The European Union’s top court told Poland to pay a daily fine of €1 million in a row over judicial reforms.
Earlier this year, Poland was ordered to suspend a controversial disciplinary chamber, but has not yet done so.
It is the latest development in a bitter feud with the EU over changes that are seen as weakening the independence of Polish courts.
The hefty penalty was immediately denounced as “blackmail” by Polish government spokesman Piotr Muller.
Some fear the escalating situation could put Poland’s membership in the EU at risk.
Earlier this month, Poland’s constitutional court ruled that Polish law supersedes EU law when there is a conflict between the two – angering European leaders by, in effect, rejecting the primacy of EU law.
European Commission President Ursula von der Leyen said it was a “direct challenge to the unity of the European legal order”.
The European Commission is yet to approve €57 billion of Covid-19 recovery funds earmarked for Poland, and may not do so until this dispute is settled.
An opinion poll on Tuesday suggested that 40.8% of Poles believed their government should concede defeat and end the row, while another 32.5% said it should compromise.
Poland’s leader told the European Parliament this month it was “unacceptable to talk about financial penalties” and he accused the EU of overstepping its powers.
Poland’s Deputy Justice Minister Sebastian Kaleta said the ruling “completely disregards and ignores the Polish constitution and the rulings of the Polish constitutional tribunal”.