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The institutions of the EU create legislation and other instruments intended to have legal effect. The EU is not a sovereign body in its own right, and ultimately such legislation is only valid to the extend that it is created under powers granted to it by the member states. These powers are to be found in the various treaties that establish the EU, most particulary the ECTreaty. The ECJ (and now the CFI) has powers (unter Art. 230 in particular) to annul any legislative instrument that falls outside the competence of the EU. Moreover, it is accepted that all legislation created by the EU institutions must state the legal basis for its enactment, and the EJC can, and has (e.g., the Tarrif Preferences case) annulled legislation that has not complied with this procedural requirement.
EU competence is complicated by the fact that legislation in different areas of competence is governed by different procedures (see CommunityDecision-makingProcess). Member states have not been above using this fact to challenge legislation which they do not believe to be in their own interests (see WorkingTimeDirectiveCase).
Along with express competence as conferred by the Treaties, it is now generally accepted that competence can be implied. That is, if a Treaty Obligation creates an obligation on a particular institution, it must follow that the institution is given sufficient authority actually to carry out that obligation (see GermanyVCommission1987).
The most contentious aspect of EU competence is the notorious Article308 procedure, which appears to create an almost unlimited competence where legislation is necessary to achieve the broad objectives of the treaties.
Because it is a condition of membership of the EU that member states give priority to EU legislation over their own law, the question naturally arises whether there are areas in which the member states are no longer competent to legislate, and must defer to the EU. Areas of EU exclusive competence are generally held to exist, but it is by no means clear what they are. Most commentators seem to suggest that the EU has exclusive competence in the areas that underpinned the original purpose of the EEC -- FreeMovementOfGoods, FreeMovementOfWorkers, etc. Most likely the EU would act to restrict any attempt by a member state to legislate in those areas. However, a more difficult question is whether the EU can have exclusive competence in areas in which it has never legislated. It would require a decision of the ECJ, at least, to settle this and, so far as I know, there has not been one.
Although the competence of the EU is broad, and may be expanding, it is not unlimited. For example, in the TobaccoAdvertisingCase, the ECJ held that a measure to restrict tobacco advertising could not be made under powers conferred on the Council for the establishment of the internal market. In addition, EU legislation can be challenged on the basis that it contravenes the principle of subsidiarity, at least where that legislation that is not within the ambit of the EU's exclusive competence.
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