The meeting, which will probably be Chancellor Merkel's last council, will also include discussions on trade deals, digital transformation and migration.
The row between Brussels and Warsaw over EU law primacy, which Ursula von der Leyen has described as a "direct challenge to the unity of the European legal order", is poised to take centre stage when leaders descend upon Brussels on Thursday for a two-day in-person summit.
The years-long showdown over the worsening state of judicial independence in Poland reached a new low earlier this month when the Polish Constitutional Court issued a defiant verdict that found two key articles of EU treaties were incompatible with the country's constitution.
The judges, in a majority decision, objected to the transfer of sovereignty from Poland to the European Union (Article 1) and rejected the supreme legal authority of the EU's Court of Justice (ECJ), based in Luxembourg (Article 19).
The ruling is seen as a "nuclear strike" on the primacy of the EU law, one of the union's cornerstone principles. Established back in 1964 as a result of the precedent-setting Costa v ENEL case, the principle states that, in all cases where the EU has competence, the bloc's laws have priority over national legislation, even over a country's constitution.
Although some tribunals from other member states had previously examined the conflict between EU law and national constitutions, this is the first time that a high court flat out rejects specific articles of the EU treaties. Before entering the bloc, candidates countries are asked to incorporate the entire legislation of the European Union and make the appropriate changes to their domestic laws.
This month's summit had been scheduled before the shocking judgment and its original agenda didn't include any mention of the issue. However, a group of outraged EU countries began pushing to put the contentious topic on the table so that leaders can have a debate at the political level.
Belgium, the Netherlands and Luxembourg (the so-called Benelux) led the public campaign, with the support of like-minded countries. According to EU officials, another group of countries objected to having a discussion on the Polish ruling during the European summit, but President Michel eventually agreed to put rule of law on the agenda.
The debate comes on the heels of a tense plenary at the European Parliament where European Commission President Ursula von der Leyen and Polish Prime Minister Mateusz Morawiecki accused each other of being on the wrong side of the dispute.
"We cannot and we will not allow our common values to be put at risk," said Ursula von der Leyen, who threatened to activate a new budgetary mechanism that can freeze EU funds for countries accused of breaching EU law.
Morawiecki denounced these threats as "blackmail" and "coercion" and vowed to fight the "unacceptable" expansion of EU competences.
"We say yes to European universalism and no to European centralism" the PM said. "Poland will not be intimidated."
The European summit is not expected to yield any significant breakthrough and will instead serve as an opportunity for leaders to voice their concerns in front of each other. The Commission is still waiting for the Polish court to publish the full legal reasoning behind the ruling, a step the executive considers indispensable to complete its internal assessment and decide the next steps.
It's still unclear if the Commission will move forward with the activation of the conditionality mechanism, which entails a complex bureaucratic process that can take up to eight or nine months. The scheme has never been used and the consequences of suspending EU funds could be far-reaching.
The European Parliament is threatening the executive with a lawsuit over failure to act.
Soaring prices on the table
Besides the legal row, European leaders will also discuss another topic of extreme importance for the bloc's stability: the ongoing energy crunch and soaring electricity prices.
The European Council, considered the union's supreme political body, rarely touches upon mundane topics like energy bills. But the worrisome dimension of the crisis – prices for natural gas in Europe have skyrocketed over 420% in the last year – has thrust the topic to the very top of the agenda. In fact, the power crunch will be the summit's first point, followed by COVID-19 and the rule of law.
Leaders will attempt to coordinate their domestic approach to the crisis and will review a series of recommendations the Commission put forward last week. In order to address the problem without distorting the market, the executive suggests temporary solutions such as direct income support for vulnerable households, subsidies for struggling companies and tax reductions in the final bill.
The proposals followed the moderate path advocated by Northern states, whose energy mix makes them less exposed to the fluctuations of fossil fuels, and fell short of the far-reaching measures demanded by Spain, France and Italy.
The Commission did endorse one innovative proposal: the creation of an EU-wide strategic reserve for natural gas, although this instrument would entail thorough work and, if eventually established, would serve to combat the next energy crunch.
"Technically, it's complicated because the states do not buy [gas], the companies do, but the creation of a pool that offers a certain guarantee of purchase for all [member states] and represents a sufficient volume for gas suppliers is a good idea," Teresa Ribera, the Spanish minister for ecological transition and one of the idea's main proponents, told Euronews.
"It may not cover everything, but it can help create a minimum reserve available to everyone," she added. "How was the vaccine crisis resolved? When we worked together in an orderly fashion. We're much more efficient that way, and also much more reassuring."
The crisis shows no signs of abating: Brussels estimates gas prices will remain high during winter, when energy consumption is expected to rise as temperatures fall, and stabilise from April onward.
"This is a very important debate for the European Union," said Ribera. "The EU should emerge strengthened with an energy policy much more orientated towards a common [European] approach, and not just simply a set of rules to govern the functioning of the market."
Trade deals and digital economy
Also on the agenda: COVID-19 vaccination, with particular attention to the inoculation disparities inside the bloc. Despite having access to the EU's common procurement of vaccines, Bulgaria and Romania have seen their campaigns come to a near-total standstill. Romania is now hitting daily records in both coronavirus infections and deaths as the country faces an acute virus surge.
Over dinner, leaders will have a chance to talk about trade deals, a topic that has turned highly divisive in recent years. The EU is struggling to advance two high-profile deals: an investment agreement with China, which is effectively frozen after Beijing sanctioned Members of the European Parliament, and a trade deal with the Latin American association Mercosur (Argentina, Brazil, Paraguay and Uruguay).
The EU-Mercosur deal, reached in principle back in June 2019, has become the target of all kinds of criticism, from European farmers who fear the agreement will flood the EU with cheap exports, to environmental activists, who condemn the policies of Brazil's climate-sceptic President Jair Bolsonaro. Countries like Austria, Ireland, Belgium and the Netherlands have made it clear the deal will not be ratified by their national parliaments in its current form.
EU leaders are aware that, as an economic powerhouse, the European Union can use trade deals to boost growth, create new jobs, promote human rights and advance climate action. But the prolonged failure to move forward with the current draft agreements can cast doubt over the bloc's international credibility. A new approach to negotiation and ratification, perhaps with a closer and more active involvement from national governments, might be the key to breaking the impasse.
The Thursday session will end with other foreign affairs, including the imminent COP26 summit, where the EU intends to showcase its reinforced climate goals and inspire others to follow suit, and relations with Eastern European and Asian countries.
Friday will be the time to tackle migration management and the EU's external borders, where Poland could again face burning questions from its peers. Polish authorities have been accused of pushing back migrants who attempt to cross the country's border with Belarus. The Commission has blasted Belarusian President Alexander Lukashenko for encouraging illegal crossing to sow chaos but also expressed concerns over Poland's refusal to grant access to aid workers and journalists.
The summit will end with a discussion on Europe's digital transformation, in the context of the negotiations around two flagship laws: the Digital Services Act (DSA) and Digital Markets Act (DMA).
Together, the DSA and DMA aim to create a safer digital space for citizens and a fairer economy for medium and small companies, which often complain they are unable to compete against the power of Big Tech. The White House has voiced reservations about these two legislative initiatives, fearing Europe, and not the United States, will be the one reining in the excesses of American companies.
At one point during the high-level meeting, EU Council President Charles Michel plans to have a break and take a family picture with all the 27 heads of governments and state, alongside President von der Leyen, in a symbolic farewell to two outgoing colleagues: Swedish Prime Minister Stefan Löfven, who will be succeeded as party chairman in November, and German Chancellor Angela Merkel, the most influential European leader of the past decade.
After almost 16 years leading Germany, Merkel chose to retire on her own terms and make way for a new Chancellor. This week's gathering will be the 107th European Council of her long career, which has seen, among other era-defining events, the Great Recession, the migration crisis, Brexit and the coronavirus pandemic. But if the ongoing coalition talks between the SPD, the Greens and the FDP drag on, Merkel could return to Brussels for her 108th – and very last – summit in mid-December.