Hungarian universities challenge Horizon Europe funding ban in EU court

Six Hungarian universities hit with an EU ban on accessing Horizon Europe and Erasmus+ funds could have a case, according to a leading expert on Hungarian constitutional law commenting after the universities lodged appeals to the Court of Justice of the European Union (CJEU), claiming the move is unreasonable, disproportionate and lacks solid factual basis.

 Kim Lane Scheppele, professor of Sociology and International Affairs at Princeton University told Science|Business the EU Council would win if the appeals are heard, but the case is not without substance and could hinge on wording within the conditionality mechanism.

This is designed to protect “final beneficiaries” if the EU cuts funds to a project because it suspects corruption or rule of law breaches. In that event, member state governments have to step in to pick up the bill. If, for example, a company constructing a bridge in a town had its EU funding pulled, the government would have to step in to finance the project so that the final beneficiary, the town, is not affected.

In Scheppele’s view, the universities, as newly formed private entities under the model of public trust foundations, could claim to be final beneficiaries and so should be protected from funding cuts.

In addition, the EU has not conducted any official legal investigations into the individual universities to justify blocking them from receiving EU funds.  

An internal EU Council information note seen by Science|Business outlining the universities’ cases states all six are making “identical pleas”. The pleas include an argument against the proper use of the EU’s conditionality regulation that the Council used to bring the measures against Hungary, and which allows the EU to withhold funding to member states suspected of violating rule of law principles.

The universities also claim the measure to block funds breaches a range of other laws and rights, including the presumption of innocence enshrined in the EU’s Charter of Fundamental Rights and competition rules within the Treaty on the Functioning of the European Union.

There is little other public information on the cases and hearing dates at the CJEU have yet to be set. The universities appealing are the University of Debrecen, Óbuda University, University of Veterinary Medicine Budapest, Semmelweis University, University of Miskolc, and University of Dunaújváros. None of the universities responded to requests for comment.

The cases brought are all technically separate but were filed in a coordinated fashion and on the same day. Dániel Deák, who recently resigned as professor of international taxation and EU law at Corvinus University of Budapest after turning 70, said he believes the government is the real force behind the appeals.

“It is for professional purposes, unfounded and even ridiculous,” he said. “The only function of approaching CJEU is to show the world that Hungarian universities act independently domestically and internationally.  This is a sham, and the prime minister’s political considerations drive the process.”

Rule of law breaches

The case follows on from the Commission’s move last December to cut off Horizon Europe funding to over 30 higher education and cultural institutions in Hungary, including 21 universities, due to ongoing concerns over rule of law breaches.

It affects institutions operated as public trust foundations or maintained by such foundations. Since 2021, the Hungarian government has brought many of the country’s universities under the control of these bodies, whose governing boards have extensive decision-making powers and contain members closely linked to the country’s prime minister, Viktor Orbán, and his political party Fidesz.

From the EU perspective, the justification for the funding ban is in the structure of the public trust foundations and the composition of their boards of trustees.

The European Commission stated in its 2022 Rule of Law report on Hungary that over 70% of the board members have, “links to the current government or personally to the prime minister, including current and former ministers and state secretaries, government commissioners, managers of the central bank, members of parliament, (deputy) mayors, vocal members of pro-government groups, relatives […].”

In response, seven Hungarian cabinet ministers agreed to step down from their positions on the boards, but evidently this has not been enough to convince Brussels to reverse its decision, and negotiations between the two sides go on.

Another justification for the EU’s decision is that these private foundations can receive money directed from the Hungarian state with no oversight. “The whole way these [foundations] were designed was to shield the accountability of what happens to these resources from public view,” Scheppele said.

Ultimately, Scheppele thinks the Council would win in court, but it will not necessarily be easy, since it will require proving in legal terms that the foundation structures pose a risk to EU funds.

“That's the kind of argument the Council has to make [...] that these were all public entities until recently and they were spun off in this suspicious manner and are now only nominally private but are still controlled by the governing party,” Scheppele said.

She noted that EU legal teams are loath to use such blatant allegations against member states in their arguments. “There's this kind of politeness about the way legal arguments work in the EU,” Scheppele said. “That's why it's just difficult. Not because the EU doesn’t have a leg to stand on, but because the leg it has to stand on isn't the one it wants to use.”

While the issue grinds on, the University of Debrecen is asking for the funding ban to be overturned immediately. This demand is not without possibility, Scheppele said, but what is more likely is that a practical solution to the EU’s complaints is found before the court processes get going.

From the Hungarian side, there have been promises that all will be resolved by this summer. Exactly what that means is still unclear. The EU has not stated publicly what changes it expects to be made, whether that is removing government-linked members of boards, introducing limits to how long they can serve, or reducing the decision-making powers of the boards.

“If there is really an interest in solving this issue, there needs to be a political decision and there needs to be more movement from Hungary,” said Thomas Estermann of the European University Association. “Once it goes to the courts, you’re in for a longer road.”