Proceedings under Article 7 of the EU Treaties were launched against Poland in 2017 and Hungary in 2018 for alleged attempts by governments to undermine the independence of their judges.
But the current system requires unanimity from member states before sanctions, such as the elimination of voting rights in Brussels, can be imposed. Right-wing governments in Poland and Hungary have said they will protect each other from such measures.
Under the new mechanism, there would be greater accountability over EU payments by removing this veto. The European Commission will establish whether principles have been violated and then propose sanctions.
A suspension of payments from the bloc’s seven-year budget and the coronavirus recovery fund could be applied in response to “violations of the rule of law principles in a member state” or where governments “are at serious risk of affecting good management EU financial budget or the protection of the EU’s financial interests ”.
EU countries would then have one month to adopt the sanctions proposed by the committee by “qualified majority”, which means at least 15 of the 27 countries representing at least 65% of the 450 million citizens of the Union.
The target member state could trigger an “emergency break” to allow two more months of talks on a possible compromise. But once the sanctions have been agreed, they must be implemented within seven months.
“We are ending a painful phase,” said Petri Sarvamaa, the Finnish MEP who helped lead European Parliament negotiators with member states on the mechanism. “If we had left this rule too vague, toothless, then the ship would have continued to not follow the course indefinitely. This is what really happened… Just look at what has happened in the United States over the past four years… We want to avoid this situation in Europe.
Katalin Cseh, a Hungarian MEP from the liberal Momentum party, said the deal would prevent Hungarian Prime Minister Viktor Orbán and others from using the EU as a “cash machine”.
She said: “Hungary is no longer a functioning democracy. Orbán and the government will fight to the death to stop this from working. But I hope we have found something to stop this kind of violation.
The deal must now be formally approved by a qualified majority of the 27 EU member states and a majority in parliament. But MEPs and member states still disagree on the total size of the seven-year budget and the coronavirus recovery fund, in a row that threatens its timely distribution. Parliament is keen to secure additional funding beyond the € 1.8bn (£ 1.6bn) agreed by EU leaders earlier this year.
MEP Cristian Terheş, from the Romanian Christian Democratic Peasants National Party, said the rule of law mechanism was an unacceptable interference by Brussels in domestic politics.
He said: “The EU is shaking a checkbook rather than a gun at the head of democratically elected governments in Poland and Hungary to get them to make the Brussels submission.
“This is a despicable interference in the legal democratic decision-making of member states. States have constitutions and parliaments which must be respected by Brussels, rather than being put online like a misbehaved child.