It IS a federation, and regardless of what you call it, the fact is that the EU has the ability to control and limit its rogue members to protect human rights, and chooses not to exercise this power in many cases. The EU is to blame for this and can be considered illiberal in this regard because it does not adequately prevent its constituent states from passing laws that infringe on citizens' fundamental rights.

It is exercising that power to the extent it can. Taking them to court and applying economic penalties would be how actual federated states deal with rogue provinces, at least, at first. The EU doesn't have a federal police force, or even a military with a mandate to reimpose the rule of (European) law in Poland. So it's silly to suggest it has the powers of a federal state, and hence the culpability of one, so should somehow be considered illiberal.