Every social organisation has a constitution. A constitution is the means by which the structure of a political system is defined, i.e. the relationship of the various parts to each other and to the whole is specified, the common objectives are defined and the rules for making binding decisions are laid down. The constitution of the EU, as an association of states to which quite specific tasks and functions have been allotted, must thus be able to answer the same questions as the constitution of a state.

In the Member States the body politic is shaped by two overriding principles: the rule of law and democracy. All the activities of the Union, if they are to be true to the fundamental requirements of law and democracy, must therefore have both legal and democratic legitimacy: the elements on which it is founded, its structure, its powers, the way it operates, the position of the Member States and their institutions, and the position of the citizen.

Following the failure of the Treaty establishing a Constitution for Europe of 29 October 2004, the EU ‘constitution’ is still not laid down in a comprehensive constitutional document, as it is in most of the constitutions of its Member States, but arises from the totality of rules and fundamental values by which those in authority perceive themselves to be bound. These rules are to be found partly in the European Treaties or in the legal instruments produced by the Union institutions, but they also rest partly on custom.

Any consideration of the legal nature of the EU must start by looking at its characteristic features. Although the EU’s legal nature was set out in two precedent-setting judgments of the Court of Justice in 1963 and 1964 relating to the then European Economic Community, the judgments are still valid for the European Union in its current form.

In this legal dispute, the Dutch transport company Van Gend & Loos filed an action against the Netherlands customs authorities for imposing an import duty on a chemical product from Germany which was higher than duties on earlier imports. The company considered this an infringement of Article 12 of the EEC Treaty, which prohibits the introduction of new import duties or any increase in existing customs duties between the Member States. The court in the Netherlands then suspended the proceedings and referred the matter to the Court of Justice for clarification as regards the scope and legal implications of the abovementioned article of the Treaty establishing the EC.

The Court of Justice used this case as an opportunity to set out a number of observations of a fundamental nature concerning the legal nature of the EU. In its judgment, the Court stated that:

‘The objective of the EEC Treaty, which is to establish a common market, the functioning of which is of direct concern to interested parties in the Community, implies that this Treaty is more than an agreement which merely creates mutual obligations between the contracting States. This view is confirmed by the preamble to the Treaty, which refers not only to governments but to peoples. It is also confirmed more specifically by the establishment of institutions endowed with sovereign rights, the exercise of which affects Member States and also their citizens ... The conclusion to be drawn from this is that the Community constitutes a new legal order of international law for the benefit of which the States have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals.’

COSTA v ENEL

Just a year later, the Costa v ENEL case gave the Court of Justice an opportunity to set out its position in more detail. The facts of this case were as follows. In 1962, Italy nationalised the production and distribution of electricity and transferred the assets of the electricity undertakings to the national electricity board, ENEL. As a shareholder of Edison Volt, one of the companies that was nationalised, Mr Costa considered that he had been deprived of his dividend and consequently refused to pay an electricity bill for ITL 1 926. In proceedings before the arbitration court in Milan, one of the arguments put forward by Mr Costa to justify his conduct was that the nationalising act infringed a number of provisions of the EEC Treaty. In order to be able to assess Mr Costa’s submissions in his defence, the court requested the Court of Justice to interpret various aspects of the EEC Treaty. In its judgment, the Court of Justice stated the following in relation to the legal nature of the EEC:

‘By contrast with ordinary international treaties, the EEC Treaty has created its own legal system which ... became an integral part of the legal systems of the Member States and which their courts are bound to apply. By creating a Community of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the States to the Community, the Member States have limited their sovereign rights ... and have thus created a body of law which binds both their nationals and themselves.’

On the basis of its detailed observations, the Court reached the following conclusion:

‘It follows from all these observations that the law stemming from the Treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question. The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail.’

In the light of these judgments, the elements which together typically characterise the special legal nature of the EU are:

The EU is thus an autonomous entity with its own sovereign rights and a legal order independent of the Member States, to which both the Member States themselves and their nationals are subject within the EU’s areas of competence.

The EU has, by its very nature, certain features in common with the usual kind of international organisation or federal-type structure, as well as a number of differences.

The EU is itself not yet a ‘finished product’; it is in the process of evolving and the form it finally takes still cannot be predicted.

The only feature that the EU has in common with the traditional international organisations is that it too came into being as a result of an international treaty. However, the EU has already moved a long way from these beginnings. This is because, although the Treaties establishing the EU were based on international treaties, they led to the creation of an independent Union with its own sovereign rights and responsibilities. The Member States have ceded some of their sovereign powers to this Union. In addition, the tasks which have been allotted to the EU are very different from those of other international organisations. While the latter mainly have clearly defined tasks of a technical nature, the EU has areas of responsibility which together constitute essential attributes of statehood.

Through these differences between the EU and the traditional type of international organisation, the EU is in the process of acquiring a status similar to that of an individual state. In particular, the Member States’ partial surrender of sovereign rights was taken as a sign that the EU was already structured along the lines of a federal state. However, this view fails to take into account that the EU institutions only have powers in certain areas to pursue the objectives specified in the Treaties. This means that they are not free to choose their objectives in the same way as a sovereign state; nor are they in a position to meet the challenges facing modern states today. The EU has neither the comprehensive jurisdiction enjoyed by sovereign states nor the powers to establish new areas of responsibility (‘jurisdiction over jurisdiction’).

The EU is therefore neither an international organisation in the usual sense nor an association of states, but rather an autonomous entity somewhere in between the two. In legal circles, the term ‘supranational organisation’ is now used.

The list of tasks entrusted to the EU strongly resembles the constitutional order of a state. These are not the narrowly circumscribed technical tasks commonly assumed by international organisations, but fields of competence which, taken as a whole, form essential attributes of statehood.

The list of tasks entrusted to the EU is very wide-ranging, covering economic, social and political action.

The economic tasks are centred around establishing a common market that unites the national markets of the Member States and on which all goods and services can be offered and sold on the same conditions as on an internal market and to which all Union citizens have the same, free access.

The plan to create a common market has essentially been fulfilled through the programme aimed at completion of the internal market by 1992, which was initiated by the then President of the Commission, Jacques Delors, and approved by the Heads of State or Government, with the Union institutions succeeding in laying down a legal framework for a properly functioning single market. This framework has now been fleshed out very largely by national transposition measures, with the result that the single market has already become a reality. This single market also makes itself felt in everyday life, especially when travelling within the EU, where identity checks at national borders have long since been discontinued.

The internal market is backed up by the economic and monetary union.

The EU’s task in economic policy is not, however, to lay down and operate a European economic policy, but to coordinate the national economic policies so that the policy decisions of one or more Member States do not have negative repercussions for the operation of the single market. To this end, a Stability and Growth Pact was adopted to give Member States the detailed criteria which their decisions on budgetary policy have to meet. If they fail to do this, the European Commission can issue warnings and, in cases of continuing excessive budgetary deficit, the Council can also impose penalties.

The EU’s task in monetary policy was and is to introduce a single currency in the EU and to control monetary issues centrally. Some success has already been achieved in this area. On 1 January 1999, the euro was introduced as the single European currency in the Member States which had already met the convergence criteria established for that purpose. These were Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. On 1 January 2002 the national currencies of these States were replaced with euro bank notes and coins. Since then, their day-to-day payments and financial transactions have been made in only one currency — the euro. Greece and Sweden had, initially, failed to meet the convergence criteria. Greece was included on 1 January 2001. Sweden, which could not meet the criteria principally due to the fact that it did not participate in the exchange rate mechanism of the European Monetary System (the ‘waiting room’ for the euro), is subject to a derogation in that the Commission and the European Central Bank must present convergence reports for Sweden at least every two years, in which they can recommend Sweden’s participation to the Council. If such a recommendation is made and approved by the Council, Sweden will not be able to refuse to participate. However, there is currently little support amongst the Swedish population for joining the euro area. In a 2003 referendum, 55.9 % were against the introduction of the euro. In a survey in December 2005, 49 % were still against the euro, while 36 % were in favour. The situation is different with regard to Denmark and the United Kingdom. These Member States secured an opt-out, which allows them to decide if and when the procedure for verifying compliance with the criteria for joining the single currency is initiated. The new Member States are also obliged to adopt the euro as their national currency as soon as they meet the convergence criteria. None of the new Member States has an opt-out clause, and most of the new Member States wish to introduce the euro as soon as possible. Slovenia (1 January 2007), Cyprus (1 January 2008), Malta (1 January 2008) and Slovakia (1 January 2009) have already achieved this, extending the ‘euro area’ — countries which have the euro as their currency — to a current total of 16 Member States.

In addition to the area of economic and monetary policy, there are many other economic policy areas in which the EU has responsibilities. These include in particular agricultural and fisheries policy, transport policy, consumer policy, structural and cohesion policy, research and development policy, space policy, environment policy, health policy, trade policy and energy policy.

In social policy the EU has the task of ensuring that the benefits of economic integration are not only felt by those active in the economy, but also shape the social dimension of the single market. One of the starting points for this has been the introduction of a social security system for migrant workers. Under this system, workers who have worked in more than one Member State, and therefore fallen under different social insurance schemes, will not suffer a disadvantage with regard to their social security (old-age pension, invalidity pension, health care, family benefits, unemployment benefits). A further priority task of social policy, in view of the unemployment situation in the EU, which has been a source of concern for a number of years, has been the need to devise a European employment strategy. This calls on the Member States and the EU to develop a strategy for employment and particularly to promote a skilled, trained and adaptable workforce, in addition to which labour markets should also be made adaptable to economic change. Employment promotion is regarded as a matter of common concern, and requires Member States to coordinate their national measures within the Council. The EU will contribute to a high level of employment by encouraging cooperation between Member States and, if necessary, complementing their action while respecting their competences.

With regard to the actual area of politics, the EU has tasks in the areas of Union citizenship, policy on judicial cooperation in criminal matters and common foreign and security policy. Union citizenship has further strengthened the rights and interests of nationals of the Member States within the EU. Citizens enjoy the right to move freely within the Union (Article 21 TFEU), the right to vote and stand as a candidate in local elections (Article 22 TFEU), entitlement to protection by the diplomatic and consular authorities of any Member State (Article 23 TFEU), the right to petition the European Parliament (Article 24 TFEU) and, in the context of the general ban on discrimination, the right to be treated by all Member States in the same way as they treat their own nationals (Article 20(2) in conjunction with Article 18 TFEU). With respect to common foreign and security policy, the EU has, in particular, the tasks of:

Since the EU is not an individual state, these tasks can only be carried out step by step. Traditionally, foreign and especially security policy are areas in which the Member States are particularly keen to retain their own (national) sovereignty. Another reason why common interests in this area are difficult to define is that only France and the United Kingdom have nuclear weapons. Another problem is that some Member States are not in NATO or the WEU. Most ‘common foreign and security policy’ decisions are therefore still currently taken on the basis of cooperation between states. In the meantime, however, a range of tools has emerged in its own right, thus giving cooperation between states a firm legal framework.

In the area of judicial cooperation in criminal matters, the main role of the EU is to carry out tasks that are in the interests of Europe as a whole. These include, in particular, combating organised crime, preventing trafficking in human beings and prosecuting criminal offences. Since organised crime can no longer be effectively countered at national level, a joint response at EU level is needed. Two very positive steps have already been taken with the directive on money-laundering and the creation of a European police authority, Europol, which has been operational since 1998 (Article 88 TFEU). This cooperation is also concerned with facilitating and accelerating cooperation in relation to proceedings and the enforcement of decisions, facilitating extradition between Member States, establishing minimum rules relating to the constituent elements of criminal acts and to penalties in the fields of organised crime, terrorism, trafficking in human beings and the sexual exploitation of women and children, illicit drug trafficking and illicit arms trafficking, money-laundering and corruption (Article 83 TFEU). One of the most significant advances in EU judicial cooperation was the creation of Eurojust in April 2003 (Article 85 TFEU). Based in The Hague, Eurojust is a team of magistrates and prosecutors from all EU countries. Its job is to help coordinate the investigation and prosecution of serious cross-border crimes. From Eurojust the Council may establish a European Public Prosecutor’s Office in order to combat crimes affecting the financial interests of the Union (Article 86 TFEU). Further progress has been made with the European arrest warrant, which has been valid throughout the EU since January 2004. The warrant can be issued for anyone accused of an offence for which the minimum penalty is more than one year in prison. The European arrest warrant is designed to replace lengthy extradition procedures.

The Treaties establishing the EU do not confer on the Union institutions any general power to take all measures necessary to achieve the objectives of the Treaty, but lay down in each chapter the extent of the powers to act. As a basic principle, the EU and its institutions do not have the power to decide on their legal basis and competencies; the principle of specific conferment of powers (Article 2 TFEU) continues to apply. This method has been chosen by the Member States in order to ensure that the surrender of their own powers can be more easily monitored and controlled.

The range of matters covered by the specific conferment of powers varies according to the nature of the tasks allotted to the EU. Competences which have not been transferred to the EU remain in the exclusive power of the Member States. The EU Treaty explicitly states that matters of national security stay under the exclusive authority of the Member States.

This naturally begs the question of where the dividing line is between EU competences and those of the Member States. This dividing line is drawn on the basis of three categories of competence:

It should be noted that the EU’s competences in the area of coordination of economic and employment policy and in the area of common foreign and security policy do not fall under any of these three categories, and therefore do not belong to this set of competences. However, a declaration is made stating that the EU’s common foreign and security policy will not affect the Member States’ competence for their own foreign policy and national standing in the world. In addition to these special powers to act, the Union Treaties also confer on the institutions a power to act when it is essential for the operation of the single market or for ensuring undistorted competition (see Article 352 TFEU — dispositive powers or flexibility clause). These articles do not, however, confer on the institutions any general power enabling them to carry out tasks which lie outside the objectives laid down in the Treaties, and the Union institutions cannot extend their powers to the detriment of those of the Member States. In practice, the possibilities afforded by this power were used very often in the past, since the EU was over time faced repeatedly with new tasks that were not foreseen at the time the founding Treaties were concluded, and for which accordingly no appropriate powers were conferred in the Treaties. Examples are the protection of the environment and of consumers or the establishment of the European Regional Development Fund as a means of closing the gap between the developed and underdeveloped regions of the EU. Now, however, specific jurisdiction has been given in the abovementioned fields. These specific provisions have meant that the practical importance of the dispositive powers has very much declined.

The exercise of these powers requires the approval of the European Parliament. Finally, there are further powers to take such measures as are indispensable for the effective and meaningful implementation of powers that have already been expressly conferred (implied powers). These powers have acquired a special significance in the conduct of external relations. They enable the EU to assume obligations towards non-member countries or other international organisations in fields covered by the list of tasks entrusted to the EU. An outstanding example is provided by the Kramer case ruled on by the Court of Justice. This case concerned the EU’s capacity to cooperate with international organisations in fixing fishing quotas and, where considered appropriate, to assume obligations on the matter under international law. Since there was no specific provision laid down in the Treaty, the Court inferred the necessary external competence of the EU from its internal competence for fisheries policy under the common agricultural policy.

However, in the exercise of these powers, the EU is governed by the subsidiarity principle, taken over from Roman Catholic social doctrine, which has acquired virtually constitutional status through being embodied in the EU Treaty (Article 5(3)). There are two facets to it: the affirmative statement that the EU must act where the objectives to be pursued can be better attained at the Union level, which enhances its powers; and the negative statement that it must not act where objectives can be satisfactorily attained by the Member States acting individually, which constrains them. What this means in practice is that all Union institutions, but especially the Commission, must always demonstrate that there is a real need for common rules and common action. To paraphrase Montesquieu, when it is not necessary for the EU to take action, it is necessary that it should take none. If the need for Union rules is demonstrated, the next question that arises concerns the intensity and the form that they should take. The answer flows from the principle of proportionality that has entered Union law through the decisions of the Court of Justice of the European Union, and is established in the EU Treaty in conjunction with the competence provisions (Article 5(4)). It means that the need for the specific legal instrument must be thoroughly assessed to see whether there is a less constraining means of achieving the same result. The main conclusion to be reached in general terms is that framework legislation, minimum standards and mutual recognition of the Member States’ existing standards should always be preferred to excessively detailed legal provisions.

National parliaments can also now check compliance with the principles of subsidiarity and proportionality. For this purpose, an early warning system has been introduced, allowing national parliaments to issue a reasoned position within eight weeks following transmission of the legislative proposal, setting out why the legislative proposal in question does not meet the subsidiarity and proportionality requirements. If this reasoned position is supported by at least a third of the votes allocated to the national parliaments (where each national parliament has two votes, or, in the case of chamber systems, one vote per chamber), the legislative proposal must be reviewed again by the institution that issued it (usually the Commission). Following this review, the proposal can be retained, amended or withdrawn. If the European Commission decides to retain the draft, it must issue a reasoned opinion, stating why it considers the draft to follow the subsidiarity principle. This reasoned opinion is sent to the EU legislator together with the reasoned opinions of the national parliaments so that they can be taken into account in the legislative procedure. If, by a 55 % majority of the Members of the Council of the EU or by a majority of the votes cast in the European Parliament, the EU legislator is of the opinion that the proposal does not comply with the subsidiarity principle, the legislative proposal is not examined any further.