WARSAW (Reuters) - Poland's constitutional court on Thursday ruled against a set of government reforms aimed at changing how the court works, deepening a months-long constitutional crisis with a verdict the ruling conservatives said they would not implement.
The standoff over the reforms and a series of new appointments to the court has hurt investor confidence in eastern Europe's largest economy.
The EU told the government last month that it had three months to resolve the crisis or face possible sanctions such as a suspension of its voting rights and freezing of its EU funds.
Since winning an outright parliamentary majority last year, the Law and Justice (PiS) party has repeatedly tried to change the court's operational rules, including changing the order in which cases are heard. It has also scrapped the previous parliament's nominations for judges and put forward its own candidates.
Critics say the reforms and nominations are aimed at stacking the court, called the Constitutional Tribunal, with PiS supporters and stifling its ability to challenge new legislation as it comes up.
The European Union has launched an unprecedented rule of law procedure against Warsaw and in July threatened sanctions, a decision Poland described as "premature".
Warsaw's closest ally, the United States, has repeatedly expressed concern over the crisis. President Barack Obama, who visited Poland for a NATO summit last month, called on the government to do more to break the impasse.
Rejecting key provisions of PiS' latest reforms, Judge Andrzej Wrobel said on Thursday that the tribunal was a guarantor of democratic checks and balances.
"Any regulations affecting it must not lead to a situation where the court loses its ability to act," he said.
The ruling party rejected the verdict before it was even announced, saying that in order for the court's rulings to be binding it must first follow the new regulations.
The judges, however, said they could not rule on a law based on that law itself.
PiS' leader Jaroslaw Kaczynski has accused the court of trying to deliberately block the government's reform agenda.
The opposition says that if the Tribunal observes the new rules, it would be forced to admit to the bench three PiS-backed judges whose appointments it has already ruled illegal.
This would also make it impossible to admit three judges appointed by the previous parliament but whom President Andrzej Duda, a close PiS ally, has refused to swear in.
The Council of Europe, a rights body whose opinions are non-binding but carry weight with the EU's executive, has recommended that the three judges chosen by the previous parliament be admitted to the bench.
It is not immediately clear how the standoff between the government and the court can be resolved by the Brussels-set deadline of October. If the government upholds Kaczynski's words, Thursday's ruling will join a list of 22 court verdicts that the government refuses to recognize.
Experts say this could lead to a split in Poland's legal system, as some state institutions including lower courts say they recognize the court's verdicts against the government's will.
Editing by Hugh Lawson