Subsidiarity for a Changing Union

Federal governments and unions of states face the fundamental task of allocating the creation and enforcement of policy to either federal (central) government or local governments. Within the European Union, subsidiarity is intended to prescribe the allocation of competences at the central (European Union) or local (member states) level and to ‘balance’ the European Union's powers at the central level with the member states' powers at the local level.Prior to recognition of the subsidiarity principle, the distribution of powers between the Community and the member states represented one of the most delicate and contentious political issues in the European Union. Since the creation of the European Economic Community in 1958, member states’ political actors were critical of what they perceived to be an irreversible process of centralization of competences at the Community level. Although in theory, the transfer of competences from member states to the Community could only take place through conferral within the limits of the competences conferred by the member states to attain the Community objectives set out in Articles 2 and 3 of the 1958 Treaty of Rome (i.e., the creation of a common market and the harmonization of related policies), competences were often reallocated outside the original scope as a result of political considerations. Everling (1997) and Carbonara, Luppi and Parisi (2009) provide a number of examples of reallocation of competences that were hardly warranted by the original treaty provisions, ranging from aids or levies to regulation of product quality and special monetary systems. Political pressures towards centralization found little constraints from within the Community laws and procedures. The 1986 Single European Act expanded the scope of the Community action to new fields (such as research, finance, economic convergence, social policy and environment) and raised the member states’ concern towards new waves of centralization. Several intergovernmental conferences addressed these concerns and eventually laid the foundations for the Maastricht Treaty, redefining the boundaries of the enlarged political, economic and monetary union. The member states’ concerns were addressed in these intergovernmental conferences with a discussion of possible rules that could provide a more effective constraint to new centralization proposals. Among these rules, subsidiarity played an important role as a potential constraint against unwarranted centralization. The subsidiarity principle was formally adopted in 1992 by the Treaty of the European Union (Treaty of Maastricht, signed on 7 February 1992, entered into force on 1 November 1993). The December 1992 Edinburgh summit further stressed the critical role of subsidiarity, requiring all institutions of the Union to use a test of subsidiarity as a condition precedent to their policy action, giving the European Court of Justice the role of guidance and adjudication to ensure compliance with subsidiarity. The subsidiarity principle is currently included in Article 5 of the consolidated version of the Treaty Establishing the European Community, which states that “The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.” The subsidiarity principle also plays a prominent role in the draft of the proposed European Constitution, under Article 9 which states that the principles of subsidiarity and proportionality govern the use of Union competences. Paragraph 3 of Article 9 further specifies that “under the principle of subsidiarity, in areas which do not fall within its exclusive competence the Union shall act only if and insofar as the objectives of the intended action cannot be sufficiently achieved by the member states, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.” Despite the prominence of subsidiarity in the European constitutional framework, the European Union struggled with the interpretation and implementation of this principle. At the 1992 Edinburgh Summit, the European Council provided some clarification of the meaning and modes of application of subsidiarity, specifying that action at the central level should be carried out only upon evidence of clear benefits of scale or effectiveness compared to the independent action of member states. In that context, the Council further stressed that the European Union's centralization decisions should be supported by qualitative or quantitative analyses showing the comparative advantage of the Union in carrying out specified competences (Marquardt, 1994). As pointed out by Estella (2002, p. 103), Provision 3 of the Protocol 30 annexed to the European Union Treaty reinforced the legal dimension and binding force of the subsidiarity principle as a dynamic principle regulating the exercise of competences already attributed to the Community, allowing action to be taken or restricted according to the evolution of circumstances. The reference to cost-benefit analysis and to the dynamic nature of subsidiarity created more questions than answers. Despite various attempts to clarify the meaning of comparative advantage in the context of subsidiarity, the implementation of the subsidiarity principle remains, obscure and in need of formal guidelines in the opinion of both scholars and policymakers. As van den Bergh (1997) points out, the existing legal guidelines lack formalization and leave skeptism regarding the subsidiarity test's real utility in providing an effective constraint to centralization. Absent a formalization of the subsidiarity test, the European Court of Justice faces unavoidably difficulties in assessing the qualitative and qualitative merits of a case on the ground of subsidiarity in a substantive judgment. In the present study, we will survey the existing economic models of subsidiarity and examine the extent to which these formalizations may provide a valuable guidance for the implementation of the subsidiarity test and for the understanding of the limits of subsidiarity as a principled constraint to centralization.