection under the CFR. However, the question is still unanswered about how the CFR interacts with the four freedoms of the single market. AG Sánchez-Bordona takes a new approach to untangle this legal ball of wool.
Background of Case – The Hungarian Restriction on NGO Funding
The matter of the case itself can be broadly described as another chapter of the rule of law crisis in the European Union. In 2017, the Hungarian legislature implemented a new law that set strict requirements for foreign funding of NGOs operating in Hungary. This measure was met with sharp criticism in Brussels and elsewhere (e.g. here and here) since it restricted the access to funding and alienated civil society organizations in Hungary, such as the Open Society Foundation, which is at loggerheads with the Orban administration. Consequently, the Commission in July 2017 decided to bring an infringement proceeding under Article 258 Treaty on the functioning of the European Union (hereinafter ‘the TFEU’). The Commission based its claim on separate infringements of Article 63 TFEU and Articles 7, 8, and 12 CFR (para. 14 of the Opinion). Article 63 TFEU provides for a free flow of capital in the single market, while Articles 7, 8, and 12 CFR provide for the protection of private and family life, the protection of personal data, and the freedom of assembly and association. Thus, the claim was based on a combination of both the Treaties and the Charter. Hungary, for his part, argued that the new law has the aim of ensuring transparency and traceability of capital movements, in the interest of combatting money laundering and terrorist financing (para. 60), which is, notably, an objective of the EU.
The AG’s Opinion – Proposing a New Standard of Review
While the AG’s Opinion is interesting regarding his findings concerning the Hungarian law and the rule of law (discussed here), it might be more significant regarding his proposal of a new review criteria for fundamental rights infringements in the realm of the freedoms of the internal market. He proposes a new integrated review criterion for claims which are based on the Treaty and the CFR. This review criteria requires to establish whether restrictions imposed on the free movement provision amount to a breach of a fundamental right of the CFR. If this is the case, additionally to the traditional test an analysis according to Article 52 CFR has to be carried out (para. 104). The reason for establishing this new integrated review criterion was that the number of infringement proceedings of the Commission based upon a joint infringement of the Treaties and the CFR are continually increasing. Therefore, the Court eventually has to clarify if the CFR should apply to national laws that are not directly implementing EU law but are restricting the EU’s fundamental freedoms.
In the seminal judgment of SEGRO (C-52/16 and C-113/16) (full discussion can be found here) the Court for the first time had to deal with a claim which on the one hand was based upon the Treaty, and on the other hand, was based upon the CFR. In SEGRO, a preliminary ruling was issued in regard to a Hungarian law which retroactively deprived the right to usufruct of foreign landowners in Hungary. The law impinged on the free movement of capital (Article 63 TFEU) and the right to property (Article 17 CFR). AG Øe, in his Opinion, declared that the Court should not analyze the infringements of the CFR separately from the infringements of the Treaty, since it would otherwise open the floodgates for further independent CFR claims. Consequently, he only found an infringement of the Treaty and assessed that the CFR did not apply to the substance, since the Hungarian law did not implement EU law. The Court followed his Opinion in so far as there was a ‘complete overlap’ between rights deriving from the Treaty and the CFR. In consequence, the CJEU sidestepped the question if a sole CFR claim is sufficient to strike down the national law. In the follow-up infringement proceeding of Commission v Hungary (C-235/17), the Court then found an individual violation of Article 17 CFR (the right to property) based on the fact that Hungary had justified its measures with implementing Union objectives (inter alia preventing the speculation in agricultural land). The consequence of that judgment was that MSs when relying on EU legislation as a justification for a national measure the CFR would be applicable. Otherwise, when MSs refrain from relying on EU law to justify the measure in question, the scope of application of the CFR would not apply. The author proposes to call this outcome the ‘SEGRO paradox’. The AG aimed at entangling this situation with its present Opinion.
The AG commences his Opinion, by noting that the entering into force of the Charter marks a shift in the trajectory of the EU legal order towards a system that revolves around the figure of the EU citizen (para. 87). Therefore, he argues, the freedoms of the single market have to be read, taking into account the CFR (para. 88). He pursues a refining of the test or criteria under which the fundamental rights should serve as the benchmark of the national legislation in question (para. 92). He, therefore, proposes a two-pronged approach. In cases in which the fundamental freedoms are restricted without affecting the fundamental rights, the traditional test of necessity, appropriateness, and proportionality of the measure should apply (para. 96). In cases in which the fundamental freedoms are restricted while at the same time also significantly affecting the fundamental rights guaranteed by the CFR, the judicial test must be that of every breach of a fundamental right (para. 97). Which is also a test of necessity, appropriateness, and proportionality but its criteria a more stringent than the test regarding the fundamental freedoms (see definition in Article 52 CFR). In light of these propositions, the AG continued in examining the new Hungarian legislation.
Commencing by analyzing the national law in light of Article 63 TFEU, the prohibition of the restriction of capital flows in the single market, the AG found that the measure in questions amounts to such a restriction of capital movements (para. 113). He, then, following his proposal, considered whether the Hungarian legislation impinges on Article 12 CFR, the freedom of association, to find that the legislation has a stigmatizing effect on NGOs in Hungary (para. 123). Further, the law foresees a dissolution of an NGO that does not comply with the law, which the AG deems as a clear interference with the freedom of association (para. 125). Proceeding in its analysis, the AG finds an interference with Articles 7 and 8 CFR, the right to private life and the right to protection of personal data. In this regard, he highlights risks of the new law, which requires a freely accessible online register of donor’s names, city, and country regardless of whether the donor is a private or legal person (paras 126-128). According to the AG, this amounts to an ideological profiling of donors, which leads to deterrence and discouragement of prospective donors. Consequently, the law impinges on the right to private life and the right to protection of personal data (para. 136).
Finally, the AG broaches on possible justifications of the new law by the Hungarian government. Therefore, and according to the new integrated review criteria, he additionally uses the higher standard of review of Article 52 CFR. In its arguments, the Hungarian government relied on the objectives to safeguard public policy and financial transparency, with the underlying objectives of combatting money laundering and terrorist financing (para. 140). While the AG acknowledges an individual discretion which MSs have in regard of protecting public policy (para. 142), he deems a general ex-ante legislation which requires all associations and foundations to publish even minor donations, regardless of what their purpose and activities are, to be going beyond what is necessary to achieve that aim (paras 144-147). In regard to the objective of financial transparency, he asserts that the law purports a general presumption of fraud on persons established in other MSs and in third states, which is incompatible with EU law (para. 151). Specifically, the online publication duty of the data of the potential donors is not in line with the objective of the legislation. It could have been better achieved by making this data available individually to anti-fraud agencies (para. 155).
In a second step, the AG assessed the proportionality of the measure in question. He finds a fourth-fold interference with the principle of proportionality (paras 158-161). First, he notes that the threshold for being an affected donor with HUF 500 000 (which is around 1.500 €) is excessively low. Second, the point that all donations from abroad are targeted, even from other EU MSs, disproportionally interferes with the interest of EU citizens in participating in the public life of that MS. Third, the obligation for NGOs to publish an online register of all its donors bears a stigmatizing effect. Fourth, the fact that non-compliance with the law can lead to winding-up of an association is an ultimate solution. Therefore, the AG deems that the Hungarian legislation unduly restricts the free movement of capital, while some provisions of the new law also amount to an unjustified interference with several fundamental rights protected in the CFR (para. 170).
Comment – A Gradual Implementation of the CFR in the Realm of the Four Freedoms
The Opinion by AG Sánchez-Bordona is a new contribution to the debate whether the CFR can be applied simultaneously in infringement proceedings regarding the freedoms of the internal market. The AG proposes a new, two-pronged, review standard. In case a national law restricts a freedom of the internal market without interfering with the CFR, the traditional test of necessity, appropriateness, and proportionality shall be applied to the law in question. In case a national law restricts a freedom of the internal market while also interfering with the fundamental rights protected by the CFR, the review criteria of Article 52 CFR shall apply additionally to the traditional test. Article 52 CFR is significantly stricter in the application of the criteria of necessity, appropriateness and proportionality than the traditional test.
In Commission v Hungary (C-235/17), the trigger for the application of the CFR was that the Hungarian government relied on EU law as justification of the measure in question. In the present case, AG Sánchez-Bordona wants to abandon this paradoxical invocation of the CFR. According to the author, he is right in doing so since the position of the Court in Commission v Hungary (C-235/17) would entail that a MS can renounce to justify its national law on EU grounds and would thus escape the scope of the Charter. As a counterfactual, if Hungary would not have justified its national law with EU objectives it would have escaped the scope of the CFR. It is doubtful if such a doctrine was the intention of the Court when it found that Hungary restricted the right to property in Commission v Hungary (C-235/17).
Potentially, the AG was also paving the way for stricter review criteria for future cases, fearing that potential further infringements of the free movements would fulfill the traditional test while escaping the scope of the CFR. As the bottom line, it can be held that the rule of law crisis in the EU gives the CJEU the possibility to clarify the fundamental rights net in the EU. As for now, it seems that the CJEU is willing to give a stronger meaning to the CFR (see here, here and here), which acts as a safety net for European citizens when the freedoms of the single market are restricted. Eventually, the application of the CFR is a means which can be systematically deployed to protect EU citizens in the rule of law crisis, as seen in the recent CJEU case-law concerning Hungary (C-235/17) and Poland (C-619/18) (discussed here and here). The judgment of the Court, in this case, will undoubtedly shed more light on if the question if the Court will guide the EU legal order on a continuous path to more fundamental rights protection.