Ruling [EGC] ¦ General Court Upholds EU Funding Ban on Hungarian Public Interest Trusts over Conflicts of Interest

General Court backs EU funding ban on Hungarian public interest trusts

The General Court of the European Union has dismissed six actions brought by Hungarian universities against the ban on funding public interest trusts, and the institutions they maintain, from the EU budget. In judgments delivered on 30 September 2026 in Cases T-115/23, T-132/23, T-133/23, T-138/23, T-139/23 and T-140/23, it confirmed that the Council could rely on the rule of law conditionality regulation to stop new EU commitments where top-level officials, including senior political executives, may sit on the boards that control the universities. The Court found a systemic breach of the rule of law in the form of conflicts of interest, a sufficiently direct link to the EU budget and no interference with academic freedom.

From state universities to trusts controlled by political appointees

In 2021, Hungary transferred the founding and management rights of most of its higher education institutions, previously run by the state, to public interest trusts. Hungarian law did not prevent ministers, state secretaries and other senior political figures from sitting on the boards of those trusts, which hold wide powers over the budgets, operations and organisation of the universities they maintain.

In December 2022, the Council adopted Implementing Decision (EU) 2022/2506 under Regulation (EU, Euratom) 2020/2092 on a general regime of conditionality for the protection of the Union budget. One of its provisions prohibits the European Commission from entering into new legal commitments with any public interest trust or any entity maintained by such a trust when implementing the EU budget. The universities affected lost access to new funding under programmes such as Erasmus+ and Horizon Europe. Six of them sought annulment of that provision.

Bastian Schwind-Wagner _Follow

"Six universities challenged a budget-protection measure under the conditionality regulation, and the Council prevailed on every point. Senior political executives sitting on the boards that control universities create a structural conflict of interest, and the Court accepts that this alone can justify keeping EU money away.

The reasoning reaches beyond Hungary. Anyone who manages, audits or co-finances EU-funded projects should take from it that governance arrangements which allow political influence over spending decisions are themselves a risk to the budget, long before any individual case of fraud or corruption is proven."

The Council acted within its budgetary competence

The universities argued that the Council had strayed into education and research policy, where the EU has only limited powers. The General Court disagreed. In adopting the measure, the Council exercised its exclusive competence for establishing and implementing the EU budget, not a competence in education or research. And since the Union in any event has supporting and shared competences in those fields, it can temporarily suspend the implementation of its budget for programmes such as Erasmus+ and Horizon Europe in respect of certain Member States, in particular where the principles of the rule of law are breached.

The Court also found that the Council had stated its reasons in sufficient detail. Its decision explained that the breach stemmed from the factual situation and the regulatory framework in Hungary, which allowed top-level officials to sit on trust boards. The Council assessed that breach in light of legal certainty, the prohibition of arbitrariness of the executive and the separation of powers, and it materialised in possible conflicts of interest.

A systemic breach does not need individual cases

Two of the universities argued that the Council had not identified any rule of law breach committed by them. The General Court carried out a full review of the conditions for adopting the measure and rejected that argument. The conditionality regulation covers both individual breaches and systemic ones. The breach here is systemic: it results from Hungary’s systemic inability, failure or unwillingness to prevent decisions taken in breach of the law on conflicts of interest. The Council therefore did not have to establish individual breaches, and the breach was proven to the required legal standard.

For anyone working on anti-corruption controls, this is a familiar logic. A governance structure that allows decision-makers with political roles to control spending creates a conflict of interest whether or not a corrupt decision can be shown in a specific file. The regulation treats that structural exposure as a breach in its own right.

How political control reaches EU spending

The second condition under the regulation is a genuine and sufficiently direct link between the breach and the sound financial management of the EU budget or the protection of the Union’s financial interests. The Court found that link established. The trusts, and through them the officials on their boards, wield significant powers over the budgetary, operational and organisational affairs of the universities. That creates a genuine and serious risk that decisions on programmes, courses, EU-funded research and development projects and staff recruitment are directly influenced by political considerations.

The Court pointed to concrete channels. Under Erasmus+ and Horizon Europe, trusts can play a role in disbursing EU funds to final beneficiaries. Under Erasmus+ in particular, conflicts of interest could interfere with the selection of beneficiary students and with the choice and mutual recognition of eligible courses abroad, bringing in considerations other than academic merit. The Council had argued that, given how pervasive political control was, all internal processes, procedures and governance structures involved in using EU funds were open to external influence and could lead to inappropriate spending. The protection of the Union’s financial interests rests on the premise that EU money should not finance entities whose operating arrangements breach the rule of law.

A proportionate measure aimed at the budget, not at Hungary

The General Court held the funding ban proportionate. The conditionality regulation exists to protect the EU budget, not to punish breaches of the rule of law as such. The universities did not show that a less onerous measure could have achieved that aim. The ban applies only to new legal commitments and leaves programmes already running untouched. Hungarian universities not maintained by trusts, along with their students, teachers and researchers, can still take part in EU-funded education and research, so the overall allocation of funds is not affected.

The Court also rejected the claim that the Council had ignored the impact on final recipients and beneficiaries. The provision was designed to be as little disruptive as possible to ongoing programmes and does not alter Hungary’s own obligations towards final recipients and beneficiaries under the programmes and funds concerned.

Academic freedom is not engaged by a refusal to fund

One university argued that the measure interfered with academic freedom under Article 13 of the Charter of Fundamental Rights. The Court recalled that academic freedom includes the autonomy of higher education institutions from public authorities, especially the executive. The contested provision, however, is a financial measure. It contains no prohibition or requirement relating to teaching or research. A refusal to fund a university, research institute or research group is not in itself an interference with academic freedom, provided it rests on scientific considerations, on education and research policy set by the legislature or on general interest objectives clearly laid down by law.

The Court added that even if there were an interference, it would be justified and proportionate given the aim of protecting the budget. It went further still: by limiting the scope for arbitrary interference by the executive in the institutions’ organisation, the measure helps preserve their autonomy and therefore academic freedom and the rule of law.

Free movement and the European research area

The Court also rejected a plea based on the freedom to provide services and on Articles 165 and 179 TFEU. Courses offered by publicly funded educational institutions are generally not “services” under Article 57 TFEU, unlike those provided by institutions essentially financed by private funds, and the evidence did not show that the universities’ teaching and research were essentially privately financed. Even if a restriction existed, it would pursue a public interest objective and be proportionate. Articles 165 and 179 TFEU, on education and research, are not cross-cutting provisions that must be applied in a binding way when interpreting free movement.

The Court nevertheless stressed that, having created and financed Erasmus+ and Horizon Europe, the Union must ensure both that granting or withdrawing support does not create unjustified obstacles to cross-border mobility and cooperation, and that countries receiving funds under these programmes respect academic freedom, so as to guarantee scientific and academic excellence.

What it means for governance of EU-funded entities

The judgments strengthen the conditionality regulation as a tool for protecting the EU budget against corruption risks that are built into a country’s governance, rather than proven case by case. For managing authorities, auditors, research administrators and the banks and advisers that support EU-funded projects, three points stand out. Political control over the boards of beneficiary entities is a recognised conflict-of-interest risk in its own right. The relevant question is whether those boards can influence how EU money is spent, from selecting beneficiaries to hiring staff and awarding projects. And measures limited to new commitments, which spare ongoing programmes and other beneficiaries, are likely to survive proportionality review.

Conflicts of interest are also a classic gateway to the misuse of public funds, which in turn can generate proceeds for laundering. Due diligence on beneficiaries of EU grants and on their governing bodies should therefore cover the composition and powers of supervisory boards, links to political office holders and the safeguards that keep spending decisions independent. The judgments may still be appealed to the Court of Justice.

Dive deeper

• CURIA ¦ Judgments of the General Court in Cases T-115/23 Debreceni Egyetem v Council, T-132/23 Óbudai Egyetem v Council, T-133/23 Állatorvostudományi Egyetem v Council, T-138/23 Semmelweis Egyetem v Council, T-139/23 Miskolci Egyetem v Council and T-140/23 Dunaújvárosi Egyetem v Council, Press release No 136/26 ¦ Link