Under the Treaty on the Functioning of the European Union, where the Commission refers a Member State to the Court of Justice of the European Union for failing to fulfill an obligation under the Treaties, the Court may impose financial sanctions in two situations:

• Where the Member State has not taken the necessary measures to comply with an earlier judgment of the Court finding an infringement of EU law.
• Where the Member State has failed to fulfill its obligation to notify measures
  transposing a directive adopted under a legislative procedure.

In both cases, the sanction imposed by the Court of Justice may be composed of a lump sum payment, to penalize the continuation of the infringement1, and a daily penalty payment, to motivate the Member State concerned to bring the infringement to an end as soon as possible after the delivery of the judgment. The Commission proposes amounts for the financial sanctions to the Court, which takes the final decision.

The general approach of the Commission when calculating the proposed sanctions is well-established. Since 1997 and as set out in successive Communications, it has applied an approach that reflects both the capacity to pay of the Member State concerned, and its institutional weight. This is applied through what is known as the ‘n’ factor. The ‘n’ factor is combined with other factors – the seriousness of the infringement, and its duration – in the Commission’s calculation of the proposed sanctions.

Since 2019, the Commission has calculated the ‘n’ factor on the basis of two elements: Gross Domestic Product and the number of seats for representatives in the European Parliament allocated to each Member State. The Commission determines the reference ‘n’ factor by using the average of each of the two elements used, GDP, and the number of representatives in the European Parliament.

The basic figures used in the calculation are updated yearly to reflect economic developments in the Member States.

The latest update still took account of the GDP of the United Kingdom and the number of seats in the European Parliament allocated to the United Kingdom prior to its withdrawal from the Union. This is because, under the Withdrawal Agreement, the Commission could still refer the United Kingdom to the Court of Justice under Article 260 TFEU during the transition period.

However, now that the transition period has ended, the data used to calculate financial sanctions need to be adjusted. The GDP of the United Kingdom and the number of seats in the European Parliament previously allocated to the United Kingdom is no longer relevant and should not be used for calculating the financial sanctions that the Commission proposes in respect of the 27 Member States.

This adjustment was already announced in the Commission Communications of February 2019 and September 2020.