This contribution is part of our joint online symposium with the JuWissBlog on the topic: “Protecting the Rule of Law in the European Union – Mechanisms and National Responsibility.”
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A contribution from Ankit Malhotra*
A. Introduction
The rule of law is enshrined as a foundational value of the European Union (EU) under Article 2 of the Treaty on European Union (TEU), and it likewise occupies a central place in the constitutional identity of the Federal Republic of Germany (Basic Law, Arts 1, 20). In external relations, both Brussels and Berlin have sought to project these values through “rule-of-lawis h clauses” in their international agreements. These clauses – often dubbed “essential elements” or “political” clauses – purport to make continued cooperation conditional upon respect for democracy, human rights, and the rule of law. This contribution surveys the deployment of such clauses in EU Association and Free Trade Agreements (FTAs), the novel budgetary conditionality mechanism adopted in 2020, and Germany’s domestic constitutional framework for treaty approval, drawing on key cases and treaty texts to assess their design and effectiveness.
B. Normative Foundations
Under Article 2 of the Treaty on European Union (TEU), the Union is founded on six core values: respect for human dignity, freedom, democracy, equality, the rule of law, and respect for human rights. Article 21 TEU requires that the Union’s external actions promote these values, including through trade and cooperation agreements. Similarly, Germany’s Basic Law enshrines the principle of the rule of law—Rechtsstaatlichkeit—in Article 20(3) and requires parliamentary approval for most international treaties under Article 59(2) sentence 1. Collectively, these provisions ensure that international commitments undertaken by the Union and Germany embody democratic legitimacy and legal constraint, thereby providing the legal foundation for insisting on rule-of-law compliance by partner states (Reconnect Europe).
C. The “Essential Elements” Clause: Design and Legal Basis
Legally, these clauses rest on Article 60 of the Vienna Convention on the Law of Treaties, which permits suspension or termination in the event of a material breach. They enable unilateral measures—up to suspension of cooperation—if serious violations occur. However, the drafting of these clauses varies significantly. For instance, the EU–Israel Association Agreement (Article 2) uses language closely aligned with universal instruments, simply stating that “relations between the Parties, as well as all the provisions of the Agreement itself, shall be based on respect for human rights and democratic principles, which guides their internal and international policy and constitutes an essential element of this Agreement.” (European Parliament).
By contrast, the EU–Ukraine Association Agreement (Article 2) goes further by referencing not only the rule of law and democratic principles but also explicit commitments to specific international conventions and to EU law. Similarly, recent Free Trade Agreements such as the Comprehensive Economic and Trade Agreement (CETA) with Canada reference the Charter of the United Nations and the Universal Declaration of Human Rights in their preambles, while also embedding EU-specific values within operative provisions (European Parliament).
D. Application in Association Agreements
- EU-Ukraine Association Agreement (2014): Article 2 of the EU–Ukraine Association Agreement commits the parties to base their relations on “respect for democratic principles, human rights and fundamental freedoms, and the rule of law,” and explicitly states that “respect for these principles shall form the essential elements of this Agreement.” The Agreement further provides, in Article 478, that either party may suspend its application in the event of a serious breach of these essential elements. In practice, despite documented backsliding on rule-of-law and democratic reforms in both the European Union and Ukraine, the EU has refrained from invoking the suspension mechanism, preferring instead to employ incentives such as visa liberalisation and financial assistance to promote compliance and encourage further reforms.
- EU-Moldova Association Agreement (2014): EU–Moldova Association Agreement (2014): The Agreement mirrors the EU–Ukraine Association Agreement by incorporating both an “essential elements” clause (Article 2) and a specific suspension clause (Article 455). Despite ongoing concerns over judicial reforms and allegations of democratic backsliding in Moldova, the EU has consistently preferred diplomatic engagement and dialogue over invoking the suspension mechanisms provided by these clauses.
- EU-Israel Association Agreement: Article 2 stipulates that “relations between the Parties…shall be based on respect for human rights and democratic principles, which guides their internal and international policy and constitutes an essential element of this Agreement.” Civil society and several Member States have repeatedly called for the activation of the suspension mechanism in response to Israel’s settlement policies and recent military operations in Gaza. Until recently, the European Commission had declined to invoke Article 2, largely on account of geopolitical sensitivities. However, as of May 2025, the European Union has announced a formal review of its trade and cooperation with Israel in light of the ongoing Gaza offensive, signalling a potential shift toward a more robust use of conditionality and suspension mechanisms.
These examples collectively demonstrate the EU’s historic reluctance to employ the “nuclear option” of suspension, instead favouring the gradual application of conditionality through pre-accession and neighbourhood policy instruments. The latest review of EU–Israel relations, however, may indicate a willingness to reconsider this approach in response to grave breaches of fundamental values.
E. Rule-of-Law Clauses in EU Free Trade Agreements
In its next-generation Free Trade Agreements (FTAs)—including the Comprehensive Economic and Trade Agreement (CETA) with Canada (2017), as well as the EU–Singapore and EU–Vietnam Agreements (2019)—the EU has inserted similar “essential elements” clauses. The CETA preamble expressly recognises “democracy, human rights and the rule of law” as prerequisites for sustainable trade (Global Affairs Canada, CETA Text). However, while Article 8.9 (the “Essential Elements Clause”) of CETA would allow for the suspension of trade preferences in the event of serious breaches of fundamental values, it is important to note that CETA is currently only provisionally applied.
According to Article 1(1)(a) of Council Decision (EU) 2017/38 of 28 October 2016, the provisional application does not extend to Article 8.9, which means the suspension mechanism is not yet operational. Moreover, there has been no evidence or finding of serious violations of democracy, human rights, or the rule of law by Canada that would justify activation of these clauses. Despite robust civil-society scrutiny and constitutional challenges in Germany to CETA’s dispute-settlement provisions (Federal Constitutional Court, BVerfG, 2 BvR 1368/16), the EU has opted to resolve concerns through political dialogue and incremental pressure rather than legal suspension mechanisms.
F. Budgetary Conditionality
In December 2020, the European Union adopted Regulation (EU, Euratom) 2020/2092, a legislative instrument—not an international treaty, but a directly applicable EU regulation—that links access to EU funds with respect for the rule of law. This marked a significant shift from rhetoric to a robust conditionality mechanism. Under Article 4 of the Regulation, the European Commission may propose measures, such as the suspension of payments or financial corrections, if a Member State’s actions “affect or seriously risk affecting” the sound financial management of the Union budget (EUR-Lex, Art. 4). In April 2022, the Commission invoked this mechanism for the first time, freezing over €6 billion in EU funds to Hungary due to breaches involving judicial independence and corruption risks.
This regulation is of great significance as it directly ties rule-of-law compliance to financial leverage within the EU’s legal framework, overcoming previous political hesitation and providing a concrete enforcement tool. Remaining with Article 4, one notes, the Commission can propose suspension of payments or financial corrections where a Member State’s conduct “affects or seriously risks affecting” the Union budget (Art. 4). In April 2022 it froze over €6 billion to Hungary. Although effective within the budgetary realm, the mechanism does not extend to trade, external aid, or sectoral cooperation, leaving those treaty portfolios unenforceable except through political means.
G. Germany’s Constitutional Framework and Treaty Practice
Germany’s Basic Law requires parliamentary consent for important treaties (Art. 59(2) sentence 1), with the Federal Constitutional Court retaining oversight to ensure constitutionality and, in particular, adherence to the “eternity clause” (Art. 79(3))—which protects fundamental principles, including the rule of law. In a Ruling the Federal Constitutional Court of Germany upheld the provisional application of CETA, stipulating that only EU-exclusive competence areas take effect and that the agreement must remain terminable by Germany if certain constitutional concerns arise (Federal Constitutional Court). This decision demonstrates Berlin’s dual commitment: to project rule-of-law values abroad, while safeguarding domestic constitutional identity.
Furthermore, in other rulings, the Court upheld the provisional application of CETA but emphasised Germany’s right to terminate mixed-agreement provisions if they breach fundamental constitutional norms. This rigorous domestic review fortifies internal rule-of-law integrity but also slows down any rapid external response when partners violate their own commitments.
H. Critical Assessment and Challenges
Although the EU has powerful internal tools to enforce rule of law, these lie outside the Association and Free Trade Agreement framework. Under Article 7 TEU, the Council may determine a “clear risk of a serious breach” of EU values by a Member State (Art. 7(1)) and ultimately suspend certain rights, including voting rights (Art. 7(2)). Nevertheless, both procedures against Poland (triggered in December 2017) and Hungary (triggered in September 2018) stalled at the unanimity requirement, and no sanctions were imposed. This demonstrates that, even for internal infractions, political divergence among Member States can frustrate enforcement.
Association Agreements. The EU–Ukraine (Art. 2 & Art. 478) and EU–Moldova (Art. 2 & Art. 455) Association Agreements both permit suspension in the event of serious breaches of democracy or rule of law. Despite backsliding in Kyiv and Chișinău, the EU has never invoked these provisions, favouring visa liberalisation and financial aid over legal suspension.
Germany’s Bilateral Investment Treaty Practice. Outside EU instruments, Germany has itself embedded rule-of-law language in bilateral treaties. For example, the 1995 Germany–India BIT preamble refers explicitly to “respect for democratic principles, the rule of law and human rights” as essential elements of the investment relationship (Germany–India BIT, Preamble). Yet, no claim under that treaty has ever led to the suspension of obligations, reflecting the same inertia seen in EU agreements.
Free Trade Agreements. Next-generation FTAs such as CETA (Art. 8.9), the EU–Singapore (Art. 13.3) and EU–Vietnam (Art. 17.8) Agreements contain suspension mechanisms. CETA’s clause, however, is not provisionally applicable (Council Decision (EU) 2017/38, Art. 1(1)(a)), and no serious breach by Canada has arisen to trigger it. Civil-society campaigns over Indigenous rights and environmental concerns have thus been handled through dialogue rather than legal suspension.
I. Germany’s Constitutional Safeguards for International Treaties
Enforcement of rule-of-law clauses—whether internal (Article 7 TEU, budgetary regulation) or external (Association/FTA clauses, Germany’s BITs)—is persistently hindered by four structural obstacles:
- Political Divergence among Member States, thwarting unanimity in Article 7 TEU procedures.
- Geopolitical Imperatives (energy security, neighbourhood stability) that override legal triggers in external agreements.
- Compartmentalisation of conditionality within the EU’s internal budget, leaving trade and cooperation treaties unenforced.
- Domestic Constitutional Safeguards in Germany that, while strengthening legitimacy, introduce procedural hurdles to swift action abroad.
To overcome this impasse, the EU should extend budgetary-style conditionality to trade and neighbourhood instruments, lower decision-making thresholds to avoid unanimity deadlocks, and develop automated “escalation ladders” combining graduated sanctions with incentives. Germany, leveraging its constitutional influence, must champion these EU-wide reforms. Only by aligning strategic imperatives with normative commitments can Brussels and Berlin ensure that rule-of-law clauses become effective instruments of foreign policy rather than aspirational rhetoric.
J. Conclusion and Recommendations
Rule-of-law clauses in EU and German treaties signify a forward-looking strategy to embed democratic governance in external relations. Yet their effectiveness hinges on credible enforcement. The EU should streamline activation procedures for essential-elements clauses, drawing on the budgetary conditionality model to extend to trade and cooperation instruments. Germany, leveraging its constitutional framework, should support EU-wide mechanisms and refrain from political shielding of partners in breach. Together, a coherent, calibrated approach – blending legal safeguards with diplomatic engagement – can ensure that treaties become not only vehicles of commerce but instruments for the defence and promotion of the rule of law.
*Ankit Malhotra is an Advocate and Felix Scholar.
Suggested Citation: Malhotra, Rule of Law in German and European Foreign Policy : The Use of Rule-of-Law Clauses in International Treaties, jean-monnet-saar 2024.
DOI: 10.17176/20250812-075021-0
Funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) – Project No.: 525576645
