It must be noted that the principle of subsidiarity and the principle of proportionality also apply to the exercise by the institutions of the powers conferred upon them by the Treaties.

Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, or, by reason of the scale or effects of the proposed action, can be better achieved at Union. This principle must be applied as laid down in the Protocol on the application of the principles of subsidiarity and proportionality.

Under the principle of proportionality, the content and form of Union action may not exceed what is necessary to achieve the objectives of the Treaties. This principle must be applied by the institutions as laid down in the above-mentioned Protocol.

Binding acts provided for in the treaties: legal acts/legislative acts

A regulation has general application, it is binding in its entirety and is directly applicable in all the member States. Regulations may be adopted by the Council or by the Council jointly with Parliament under the ordinary legislative procedure, by the Council with the participation of Parliament or by Parliament with the participation of the Council under a special legislative procedure, by the Commission and by the European Central Bank. The criterion for the distinction between a regulation and other acts, especially decisions, must be sought in its “general application”. Being essentially of a “legislative nature, a regulation is applicable, not to a limited number of persons, defined and identifiable, but to categories of persons viewed abstractly and in their entirety”.

Secondly, a regulation is “binding in its entirety”. This distinguishes it from a directive which only imposes on the Member States to which it is addressed the obligation to achieve specific results. The Court has considered that it cannot be accepted in an incomplete and selective manner.

Finally, a regulation is “directly applicable” in all the member States. This means that it does not require a national measure, such as ratification, to become binding upon institutions, States, undertakings and natural persons all over the Union. Directly applicable also means that the national authorities and national legal or administrative measures, even those posterior to the Union act, cannot prevent its application. By this is meant the precedence of Union law over national law.

Direct applicability must not be confused with “direct effect”. Union measures have direct effect when they create, for those who are subject to Union law, rights that the national judge is bound to uphold. This is the case every time Union rules impose, in a clear and unconditional way, an obligation (affecting a third party) upon a Member State, an institution or a natural or legal person. The beneficiaries of those obligations can invoke them in the national courts and tribunals to protect the rights which result from these obligations, and those courts and tribunals are under Treaty obligation to uphold them.

Directives are issued by the Council, by the Council jointly with Parliament or by the Commission. They constitute the appropriate measure when existing national legislation must be modified or national provisions must be enacted, in most cases for the sake of harmonization. Directives are binding upon the Member States to which they are addressed, as to the results to be achieved. Although this means that Member States are obliged to take the national measures necessary to achieve the results set out in the directive, they are free to decide how they “transpose” this piece of Union legislation into national law. When transposing a directive into national law, Member States must take care to rely on an interpretation of the directive which allows a fair balance to be struck between the various fundamental rights protected by the Union’s legal order. Furthermore, when implementing the measures transporting the directive, the authorities and courts of the Member States must not only interpret their national law in a manner consistent with the directive, but also make sure that they do not rely on an interpretation which would be in conflict with those fundamental rights or with the other general principles of Union law, such as the principle of proportionality.

Although directives are not directly applicable, since they must first be transposed into national law, certain of their provisions can nevertheless have direct effect. This must be ascertained on a case by case basis, taking into account their nature, background and wording. According to the Court, provisions are capable of producing direct effect in the legal relationship between the addressee of the act and others, i.e. the Member States and third parties, for instance their citizens.

Once a directive has been properly transposed into national law, Member States are entitled to impose criminal penalties for breach of national legislation implementing that directive, even if this is not provided by the directive.

The obligation imposed upon Member States to transpose directives into national legislation makes these Member States responsible for the consequences of their failure to do so. In other words the State is liable for loss and damage caused to individuals as a result of a breach of Union law for which the State can be held responsible. This obligation applies provided that three conditions are fulfilled. First, the purpose of the directive must be to grant rights to individuals. Second, it must be possible to identify the content of those rights on the basis of the provisions of the directive and, finally, there must be a causal link between the breach of the State’s obligation and the damage suffered.

As for a decision, it is binding in its entirety upon those to whom it is addressed. The addressee can be a Member State or a legal or natural person. A decision can be taken by the Council, by the Council jointly with Parliament, by Parliament with the participation of the Council or by the Council with the participation of Parliament, under the ordinary or special procedure, by the Commission and by the ECB. Decisions are normally of an administrative nature, implementing other Union rules, e.g. granting of an exemption or authorization, or imposing fines. There are no requirements as to the form of the decision, so that it may, in certain cases, be doubtful whether a given act constitutes a binding decision or not. Obviously, the institutions must ensure that a decision is recognisable as a binding act by its very form.

The TFEU also provides for recommendations and opinions, which, however, have no binding force. Nonetheless, according to recent case law, recommendations should not be dismissed as having no legal effect whatsoever. They do not, it is true, create rights which can be invoked in the courts, but the national judges must take recommendations into consideration when solving cases submitted to them. This is especially so if the recommendations can help with the interpretation of other national or Union legal measures. Generally speaking, recommendations aim at obtaining a given action or behaviour from the addressee. An opinion, on the other hand, expresses a point of view, often at the request of a third party. Having no binding effect, the legality of recommendations and opinions cannot, in theory, be reviewed by the Court. Neither can they be submitted to the Court for a preliminary ruling concerning their validity or interpretation. The Court has nevertheless agreed to examine whether recommendations had legal effect when a Member State failed to take the recommended action.

Regulations, directives and decisions must be reasoned

Regulations, directives and decisions must state the reasons on which they are based and must refer to the proposals and opinions which were required to be obtained pursuant to the Treaties.

Reasons must be understood as referring both to the Treaty provision which entitle the institution to take the measure in question and the reasons which motivated the institution to act. The mention of the provision is particularly important since the Union institutions may only exercise those powers which are explicitly conferred upon them by the Member States.

As for the motives which prompted the institution to act, they must be mentioned in order to make it possible for the interested parties and for the Court to reconstruct the essential elements of the institution’s reasoning, thereby permitting the parties to defend their rights, the Court to exercise its control, and the Member States (and in the same way all the interested citizens) to know the conditions under which the institution has applied the Treaty.

To attain those objectives, it is sufficient for the act to set out, in a concise but clear and relevant manner, the principal issues of law and fact upon which it is based and which are necessary in order that the reasoning which has led the institution to its decision may be understood. The extent of this requirement depends on the nature of the measure in question. The condition can also be considered as fulfilled when reference is made to the reasons developed in an earlier act. Furthermore, the question whether a statement of reasons satisfies the requirements must be assessed with reference not only to the wording of the measure but also to its context and to the whole body of legal rules governing the matter in question. If the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for each of the technical choices made by the institution.