Warsaw has clashed repeatedly with Brussels over sweeping changes to courts in Poland, which is a major recipient of European Union funds.
Critics have claimed the changes undermine judicial independence but Poland's ruling conservatives have said the reforms are vital to make courts more efficient and more transparent.
Justice Commissioner Vera Jourova said on Wednesday in Brussels that she had been tasked by the EU’s executive with developing a definition of the respect of the rule of law.
Jourová said that all funds from the EU budget, not just those from the bloc’s Cohesion Policy, would be tied to respect for the rule of law by member states.
A Commission spokesman said earlier this week that the project by Jourova was part of broader preparations for a new, seven-year proposed EU budget expected to be published in May, according to the Reuters news agency.
The European Commission in December took the unprecedented step of triggering Article 7 of the EU Treaty against Poland, stepping up pressure on Warsaw over controversial changes to the judicial system by the country’s ruling conservatives.
The move means that the EU’s executive wants the bloc’s member states to declare that the rule of law in Poland is under threat.
The move could pave the way for sanctions being imposed on Poland, for example suspending its voting rights in the European Union. But penalties on Warsaw would have to be backed unanimously by EU member states, while Hungary has said it would not support sanctions.
Poland's governing Law and Justice (PiS) party has said sweeping changes are needed to reform an inefficient and sometimes corrupt judicial system tainted by the communist past, accusing judges of being an elite, self-serving clique often out of touch with the problems of ordinary citizens.
But opponents have accused Law and Justice of aiming to stack courts with its own candidates and to dismantle the rule of law.
At the World Economic Forum in Davos, Switzerland, Polish Prime Minister Mateusz Morawiecki said on Wednesday that clashes with the EU were the result of misunderstandings and a lack of dialogue, the PAP news agency reported, citing an interview by the premier with Bloomberg.
Morawiecki said that, thanks to government-proposed reforms, the Polish judicial system would be more objective, more effective and more transparent, according to PAP.
Morawiecki and European Commission President Jean-Claude Juncker earlier this month held what officials hailed as a "constructive" meeting amid concerns over the rule of law in Poland.