Contents
Judgment of the General Court (Intermediate Chamber)30 September 2026note(Implementation of the Union budget — Regulation (EU, Euratom) 2020/2092 — General regime of conditionality for the protection of the Union budget — Implementing Decision (EU) 2022/2506 — Measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary — Article 2(2) of Implementing Decision 2022/2506 — Prohibition preventing the Commission from entering into legal commitments with any public interest trust or any entity maintained by such a trust — Obligation to state reasons — Right to be heard — Intensity of judicial review — Proportionality — Error of assessment — Misuse of powers)In Case T‑138/23,Semmelweis Egyetem, established in Budapest (Hungary), represented by P. Nagy, B. Karsai and Z. Lehoczki, lawyers,supported byHungary, represented by M. Fehér, acting as Agent,vCouncil of the European Union, represented by E. Rebasti, G. Rugge and L. Vétillard, acting as Agents,supported byEuropean Commission, represented by J. Baquero Cruz and D. Drambozova, acting as Agents,THE GENERAL COURT (Intermediate Chamber),composed of S. Papasavvas, President, M.J. Costeira, L. Truchot, J. Schwarcz, M. Kancheva, U. Öberg (Rapporteur), P. Zilgalvis, E. Tichy‑Fisslberger and S. Verschuur, Judges,Registrar: S. Spyropoulos, Administrator,having regard to the written part of the procedure, in particular the order of 4 April 2024, Semmelweis Egyetem v Council (T‑138/23, not published, EU:T:2024:211),further to the hearing on 10 September 2025,having regard to the applicant’s request to reopen the oral part of the procedure, lodged at the Registry of the General Court on 26 November 2025,gives the following
Judgment
1By its action under Article 263 TFEU, the applicant, Semmelweis Egyetem, seeks, in essence, the annulment of Article 2(2) of Council Implementing Decision (EU) 2022/2506 of 15 December 2022 on measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary (OJ 2022 L 325, p. 94; ‘the contested provision’), by which the Council of the European Union prohibited the European Commission, where it implements the budget of the European Union under direct or indirect management, from entering into legal commitments with any public interest trust established on the basis of the közfeladatot ellátó közérdekű vagyonkezelő alapítványokról szóló 2021. évi IX. törvény (Law IX of 2021 on public interest trusts with a public service function (Magyar Közlöny 2021/75.); ‘Hungarian Law IX’) or with any entity maintained by such a public interest trust.
Background to the dispute
2The applicant is a medical and health sciences research university founded in 1769 and based in Budapest (Hungary). Until 2021, the applicant was owned, controlled and in part financed by the Hungarian State as a public university.
3The provisions of Hungarian Law IX removed the applicant from the pool of institutions directly managed and financed by the State, with effect from 1 August 2021. Its founding and management rights were transferred to a public interest trust. It was incorporated into the Nemzeti Egészségügyi és Orvosképzésért Alapítvány public interest trust (national foundation for healthcare and physician training).
4On 24 November 2021, the Commission sent a request for information to Hungary pursuant to Article 6(4) of Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget (OJ 2020 L 433 I, p. 1).
5On 15 December 2022, following exchanges between Hungary and the Commission, the Council adopted Implementing Decision 2022/2506 on the basis of Commission proposal COM(2022) 485 final of 18 September 2022 for a Council Implementing Decision on measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary (‘the Commission proposal’) and Communication COM(2022) 687 final from the Commission to the Council of 30 November 2022 on the remedial measures notified by Hungary under Regulation 2020/2092 for the protection of the Union budget (‘the Commission communication’).
6By Implementing Decision 2022/2506, the Council found, inter alia, that the conditions laid down in Article 4(1) of Regulation 2020/2092 were met and therefore adopted measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary. Those breaches related to public procurement, prosecutions, conflicts of interest, the fight against corruption and public interest trusts.
7The Council adopted two measures: (i) a suspension of 55% of the budgetary commitments for three cohesion policy programmes for the period between 2021 and 2027, imposed by Article 2(1) of Implementing Decision 2022/2506; and (ii) a prohibition preventing the Commission from entering into any new legal commitments with public interest trusts or with entities maintained by them in relation to EU funding implemented under direct or indirect management, imposed by the contested provision.
8Thus, Implementing Decision 2022/2506 provides, in the contested provision, that ‘where the Commission implements the Union budget in direct or indirect management pursuant to … Article 62(1) points (a) and (c), of Regulation (EU, Euratom) 2018/1046, no legal commitments shall be entered into with any public interest trust established on the basis of [Hungarian Law] IX … or any entity maintained by such a public interest trust’. Implementing Decision 2022/2506 took effect on 16 December 2022.
Forms of order sought
9The applicant claims that the Court should:– annul the contested provision in so far as it concerns the applicant;– in the alternative, annul the contested provision in its entirety;– order the Council to pay the costs.
10The Council, supported by the Commission, contends that the Court should:– dismiss the action;– order the applicant to pay the costs.
11Hungary claims that the Court should uphold the applicant’s action.
Law
The request to reopen the oral part of the procedure
12By document lodged at the Court Registry on 26 November 2025, the applicant requested that the oral part of the procedure be reopened under Article 113(2)(c) of the Rules of Procedure of the General Court. It also submitted additional offers of evidence consisting of two notifications in the context of the Erasmus+ programme, seeking to demonstrate that universities maintained by public interest trusts were excluded from that programme, as well as letters from the European Ombudsman replying to a complaint made by the applicant concerning the Commission’s failure to respond to its confirmatory application concerning a refusal to grant access to documents, documents which, according to the applicant, potentially contain information of relevance to the outcome of the present dispute.
13Under Article 113(2)(c) of the Rules of Procedure, the Court may order the reopening of the oral part of the procedure where requested by a main party who is relying on facts which are of such a nature as to be a decisive factor for the decision of the Court but which it was unable to put forward before the oral part of the procedure was closed.
14Without it being necessary for the Court to rule on the admissibility of the offers of evidence made after the hearing, the Court finds that the facts on which the applicant relies are not, in any event, such as to be a decisive factor for its decision.
15Therefore, since the condition laid down in Article 113(2)(c) of the Rules of Procedure is not satisfied in the present case, the Court refuses the applicant’s request to reopen the oral part of the procedure.
Substance
16In support of its action, the applicant raises five pleas in law, alleging, first, lack of a sufficiently solid factual basis, manifest errors of assessment and breach of the obligation to state reasons; secondly, breach of the right to be heard; thirdly, lack of a legal basis and misuse of powers; fourthly, breach of the principle of proportionality; and, fifthly, infringement of Article 107 TFEU.
17For the purposes of its examination of the present action, the Court will consider, in turn, the first part of the third plea, alleging that there is no legal basis for the adoption of the contested provision; the second plea, alleging breach of the right to be heard; the third part of the first plea, alleging breach of the obligation to state reasons; the first and second parts of the first plea, alleging, in essence, infringement of Regulation 2020/2092; the fourth plea, alleging breach of the principle of proportionality; the second part of the third plea, alleging misuse of powers; and the fifth plea, alleging infringement of Article 107 TFEU.
The first part of the third plea in law, alleging that there is no legal basis for the adoption of the contested provision
18By the first part of the third plea, the applicant claims that Regulation 2020/2092 does not confer appropriate powers for the adoption of the contested provision.
19In that regard, first, the applicant submits that, at the beginning of the procedure, the alleged breaches of the principles of the rule of law as regards public interest trusts related solely to public procurement and that that issue was resolved before the adoption of Implementing Decision 2022/2506. Thus, the concerns relating to conflicts of interest were raised at a later time and did not concern the applicant, since none of its board members was a member of Parliament or of the Government. Therefore, Regulation 2020/2092 is not intended to apply to the applicant and the contested provision went beyond the power conferred by that regulation. Secondly, the applicant submits that the fact that the measures adopted are not appropriate and proportionate, within the meaning of Regulation 2020/2092, demonstrates that, by definition, they exceed the limits of the Council’s power under that regulation.
20The Council contends that this part of the plea must be rejected either as inadmissible, in so far as it was not put forward in a sufficiently clear and coherent manner in the application, or, in the alternative, as unfounded.
21As regards the plea of inadmissibility raised by the Council, it should be borne in mind that, under the first paragraph of Article 21 of the Statute of the Court of Justice of the European Union, which is applicable to the procedure before the General Court pursuant to the first paragraph of Article 53 thereof, and Article 76(d) of the Rules of Procedure, applications must state the subject matter of the dispute, the pleas in law and arguments relied on and a summary of those pleas in law.
22It is settled case-law that the Statute of the Court of Justice of the European Union and the Rules of Procedure do not require the applicant to cite in the application the articles on which it relies. It is sufficient for the facts, pleas in law and forms of order sought by the applicant to appear therein. Conversely, it is not sufficient to cite a provision of the FEU Treaty or of EU law in order for a plea to be admissible. Under Article 76(d) of the Rules of Procedure, the application must contain, inter alia, a summary of the pleas in law relied on. Furthermore, that summary must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the action, if necessary without any other supporting information. In order to ensure legal certainty and the sound administration of justice, if a plea is to be admissible, the essential points of fact and of law on which it is based must be indicated, at least in summary form, coherently and intelligibly in the application itself, so that the Court does not fail to rule on a complaint relevant to the outcome of the dispute. Any plea which is not adequately articulated in the application initiating the proceedings must be held to be inadmissible (see, to that effect and by analogy, judgment of 19 November 2024, Commission v Poland (Ability to stand for election and membership of a political party), C‑814/21, EU:C:2024:963, paragraph 60 and the case-law cited).
23Although the arguments put forward by the applicant in support of this part of the plea are not particularly specific, it is apparent from its written pleadings that it clearly maintains that Regulation 2020/2092 does not confer appropriate powers for the adoption of the contested provision.
24Accordingly, the plea of inadmissibility raised by the Council must be rejected.
25As regards the merits of the applicant’s arguments, it follows from the citations in Implementing Decision 2022/2506 that that instrument was adopted by the Council on the basis of Regulation 2020/2092, in particular Article 6(10) thereof, following the Commission proposal laying down the appropriate measures to be adopted, in accordance with Article 6(9) of that regulation.
26More specifically, the contested provision results from the fact that the Commission took the view that the conditions laid down in Article 4 of Regulation 2020/2092 were met and that the remedial measures proposed by Hungary were not adequate to address the findings set out in the Commission notification, provided for in Article 6(1) of that regulation. In such a situation, Article 5(1)(a)(ii) of Regulation 2020/2092 provides that, where the Commission implements the Union budget under direct or indirect management, pursuant to Article 62(1)(a) and (c) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ 2018 L 193, p. 1), and where a government entity is the recipient of the funds from that budget, the Council may prohibit the Commission from entering into new legal commitments with that entity.
27It follows from the applicant’s written pleadings that it does not deny, as such, that Implementing Decision 2022/2506 could be adopted on the basis of Article 6(10) of Regulation 2020/2092.
28In the present case, the applicant submits that the power conferred by Article 6(10) of Regulation 2020/2092 did not extend to the adoption of the contested provision. However, none of the arguments put forward by the applicant is capable of substantiating that assertion.
29First, the applicant’s argument that the Commission’s conflict of interest concerns were not expressed at the beginning of the procedure and were thus raised belatedly does not relate to the lack of a legal basis for the contested provision. The same is true of the fact that there were no such concerns vis-à-vis the applicant. It follows that those arguments are not relevant for the purpose of demonstrating that there was no legal basis for the adoption of the contested provision.
30In any event, the argument that the conflict of interest concerns were raised belatedly is contradicted by Implementing Decision 2022/2506. It is apparent from recital 2 thereof that, in its notification, the Commission expressed its concerns and presented its findings regarding a number of issues relating to the public procurement system in Hungary, including ‘the detection, prevention and correction of conflicts of interest’ and ‘issues related to public interest trusts’.
31Thus, contrary to the applicant’s assertions, the risk of conflicts of interest in public interest trusts was flagged up by the Commission at the beginning of the procedure conducted under Regulation 2020/2092 and was not, in any event, the only issue relating to public interest trusts and the entities maintained by them, as is apparent, in particular, from paragraph 33 of the Commission proposal.
32Secondly, as regards the applicant’s argument linking the power to adopt the contested provision to the proportionality of the measure, it must be stated that that argument is also irrelevant, since the applicant conflates the existence of the legal basis for adopting the contested provision with the proportionality of the measure adopted. However, the fact that a measure is not proportionate does not mean that it was not adopted on an appropriate legal basis.
33It follows from the foregoing that the first part of the third plea must be rejected as unfounded.
The second plea in law, alleging breach of the right to be heard
34By its second plea, the applicant submits that, owing to the lack of consultation as regards Implementing Decision 2022/2506, the Council breached the applicant’s right to be heard.
35In that regard, the applicant claims that although the objective of the contested provision is not to penalise Hungary or the applicant itself but to protect the Union budget, one of its indirect consequences is nevertheless to penalise the applicant, with the result that it had the right to be heard. According to the applicant, if it had been able to exercise its right to be heard at the relevant time, limitations could have been envisaged that were more appropriate, more proportionate and better targeted.
36The Council, supported by the Commission, disputes the applicant’s arguments.
37The right to be heard is enshrined in Article 41(2)(a) of the Charter of Fundamental Rights of the European Union and includes, inter alia, the right of every person to be heard before any individual measure which would affect him, her or it adversely is taken.
38The right to be heard is one of the rights of the defence and is a general principle of EU law which is applicable even in the absence of any specific rules in that regard. That principle requires that the addressees of decisions which significantly affect their interests should be placed in a position in which they may effectively make known their views with regard to the evidence on which those decisions are based (see judgment of 28 October 2021, Vialto Consulting v Commission, C‑650/19 P, EU:C:2021:879, paragraph 122 and the case-law cited).
39However, the right to be heard in an administrative procedure taken against a specific person, which must be observed even in the absence of any rules governing the procedure, cannot be transposed to a procedure leading to the adoption of a measure of general application (see, to that effect, judgments of 22 June 2023, Arysta LifeScience Great Britain v Commission, C‑259/22 P, not published, EU:C:2023:513, paragraph 50, and of 11 September 2002, Alpharma v Council, T‑70/99, EU:T:2002:210, paragraph 388 and the case-law cited), such as Implementing Decision 2022/2506 (see, to that effect, order of 4 April 2024, Semmelweis Egyetem v Council, T‑138/23, not published, EU:T:2024:211, paragraph 36).
40In particular, in the case of acts of general application, neither the process of drafting them nor those acts themselves require, in accordance with the general principles of EU law, such as the right to be heard, consulted or informed, the participation of the persons affected. The position is different if an express provision of the legal framework governing the adoption of that act confers such a procedural right on an affected person (judgment of 22 June 2023, Arysta LifeScience Great Britain v Commission, C‑259/22 P, not published, EU:C:2023:513, paragraph 51; see also judgment of 19 December 2019, Probelte v Commission, T‑67/18, EU:T:2019:873, paragraph 87 and the case-law cited).
41The procedure provided for in Article 6(1) to (9) of Regulation 2020/2092 for the adoption of appropriate measures to protect the Union budget merely lays down the obligation to consult the Member State concerned and provides for the various exchanges that are to take place between the Commission and that Member State. The applicant does not, moreover, dispute that that procedure was properly conducted. In addition, in the present case, it follows from recitals 1, 2, 6 and 8 to 10 of Implementing Decision 2022/2506 that the Commission engaged in discussions with the Hungarian authorities before sending its proposal to the Council.
42It should be added that the Commission and the Council did not make allegations of individual breaches of the principles of the rule of law, of systemic fraud or of particular conflicts of interest involving the applicant, justifying the adoption of specific measures under Regulation 2020/2092, which would have required its right to be heard to be observed. The fact that the contested provision affects the applicant in the same way as other beneficiaries due to serious systemic breaches of the principles of the rule of law, as alleged by the Commission and the Council, does not, on its own, confer a special procedural right on the applicant.
43In those circumstances, it must be held that the applicant cannot validly claim breach of its right to be heard.
44Therefore, the second plea must be rejected as ineffective.
The third part of the first plea in law, alleging breach of the obligation to state reasons
45In the third part of the first plea, the applicant submits that Implementing Decision 2022/2506 is not sufficiently reasoned.
46The applicant claims, inter alia, that even if Implementing Decision 2022/2506 contained facts or references on the basis of which breaches of the principles of the rule of law committed by it could be established, those facts and references are not clear from the statement of reasons for that decision. In addition, the applicant complains that the Council did not give adequate reasons explaining why the contested provision was appropriate in the light of that provision’s serious consequences not only for the applicant, but also for its students, teachers and researchers. Thus, the applicant criticises the Council for failing to set out clearly the reasons for its inclusion on the list of entities covered by the contested provision.
47The Council, supported by the Commission, disputes the applicant’s arguments.
48The second paragraph of Article 296 TFEU provides that legal acts are to state the reasons on which they are based and are to refer to any proposals, initiatives, recommendations, requests or opinions required by the Treaties.
49According to settled case-law, the obligation to state reasons laid down in Article 296 TFEU is an essential procedural requirement that must be distinguished from the question whether the reasoning is well founded, which goes to the substantive legality of the measure at issue (see judgment of 10 September 2024, Commission v Ireland and Others, C‑465/20 P, EU:C:2024:724, paragraph 389 and the case-law cited).
50A measure which lacks an adequate statement of reasons, for the purpose of the formal obligation to state reasons, is one which does not make it possible to understand why, on what basis or for what reason it was adopted, whereas the reasons for a measure and its justifications may be sufficiently known and comprehensible, but inadequate to justify it in law, in that they are not substantiated, clear or compliant with the relevant provisions (judgment of 24 January 2024, Veritas v Commission, T‑602/22, EU:T:2024:26, paragraph 18).
51As a preliminary point, the Court finds that, contrary to what the Council claims, an implementing act does not satisfy the obligation to state reasons imposed by the second paragraph of Article 296 TFEU where it merely contains an express or implied reference to provisions of the regulation on which it is based, so that the EU Courts can ‘understand’ the criteria leading to its adoption.
52The statement of reasons required by Article 296 TFEU must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that act in such a way as to enable the persons concerned to ascertain the reasons for it and to enable the competent court to carry out its review. In that regard, it is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of that article must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see judgment of 10 September 2024, Commission v Ireland and Others, C‑465/20 P, EU:C:2024:724, paragraphs 391 and 392 and the case-law cited).
53Thus, the statement of reasons required by the second paragraph of Article 296 TFEU must disclose in a clear and unequivocal fashion the specific grounds and evidence on which the Council relied in order to adopt the contested provision, in particular as regards the breaches of the principles of the rule of law alleged by that institution and the reasons why it considers that those breaches affect or pose a risk to the sound financial management of the Union budget or the protection of the financial interests of the Union, but also as regards the appropriateness of the contested provision.
54In that connection, first of all, it should be noted that recital 11 of Implementing Decision 2022/2506 states:‘… there are concerns regarding the non-application of public procurement and conflict of interest rules to “public interest trusts” and the entities managed by them, and the lack of transparency with regard to the management of funds by those trusts. Those issues and their recurrence over time demonstrate a systemic inability, failure or unwillingness, on the part of the Hungarian authorities, to prevent decisions that are in breach of the applicable law, as regards … conflicts of interest, and thus to adequately tackle risks of corruption. They constitute breaches of the principles of the rule of law, in particular the principles of legal certainty and prohibition of arbitrariness of the executive powers and raise concerns as regards the separation of powers.’
55In addition, recital 43 of Implementing Decision 2022/2506 states:‘[Despite some legislative amendments,] the regulatory framework [in Hungary] still does not prevent top-level officials, including senior political executives from the National Assembly and Hungary’s autonomous bodies, from sitting on boards of public interest asset management foundations …. Moreover, Hungary has reintroduced as of 1 November 2022 the possibility (by means of an exception from the general prohibition) for senior political executives to have other remunerated employment, including on boards of public interest asset management foundations. The Council considers that for these reasons as further set out in the Commission’s communication, the weaknesses of the regulatory framework combined with the new legislative developments aggravate the possible conflict of interest that the remedial measure was meant to address and therefore renders it inadequate to address the concerns originally raised by the Commission.’
56Lastly, recital 62 of Implementing Decision 2022/2506 states:‘Concerning the identified breaches in relation to public interest trusts, the regulatory framework in Hungary has weaknesses, as set out above, which have not remedied the risk of conflict of interest that the remedial measure was meant to address. In light of the inadequacy of the remedial measure, a serious risk for the Union budget remains and can best be addressed by a prohibition on entering into new legal commitments with any public interest trust and any entity maintained by them under any programme under direct or indirect management. …’
57It thus follows from recitals 11, 43 and 62 of Implementing Decision 2022/2506 that the alleged breach of the principles of the rule of law which affects or seriously risks affecting the sound financial management of the Union budget or the financial interests of the Union is assessed from the perspective of the principle of legal certainty, the prohibition of arbitrariness of the executive and the principle of the separation of powers and is manifested, in the present case, by the existence of possible conflicts of interest.
58The alleged breach of the principles of the rule of law stems from a factual situation and from the regulatory framework in Hungary, which does not prevent top-level officials, including senior political executives, from sitting on boards of public interest asset management foundations established by Hungarian Law IX. That breach of the principles of the rule of law is exacerbated by the fact that, with effect from 1 November 2022, Hungary reintroduced the possibility for senior political executives to hold other remunerated positions, including on boards of public interest asset management foundations established by that law.
59It follows that the Council set out, in a sufficiently detailed and comprehensive manner, the reasons why the contested provision was adopted.
60As regards the statement of reasons concerning the appropriateness of the contested provision, it should be observed that recitals 43 and 62 of Implementing Decision 2022/2506 clearly explain why the contested provision is appropriate in order to meet the objective of protecting the Union budget, referred to in Article 1 of Regulation 2020/2092, since they make clear that breaches of the principles of the rule of law, stemming from weaknesses in the Hungarian regulatory framework relating to public interest trusts, pose a serious risk of conflicts of interest in the management of EU funds.
61Accordingly, the third part of the first plea must be rejected.
The first and second parts of the first plea in law, alleging infringement of Regulation 2020/2092
62In the first part of the first plea, the applicant submits that the Council did not ensure that its inclusion in the group of entities subject to the measure provided for in the contested provision rests on a sufficiently solid factual basis. In addition, the applicant claims that the Council infringed the conditions laid down in Article 4(1) of Regulation 2020/2092, in particular those concerning the existence of breaches of the principles of the rule of law and the determination of the ‘direct link’ between those breaches and the effect or risk of an effect on the sound financial management of the Union budget or the protection of the financial interests of the Union.
63In that regard, first, the applicant, supported by Hungary, claims that the Commission’s fact finding did not extend to the composition, decision making, finances and operation of public interest trusts and that the Commission failed to take account of the fact that those trusts are not involved in the management of universities. Secondly, the applicant argues that there is no evidence demonstrating that it or the public interest trust that holds its founding rights has, by act or omission, done anything that could be classified as a breach of the principles of the rule of law which affects or poses a risk to the sound financial management of the Union budget or the protection of the financial interests of the Union. In essence, the applicant thus criticises the Commission and the Council for failing to establish individual breaches of the principles of the rule of law.
64Moreover, the applicant maintains, in its reply, that in the absence of any demonstration by the Council that individual breaches were committed, there can be no systemic breach of the principles of the rule of law.
65The applicant also submits that, although the Commission is not required to assess its individual situation, the same is not true of the Council. Hungary adds that, even though there may be situations in which the Council cannot be expected to carry out an individual assessment of the situation of the persons concerned because of their particularly high number, that does not apply in the present case, where the relatively small number of persons affected by the contested provision could be identified precisely.
66Furthermore, the applicant, supported by Hungary, states that Implementing Decision 2022/2506 did not establish a ‘factual link’ between the breach of the principles of the rule of law and its impact on the Union budget.
67In the second part of the first plea, the applicant submits that the Council made manifest errors of assessment, in so far as Implementing Decision 2022/2506 is not based on relevant facts. In essence, the applicant complains that the Council adopted that decision even though the necessary prerequisites enabling such a measure to be taken were not met.
68The Council, supported by the Commission, disputes the applicant’s arguments.
69As a preliminary point, it should be recalled that Article 4 of Regulation 2020/2092 lays down the conditions for the adoption of appropriate measures under that regulation.
70Article 4(1) of Regulation 2020/2092 states that such measures are to be taken where it is established, in accordance with Article 6 thereof, that breaches of the principles of the rule of law in a Member State affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way.
71Under Article 6 of Regulation 2020/2092, it is for the Commission to set out, in a written notification to the Member State concerned, the factual elements and specific grounds on which it based its findings that there are reasonable grounds for considering that the conditions set out in Article 4(1) of that regulation are fulfilled (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 338) and, in particular, that the breaches affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way, that latter condition requiring a genuine link between those breaches and that effect or serious risk of an effect (see, to that effect, judgment of 16 February 2022, Hungary v Parliament and Council, C‑156/21, EU:C:2022:97, paragraphs 111 and 147).
72In addition, the Court has held that the prevention of effects such as those referred to in Article 4(1) of Regulation 2020/2092 requires that the breaches of the principles of the rule of law which have been established must ‘seriously’ risk affecting the sound financial management of the Union budget or the financial interests of the Union and requires, therefore, the Commission and the Council to demonstrate that that risk has a high probability of occurring, in relation to the situations or to the conduct of authorities referred to in Article 4(2) of Regulation 2020/2092 (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 299).
73Moreover, the assessments of the Commission and the Council are subject to the procedural requirements specified in Article 6(1) to (9) of Regulation 2020/2092. Those requirements imply in particular, as stated in recital 26 of that regulation, the obligation for the Commission to follow an evidence-based approach and to respect the principles of objectivity, non-discrimination and equal treatment of Member States before the Treaties when it conducts proceedings under that provision. As regards the identification and assessment of breaches of the principles of the rule of law, those requirements must be understood in the light of recital 16 of that regulation, according to which that assessment must be objective, impartial and fair, compliance with all of those obligations being subject to full judicial review by the EU Courts (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 286).
74Lastly, the choice and scope of the measures which may be adopted pursuant to Regulation 2020/2092 are limited, in so far as Article 5(1) of that regulation exhaustively enumerates the various protection measures that may be adopted (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 301).
75In accordance with Article 5(3) of Regulation 2020/2092, such measures must be proportionate and determined in the light of the actual or potential impact of the breaches of the principles of the rule of law on the sound financial management of the Union budget or the financial interests of the Union. The nature, duration, gravity and scope of the breaches of the principles of the rule of law must be duly taken into account and must, in so far as possible, target the Union actions affected by those breaches. It follows that the measures taken must be strictly proportionate to the impact of the breaches of the principles of the rule of law found on the Union budget or on the protection of the financial interests of the Union (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 302).
76Therefore, it follows from a combined reading of Article 4 and Article 6(1) of Regulation 2020/2092 that, in order to justify the adoption of appropriate measures under that regulation, the Council and the Commission must establish in a specific manner, first, that there are reasonable grounds for considering that at least one of the principles of the rule of law referred to in Article 2(a) of that regulation has been breached in a Member State; secondly, that that breach concerns at least one of the situations attributable to an authority of a Member State or at least one instance of conduct of such an authority referred to in Article 4(2) of that regulation, in so far as those situations or that conduct is relevant to the sound financial management of the Union budget or to the protection of the financial interests of the Union; and, thirdly, that that breach affects or seriously risks affecting that sound management or the protection of those financial interests, in a sufficiently direct way, by a genuine link between those breaches and that effect or serious risk of effect (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 288).
77It is in the light of those considerations that the Court must examine the parties’ arguments.
–The intensity of judicial review
78The Council, supported by the Commission, submits that the institutions have a broad discretion in deciding on the measures they consider appropriate in order to remedy breaches of the principles of the rule of law in a Member State.
79At the hearing, the Commission stated that, given the complexity of the matters and budgetary measures subject to judicial review in the present case, both the Commission and the Council should be allowed a broad discretion as regards their assessments in that context, with judicial review being confined to manifest errors of assessment.
80However, the Council and the Commission conceded at the hearing that the condition of the existence of a breach of the principles of the rule of law, laid down in Article 4 of Regulation 2020/2092, was a question of law in respect of which judicial review by the EU Courts had to be strict.
81The applicant, supported by Hungary, submits that the Court must carry out a full and complete judicial review in the present case.
82As a preliminary point, the Court recalls that the principles of the rule of law, on which the European Union is founded, mean that neither the Member States nor the EU institutions can avoid review of the question whether the measures adopted by them are in conformity with the FEU Treaty, which has established a complete system of legal remedies and procedures designed to permit the Court of Justice of the European Union to review the legality of measures adopted by the institutions (see, to that effect, judgment of 23 April 1986, Les Verts v Parliament, 294/83, EU:C:1986:166, paragraphs 23 and 24).
83In the context of that judicial review, the EU Courts carry out a full review of questions of law, which includes the interpretation to be given to legal provisions on the basis of objective factors as well as the verification of whether or not the conditions for the application of such provisions are satisfied (see, to that effect, judgment of 9 November 2022, Cambodia and CRF v Commission, T‑246/19, EU:T:2022:694, paragraph 45).
84Moreover, where the EU institutions enjoy a broad discretion, in particular as regards the assessment of highly complex economic, technical or scientific facts in order to decide on the nature and scope of the measures which they adopt, the exercise of that discretion is not excluded from judicial review. In that review, the EU Courts must verify whether the exercise of such discretion is vitiated by a manifest error of assessment or a misuse of powers, or whether those authorities have manifestly exceeded the limits of their discretion. In such a context, the EU Courts cannot substitute their assessment of economic, scientific or technical facts for that of the institutions upon which, alone, the Treaties have conferred that task (see, to that effect, judgments of 18 July 2007, Industrias Químicas del Vallés v Commission, C‑326/05 P, EU:C:2007:443, paragraphs 75 and 76; of 4 May 2023, ECB v Crédit lyonnais, C‑389/21 P, EU:C:2023:368, paragraph 55; and of 1 August 2025, France and Commission v CWS Powder Coatings and Others, C‑71/23 P and C‑82/23 P, EU:C:2025:601, paragraph 106 and the case-law cited).
85In that regard, it is settled case-law that the EU Courts must, inter alia, establish not only whether the evidence relied on is factually accurate, reliable and consistent, but also whether that evidence contains all the relevant information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (see judgment of 4 May 2023, ECB v Crédit lyonnais, C‑389/21 P, EU:C:2023:368, paragraph 56 and the case-law cited).
86By contrast, as regards the establishment of facts devoid of economic, technical or scientific complexity, the judicial review carried out by the EU Courts continues to be a full review (see, to that effect, judgment of 23 September 2020, Medac Gesellschaft für klinische Spezialpräparate v Commission, T‑549/19, EU:T:2020:444, paragraph 47 (not published)).
87As the Court has observed in its case-law, the EU legislature has in no way conferred on the Council and the Commission an unlimited right to assess, in the light of political considerations, observance of the principles of the rule of law or to link any identified breach of those principles, in a general manner, to the principle of sound financial management of EU funds. It made the initiation of the procedure subject to criteria, referred to in paragraphs 69 to 76 above, which ensure that the assessments of those institutions fall within the scope of EU law and are of a legal rather than political nature (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 358).
88It follows from that case-law that the obligation for the Commission and the Council, when examining whether the adoption of appropriate measures is justified, to follow an evidence-based approach and to respect the principles of objectivity, non-discrimination and equal treatment of Member States before the Treaties is subject to full judicial review by the EU Courts (see, to that effect, judgments of 16 February 2022, Hungary v Parliament and Council, C‑156/21, EU:C:2022:97, paragraph 149, and of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraphs 167, 202 and 286).
89It cannot therefore be argued that the judicial review to be carried out in the present case is a limited review.
–The first part, alleging infringement of Article 4(1) of Regulation 2020/2092, as regards the existence of breaches of the principles of the rule of law
90The applicant takes issue with the Commission and the Council for failing to establish that it or the trust maintaining it committed individual breaches of the principles of the rule of law. Therefore, the contested provision lacks a sufficiently solid factual basis. The applicant also submits that, in the absence of any demonstration by the Council that individual breaches were committed, there can be no systemic breach of the rule of law.
91The Council, supported by the Commission, disputes the applicant’s arguments.
92As is apparent from the case-law cited in paragraph 76 above, the first condition for adopting budget protection measures under Regulation 2020/2092 is to establish a breach of the principles of the rule of law, as defined in Article 2(a) of that regulation.
93As regards the nature of the breaches at issue in the present case, it should be observed that Regulation 2020/2092 covers both individual breaches of the principles of the rule of law and systemic breaches.
94The situations or conduct of the authorities listed in Article 4(2)(a) to (h) of Regulation 2020/2092, as breaches of the principles of the rule of law within the meaning of that regulation, include situations or conduct of both an individual and a systemic nature. Moreover, recital 15 of Regulation 2020/2092 states that not only individual breaches of the principles of the rule of law, but also breaches that are widespread or due to recurrent practices or omissions by public authorities, or due to general measures adopted by such authorities, may seriously harm the financial interests of the Union.
95In that regard, the Court has held that, where breaches of the principles of the rule of law liable to be systematic in nature are also liable to affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union, the European Union cannot be criticised for implementing the means necessary to protect that sound management and those financial interests (see, to that effect, judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 362).
96In the present case, it should be recalled that it follows from recitals 11, 43 and 62 of Implementing Decision 2022/2506 that the breach of the principles of the rule of law stems from a factual situation and from the regulatory framework in Hungary, which does not prevent top-level officials, including senior political executives, from sitting on boards of public interest asset management foundations, thus exacerbating the potential risk of conflicts of interest.
97Moreover, recital 58 of Implementing Decision 2022/2506 expressly states that ‘the identified cases of non-compliance refer to breaches of a systemic character’.
98In that connection, paragraph 128 of the Commission proposal states that, ‘as regards the nature of the breaches, the Commission considers that the assessment of the breaches … relevant to conflicts of interest for public interest trusts has led to the conclusion that these issues are indicative of breaches of the rule of law, in particular of those of Article 3(b) of Regulation … 2020/2092, as they fail to prevent, correct or sanction arbitrary or unlawful decisions by public authorities and fail to ensure the absence of conflicts of interest’.
99In paragraph 57 of its proposal, the Commission also took the view that the breaches of the principles of the rule of law concerned, inter alia, the situation referred to in Article 4(2)(h) of Regulation 2020/2092, that is to say, ‘other situations … that are relevant to the sound financial management of the Union budget or the protection of the financial interests of the Union’, manifested in this case by the increased risk of conflicts of interest due to the fact that senior political executives sat on the boards of public interest trusts.
100In addition, paragraph 130 of the Commission proposal states:‘… the identified breaches of the principles of the rule of law concern important parts of the public sector in Hungary, i.e. all public entities implementing Union funds that may be or become contracting authorities, as well as all public interest trusts, which despite being private entities, have a public interest objective, such as education, research, environment and climate protection and heritage protection. Thus, the identified breaches of the principles of the rule of law are systemic and widespread, and thus serious.’
101Lastly, in paragraph 142 of its proposal, the Commission observed that it was practically impossible to consider that the prohibition on entering into new legal commitments, in connection with programmes under direct and indirect management, with public interest trusts and entities maintained by them should apply only to certain public interest trusts and certain entities maintained by them, or that partial legal commitments could be entered into with such entities.
102As is apparent from paragraph 70 of the Commission communication, the fact that top-level officials and senior political executives are able to sit on the boards of public interest trusts ‘creates a situation in which [those] senior political executives may participate in decision-making relating to the disbursement of public funds to entities, in which they themselves are employed and have key decision-making powers’. As the Council has stated, public interest trusts exercise, by legislative design, decisive influence and control over the entities maintained by them, such that, in practice, the two are inextricably linked as a unit. As a result, any decision regarding the use of EU funds by an entity managed by a public interest trust is affected by the risk of conflicts of interests relating to public interest trusts.
103Therefore, it follows from Implementing Decision 2022/2506, read in the light of the Commission proposal and the Commission communication, that the concerns regarding breaches of the principles of the rule of law related to the legal framework applicable to public interest trusts, in particular the organisation, functioning and systemic lack of transparency in connection with the management of funds by those trusts and the entities maintained by them, and not breaches committed on an individual basis by them or by the entities maintained by them, such as the applicant.
104In such circumstances, it would run counter to the effectiveness of Regulation 2020/2092 to require the Commission and the Council also to establish, of necessity, in the context of an alleged systemic breach of the principles of the rule of law, individual breaches of those principles by each entity concerned, as the applicant claims. Moreover, such an interpretation would make it impossible to adopt measures aimed at remedying systemic breaches of the principles of the rule of law.
105Consequently, contrary to what the applicant claims, a systemic breach of the rule of law may be alleged by the Council and may lead to the adoption of a measure to protect the Union budget under Regulation 2020/2092, even in the absence of individual breaches of the rule of law by the entities concerned.
106On the matter of establishing the breaches of the principles of the rule of law in question, it should be pointed out, as is apparent from paragraphs 96 to 102 above, that the contested provision has a sufficiently solid factual basis, in that it was established, to the requisite legal standard, in accordance with Article 4(1) of Regulation 2020/2092, taken together, inter alia, with Article 3(b) thereof, that breaches of the principles of the rule of law, within the meaning of Article 2(a) of that regulation, had been committed. Those breaches consist of a serious risk of potential conflicts of interest due to the Hungarian regulatory framework and are of a systemic nature owing to Hungary’s systemic inability, failure or unwillingness to prevent decisions taken in breach of the applicable law on conflicts of interest.
107In those circumstances, the finding of a breach of the principles of the rule of law did not, for the purpose of adopting the contested provision, require individual breaches committed by entities, such as the applicant, or by the trusts which maintained them, to be established.
108Accordingly, the applicant’s argument that the Council failed to establish individual breaches of the principles of the rule of law must be rejected as ineffective. In so far as establishing the breaches of the principles of the rule of law is concerned, the applicant’s argument must be rejected as unfounded, inasmuch as it submits that Implementing Decision 2022/2506 lacked a sufficiently solid or substantiated factual basis.
–The second part, alleging infringement of Article 4(1) of Regulation 2020/2092, as regards the existence of a genuine and sufficiently direct link between the breach of the principles of the rule of law and its impact on the Union budget
109The applicant, supported by Hungary, submits that Implementing Decision 2022/2506 did not establish a ‘direct link’ between the breach of the principles of the rule of law and its impact on the Union budget.
110The Council, supported by the Commission, disputes the applicant’s arguments.
111In that regard, the Court recalls that, under Article 4(1) of Regulation 2020/2092, in order for appropriate measures to be adopted, it must be established that breaches of the principles of the rule of law in a Member State affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way. That condition thus requires that a ‘genuine link’ be established between those breaches and that effect or serious risk of an effect (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 165).
112In the first place, it is necessary to examine the applicant’s argument that the Commission failed to take account of the fact that public interest trusts were not involved in the management of universities.
113Under Paragraph 22(4) of Hungarian Law IX, the deed of foundation of a higher education institution maintained by a trust may stipulate that that trust is to be responsible for approving the budget of the higher education institution, its annual accounts drawn up in accordance with the relevant accounting provisions, its organisational and operational rules, its asset management plan and the creation and acquisition of shares in an economic entity, and that it is to be responsible for launching the call for applications for the position of rector.
114The powers of public interest trusts which maintain higher education institutions in Hungary are also set out in the nemzeti felsőoktatásról szóló 2011. évi CCIV. törvény (Law CCIV of 2011 on national higher education (Magyar Közlöny 2011/165.); ‘Hungarian Law CCIV’), which applies to all higher education institutions in Hungary. Paragraphs 12 and 73 of that law govern the division of powers between the boards of higher education institutions and the entities which maintain them, namely public interest trusts, as the case may be.
115In that regard, Paragraph 12(3) of Hungarian Law CCIV provides, as a general rule, that it is for the board, inter alia, to adopt the budget, the annual accounts and the organisational and operational rules of the higher education institution.
116Paragraph 73(1) of Hungarian Law CCIV states that, unless otherwise provided, the rights and obligations relating to control by the maintaining entities are to be the same, irrespective of which entity exercises those rights and fulfils those obligations. Thus, it follows from Paragraph 73(3) of that law that the maintaining entities have, inter alia, the power to adopt and amend the deed of foundation of the higher education institution and the power to review its organisational and operational rules.
117Lastly, Paragraph 94(6) of Hungarian Law CCIV states that, by way of derogation from Paragraph 12(3) and Paragraph 73(3) of that law, the deed of foundation of a private higher education institution may stipulate, inter alia, that the maintaining entity is to approve the budget of the higher education institution, its annual accounts and its organisational and operational rules.
118It follows from the foregoing that, depending on the deed of foundation of a given higher education institution, the public interest trust may have significant powers over the institution’s budgetary, operational and organisational affairs.
119In the second place, it is necessary to ascertain whether there is a ‘genuine link’ between the breaches at issue and the effect or the serious risk of an effect on the sound financial management of the Union budget or the protection of the financial interests of the Union.
120It is apparent from recitals 58 and 62 of Implementing Decision 2022/2506 that, due to the inadequacy of the remedial measures notified by Hungary to address the systemic breaches of the rule of law, a serious risk for the Union budget remained, given that those breaches threatened the sound financial management of the Union budget and the protection of the financial interests of the Union in a sufficiently direct way.
121Paragraph 33 of the Commission proposal states, in that regard, that the establishment of private law entities to which the State has donated significant public assets may imply a lack of public control over the functioning and governance of those entities.
122In addition, in paragraph 142 of that proposal, the Commission observes that the exception exempting board members of public interest trusts from compliance with conflict of interest requirements may affect the budgets which those entities may implement or manage.
123In the same vein, according to paragraph 70 of the Commission communication, the exception which Hungary reintroduced, with effect from 1 November 2022, allowing senior political executives to sit on the boards of public interest trusts creates a situation whereby those senior political executives are able to participate in decision making relating to the disbursement of public funds to entities on which they sit and in which they have key decision-making powers.
124Lastly, paragraph 154(vi) of the Commission communication states that ‘… important risks remain as regards a number of other issues, namely: … the further facilitation, after the Commission’s September assessment of the proposed remedial measure, of the presence of top-level officials on boards of public interest management foundations whose purpose it is to disburse large amounts of public funds’.
125In the present case, in the light of the considerations set out in paragraphs 120 to 124 above, the Court finds that the applicant is maintained by a public interest trust and is under the control of the board of that trust, the members of which are appointed for an indefinite term by the executive. There is therefore a genuine and serious risk, from a systemic perspective, that decisions on the development of university programmes and training courses as well as EU-funded research and development projects could be directly influenced politically or would simply no longer be supported for such reasons.
126Thus, it must be held that, in the absence of the contested provision, trusts on which top-level officials, including senior political executives, may sit and entities maintained by such trusts could receive resources from the Union budget. As is apparent from paragraph 118 above, public interest trusts may wield considerable powers over the budgetary, operational and organisational affairs of the entities maintained by them, such as the applicant in the present case.
127In addition, there is a genuine risk that staff involved in the implementation of research and development projects or higher education projects, financed from the Union budget, could be hired by the board of a public interest trust or by university management on the basis of their political alignment.
128Therefore, in the context of the Erasmus+ and Horizon Europe programmes, public interest trusts are able to play a role in the disbursement of EU funds to final beneficiaries. There is thus a genuine risk that political, economic or personal conflicts of interest could interfere with the choice of those beneficiaries.
129Moreover, the Council was right to state that there was a genuine and systemic risk, in the case of the Erasmus+ programme, that conflicts of interest could interfere with the selection of beneficiary students, in particular with the choice and mutual recognition of eligible courses taken in other Member States, thereby introducing into that selection process considerations going beyond the assessment of academic merit.
130The Council also claimed, without being contradicted to any significant degree by the applicant or Hungary, that, as regards the implementation of grants under the Horizon Europe programme, the selection of providers in procurement procedures for the implementation of projects governed by that programme, which were often of considerable importance in terms of budget for scientific projects, would be vulnerable to the risk of undue influence. According to the Council, the Hungarian regulatory framework also has an impact on the recruitment of staff and other human resources processes. In view of the pervasiveness of political control and the risk of conflicts of interest, the Council asserted that all internal processes, university procedures and governance structures involved in the use of EU funds are susceptible to external influence, which could result in the inappropriate expenditure of EU funds.
131The protection of the financial interests of the Union is based on the premiss that its financial resources are not to be used to finance public interest entities of Member States, such as trusts, or entities maintained by them, the operating arrangements of which breach the principles of the rule of law.
132Consequently, contrary to what the applicant and Hungary claim, in the present case the Commission and the Council established to the requisite legal standard a genuine and sufficiently direct link between the serious and systemic breaches of the principles of the rule of law, as alleged, and the effect or the serious risk of an effect on the sound financial management of the Union budget or the protection of the financial interests of the Union.
133The Court must therefore reject as unfounded the argument alleging that Implementing Decision 2022/2506 did not establish a genuine and sufficiently direct link between the breach of the principles of the rule of law and its impact on the Union budget. Consequently, it rejects the first and second parts of the first plea in their entirety.
The fourth plea in law, alleging breach of the principle of proportionality
134By its fourth plea, the applicant, supported by Hungary, claims that the contested provision breaches the principle of proportionality laid down in Article 5(4) TEU and recital 18 of Regulation 2020/2092.
135In that regard, the applicant puts forward five arguments. First, since the applicant has no influence over the alleged breaches of the principles of the rule of law, the contested provision, which adversely affects its business, cannot be considered to be appropriate and necessary for the protection of the Union budget. Secondly, owing to the limited budgetary impact of the contested provision as compared with Article 2(1) of Implementing Decision 2022/2506, that provision is not appropriate for the protection of the Union budget. Thirdly, the contested provision, the effects of which are detrimental to the applicant’s activities and good reputation, is not the least onerous measure. Fourthly, the arguments set out in recital 61 of Implementing Decision 2022/2506 to justify the proportionality of the contested provision, particularly the fact that the measure is temporary, are not sufficient in that respect. Fifthly, the applicant’s interests and situation were not taken into account before the adoption of Implementing Decision 2022/2506.
136The Council, supported by the Commission, disputes the arguments put forward by the applicant and Hungary.
137In recital 62 of Implementing Decision 2022/2506, the Council stated that the best way to address the serious risk posed to the budget, caused by potential conflicts of interest in public interest trusts, was the contested provision, namely the prohibition preventing the Commission, when implementing the Union budget under direct or indirect management, from entering into new legal commitments with those trusts or the entities maintained by them. According to the Council, such a measure is proportionate to what is strictly necessary in order to achieve the objective of protecting the Union budget against the effects or risks of effects stemming from breaches of the principles of the rule of law in a Member State.
138The Court recalls that Article 5(3) of Regulation 2020/2092 provides that measures taken pursuant to that regulation are to be proportionate. They are to be determined in the light of the actual or potential impact of the breaches of the principles of the rule of law on the sound financial management of the Union budget or the financial interests of the Union. The nature, duration, gravity and scope of the breaches of the principles of the rule of law are to be duly taken into account. In so far as possible, the measures are to target the Union actions affected by the breaches. It follows that the measures taken must be strictly proportionate to the impact of the breaches of the principles of the rule of law found on the Union budget or on the protection of the financial interests of the Union (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 302).
139The principle of proportionality, which is one of the general principles of EU law and is enshrined in Article 5(4) TEU and Article 52(1) of the Charter of Fundamental Rights, requires that acts of the EU institutions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and not go beyond what is necessary in order to achieve those objectives; when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (judgment of 16 February 2022, Hungary v Parliament and Council, C‑156/21, EU:C:2022:97, paragraph 340; see, also, judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 353 and the case-law cited).
140In the first place, it is necessary to examine whether the contested provision is necessary and appropriate.
141First of all, it should be borne in mind that Regulation 2020/2092 and Implementing Decision 2022/2506 are intended to protect the Union budget against effects liable to arise from breaches of the principles of the rule of law in a Member State.
142However, the applicant has not submitted any evidence to the Court which casts doubt on the ability of the contested provision to achieve the objective pursued, by imposing a prohibition on the Commission preventing it from entering into new legal commitments with public interest trusts established on the basis of Hungarian Law IX or with entities maintained by such trusts.
143Next, the applicant submits that, since it has no influence over the alleged breaches of the principles of the rule of law, the contested provision, which adversely affects its business, cannot be considered to be appropriate for the protection of the Union budget.
144That assertion disregards the fact that the purpose of Regulation 2020/2092 is to protect the Union budget and not to penalise, as such, breaches of the principles of the rule of law in a Member State (judgment of 16 February 2022, Hungary v Parliament and Council, C‑156/21, EU:C:2022:97, paragraph 119). In addition, as is apparent from paragraph 118 above, the public interest trust that maintains the applicant may wield considerable powers, in particular over budgetary matters, and may therefore exert an influence over EU funds. Moreover, since the breaches of the principles of the rule of law are systemic and not individual in nature, in so far as they stem from the regulatory framework in Hungary, the fact that the applicant did not commit the breaches at issue or had no influence over them has no bearing on the appropriateness of the measure imposed by the contested provision.
145Lastly, the applicant argues that, given the limited budgetary impact of the contested provision, it is not appropriate for the protection of the Union budget. In that regard, the applicant submits, inter alia, that EUR 1.85 million in commitments were suspended pursuant to the contested provision, whereas EUR 6.3 billion in assets were frozen under Article 2(1) of Implementing Decision 2022/2506.
146However, the observation that the contested provision has a more limited budgetary impact than that of some other measures provided for in Implementing Decision 2022/2506 is not sufficient to establish that it is inappropriate and must be disregarded. As is apparent from the case-law of the Court, the proportionality of measures to be adopted is ensured, decisively, by the criterion of the ‘impact’ of breaches of the principles of the rule of law on the sound financial management of the Union budget or on the protection of the financial interests of the Union (judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 361). Therefore, Regulation 2020/2092 does not set a minimum threshold which the budgetary impact or the significance of a breach must reach in order to be able to adopt a measure under that regulation, but requires that the measure taken be strictly proportionate to that impact on the budget or the financial interests of the Union.
147In the second place, as regards the applicant’s argument that the contested provision is not the least onerous measure, the Court finds that the applicant makes no more than a general assertion to that effect, without, however, specifying which other measure would have been less onerous.
148It has thus not been established that there was any other less onerous measure for the protection of the Union budget.
149Moreover, it should be pointed out, as the Council does, that even if the contested provision had the effect of excluding the applicant from certain lines of funding, the least onerous of the five measures listed in Article 5(1)(a) of Regulation 2020/2092, in the light of the objectives pursued, is the prohibition on entering into new legal commitments. The other measures listed in that provision would have disruptive effects on programmes already in progress on the date of taking effect of Implementing Decision 2022/2506, also entailing difficulties for third parties.
150Furthermore, as is apparent from recital 62 of Implementing Decision 2022/2506, the contested provision does not affect the overall allocation of funds from EU programmes under direct or indirect management. That means, specifically, that Hungarian universities which are not maintained by public interest trusts established on the basis of Hungarian Law IX, as well as their students, teachers and researchers, are eligible for EU funds under the Erasmus+ and Horizon Europe programmes.
151Lastly, Article 5(2) of Regulation 2020/2092 provides that the imposition of appropriate measures is not to affect the obligations of government entities or Member States to implement the programme or fund, and in particular the obligations they have towards final recipients or beneficiaries, unless the decision adopting the measures provides otherwise.
152In that connection, recital 63 of Implementing Decision 2022/2506 states that ‘pursuant to Article 5(2) of Regulation … 2020/2092, this Decision does not affect the obligations of Hungary to implement the programmes and funds concerned by this Decision, and in particular its obligations towards final recipients or beneficiaries, including the obligation to make payments under the applicable sector-specific or financial rules’.
153In the third place, the applicant states that the arguments set out in recital 61 of Implementing Decision 2022/2506 to justify the proportionality of the contested provision are not sufficient in that respect and can be rebutted. In particular, the applicant submits that it has not, by act or omission, done anything that could be classified as a breach of the principles of the rule of law, that it is apparent from recital 61 of that decision that it is the Hungarian State and not the applicant itself which implements the programmes concerned and that the effects of the contested provision cannot be described as temporary from its perspective.
154In the present case, it must be stated at the outset that the applicant’s submissions seeking to cast doubt on the arguments set out in recital 61 of Implementing Decision 2022/2506 are irrelevant, since that recital is intended to justify the proportionality of the measure referred to in Article 2(1) of that decision and not the measure stemming from the contested provision.
155By contrast, it follows from recital 62 of Implementing Decision 2022/2506 that the prohibition on entering into new legal commitments stemming from the contested provision does not affect the overall allocation of funds from EU programmes under direct and indirect management, which may still be used for other entities, and is therefore sufficient to ensure the protection of the Union budget while being proportionate to what is strictly necessary to achieve that objective.
156It must be stated that the applicant has not adduced any evidence capable of properly challenging that finding.
157In the fourth place, as regards the applicant’s argument that its interests and situation were not taken into account before the adoption of Implementing Decision 2022/2506, it should be recalled that recital 19 of Regulation 2020/2092 states that it is ‘essential that the legitimate interests of final recipients and beneficiaries are properly safeguarded when measures are adopted in the event of breaches of the principles of the rule of law’ and that, ‘when considering the adoption of measures, the Commission should take into account their potential impact on final recipients and beneficiaries’.
158In the present case, it follows from Implementing Decision 2022/2506, read in the light of the Commission proposal, that the potential impact of the measure on beneficiaries and, in particular, on the applicant was taken into account. First, it must be held, as is apparent from paragraph 149 above, that the measure provided for in the contested provision is the least disruptive to the programmes already in progress on the date on which Implementing Decision 2022/2506 took effect, since it allows the final recipients of the Erasmus+ and Horizon Europe programmes to continue to receive, even after the adoption of the contested provision, grants awarded before its adoption, until the end of the agreements signed under those programmes.
159Secondly, recital 63 of Implementing Decision 2022/2506, which states that that decision does not affect Hungary’s obligations, in particular, towards final recipients or beneficiaries, including the obligation to make payments, demonstrates that the Council took into account the effects of that decision on the final recipients and beneficiaries of EU funding.
160Accordingly, the applicant’s argument must be rejected as unfounded.
161In the fifth place, as regards the proportionality of the contested provision, it should be observed, first of all, that in the light of the foregoing, that provision meets the general interest objective of protecting the Union budget. Next, the measure provided for in the contested provision is one of the measures listed in Article 5(1) of Regulation 2020/2092. The Council does not have a broad discretion as to the choice and scope of the measures which may be adopted under Regulation 2020/2092, given that those choices are strictly circumscribed by that article and in particular by the procedure for the adoption of those measures laid down by that regulation, as recalled in paragraphs 73 and 74 above. Lastly, the contested provision is not disproportionate, since its impact on the overall allocation of funds and on the final recipients or beneficiaries, towards whom Hungary is required to fulfil its obligations, is limited, as recalled in recital 62 of Implementing Decision 2022/2506.
162It follows that the applicant has not demonstrated that the contested provision was disproportionate in the light of the objective pursued.
163Therefore the fourth plea must be dismissed as unfounded.
The second part of the third plea in law, alleging misuse of powers
164By the second part of the third plea, the applicant submits that the Council misused its powers.
165In that regard, the applicant claims, inter alia, that the Council, by adopting Implementing Decision 2022/2506, stopped the funding it had been receiving directly and indirectly from the European Union and severed the professional, personal and scientific relationships which that funding permitted. It argues that the Council is empowered only to adopt ‘appropriate measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary’.
166In that context, according to the applicant, a finding that the Council did not misuse its powers would effectively give it complete control of the designation criteria and the persons targeted by the measures provided for in Article 5 of Regulation 2020/2092.
167The Council contends that the second part of the third plea must be rejected either as inadmissible, in so far as it was not put forward in a sufficiently clear and coherent manner in the application, or, in the alternative, as unfounded.
168As a preliminary point, the plea of inadmissibility raised by the Council under Article 76 of the Rules of Procedure must be rejected.
169In accordance with the case-law cited in paragraphs 21 and 22 above, although the arguments put forward by the applicant in support of that part of the plea are not particularly precise, its written pleadings show that it clearly maintains that the Council misused its powers.
170Next, as to the merits, the Court recalls that the concept of ‘misuse of powers’ has a precise meaning and encompasses the use by an administrative authority of its powers for a purpose other than that for which they were conferred upon it. A decision is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken solely, or at the very least chiefly, for ends other than those for which the power in question was conferred or with the aim of evading a procedure specifically prescribed by the Treaties or by EU law for dealing with the circumstances of the case (see, to that effect, judgment of 24 November 2022, Parliament v Council (Technical measures relating to fishing opportunities), C‑259/21, EU:C:2022:917, paragraph 61 and the case-law cited). In that regard, it is not sufficient for the interested party to refer to certain facts in support of its claims; it must also adduce evidence of a sufficiently specific, objective and consistent nature to support their truth or, at the very least, their probability. Failing that, the material accuracy of the claims made by the institution concerned cannot be called into question. Thus, the overall assessment of the evidence of misuse of powers cannot be based on mere assertions or on evidence that is insufficiently clear or is neither objective nor relevant (see order of 19 December 2013, da Silva Tenreiro v Commission, T‑32/13 P, EU:T:2013:721, paragraphs 32 and 33 and the case-law cited).
171It must be noted, as the Council did, that the applicant has not adduced any evidence capable of demonstrating that the Council misused its powers.
172The applicant appears to base that assertion on the observation that the contested provision stopped the funding which it had been receiving from the European Union. However, that observation is not sufficient to conclude that the Council used its powers under Regulation 2020/2092 for a purpose other than that of protecting the Union budget against breaches of the principles of the rule of law in Hungary or with the aim of evading a procedure specifically prescribed by the Treaties or by EU law.
173In that regard, the Council rightly points out that the Commission and the Council itself followed the procedure provided for in Regulation 2020/2092, without the applicant adducing evidence to the contrary, and that that procedure pursues a legitimate objective recognised by the Treaties, namely the protection of the Union budget, in connection with respect for the principles of the rule of law.
174Consequently, in the context of the adoption of Implementing Decision 2022/2506 and, in particular, of the contested provision, the Council exercised a competence relating to the establishment and implementation of the Union budget, within the meaning of Article 322(1)(a) TFEU (see, to that effect, judgment of 16 February 2022, Poland v Parliament and Council, C‑157/21, EU:C:2022:98, paragraph 241).
175Therefore, the second part of the third plea must be rejected as unfounded.
The fifth plea in law, alleging infringement of Article 107 TFEU
176By its fifth plea, the applicant, supported by Hungary, claims that the contested provision distorts the market in so far as it had an immediate effect on research and development projects and jeopardises its participation in the Erasmus+ and Horizon Europe programmes. The application of dissimilar conditions to equivalent or similar business players entails discrimination and could result in a distortion of the market.
177Therefore, the applicant submits that the contested provision constitutes State aid and infringes Article 107 TFEU.
178The Council, supported by the Commission, contends, principally, that this plea is inadmissible because it lacks clarity, coherence and structure, and, in the alternative, disputes the applicant’s arguments on the substance.
179As a preliminary point, the plea of inadmissibility raised by the Council under Article 76 of the Rules of Procedure must be rejected.
180Although the arguments put forward by the applicant in support of this plea are not particularly precise, its written pleadings show that it clearly maintains that the contested provision is unlawful in so far as it distorts competition under Article 107 TFEU.
181Next, it should be recalled that Article 107(1) TFEU provides that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade between Member States, incompatible with the internal market.
182For it to be possible to categorise advantages as aid within the meaning of Article 107 TFEU, they must, first, be granted directly or indirectly through State resources and, secondly, be imputable to the State (see judgment of 16 May 2002, France v Commission, C‑482/99, EU:C:2002:294, paragraph 24 and the case-law cited).
183The contested provision cannot be regarded as State aid since, in particular, the funding to which it relates consists of EU resources, managed directly or indirectly by the European Union, without there being any discretion on the part of the Member States.
184The fifth plea must therefore be rejected and, consequently, the action must be dismissed in its entirety.
Costs
185Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to bear its own costs and to pay those incurred by the Council, in accordance with the form of order sought by the Council, with the exception of the costs incurred in connection with the plea of inadmissibility rejected by order of 4 April 2024, Semmelweis Egyetem v Council (T‑138/23, not published, EU:T:2024:211), which must be borne by the Council.
186Under Article 138(1) of the Rules of Procedure, Hungary and the Commission must bear their own costs.
Operative part
On those grounds,THE GENERAL COURT (Intermediate Chamber)hereby:
1.Dismisses the action;
2.Orders Semmelweis Egyetem to bear its own costs and to pay those incurred by the Council of the European Union, with the exception of the costs incurred in connection with the plea of inadmissibility rejected by order of 4 April 2024, Semmelweis Egyetem v Council (T‑138/23, not published, EU:T:2024:211), which shall be borne by the Council;
3.Orders Hungary and the European Commission to bear their own costs.
Delivered in open court in Luxembourg on 30 September2026.
Source: EUR-Lex, © European Union, 1998-2026. Reuse authorised under Decision 2011/833/EU.